This Week in Startups - Google’s game-changing ad policy + Michael Dell on “Play Nice But Win,” stories from building a computing giant | E1293

Episode Date: September 29, 2021

First, Jason brings on investor, former ad tech exec, and frequent guest Zach Coelius to discuss the strategic implications of Google's new ad attribution policy (01:43). Then Michael Dell joins for for a full interview (21:54) sharing stories from the early days of building Dell, scrappy supply-chain arbitrage, global expansion, negotiations with Steve Jobs and Bill Gates, the $67B EMC VMware acquisition (57:40) and more!

Hey, everybody. Hey, everybody. We got an amazing show for you today on this week in startups. Two awesome guests for the price of one. First, my friend of the pod and digital ad vector, Zach Collius, is with us, and we're going to break down some of Google's new ad policy changes around attribution. And then, amazingly, Michael Dell, the founder of Dell, is on the program. He's got an amazing new book out that you're going to want to pre-order right now, or depending on when you're listening to this, you might be able to order it. It's called Play Nice, but Win. amazing guest, we go deep, really just a legend in the tech industry and a delight for me to have him on the program. Probably one of those episodes you're going to want to listen to two or three times because there's a lot of nuggets in there about how to build a world changing company and make sure you order the book. Okay, stick with us.

This Weekend Startups is brought to you by LinkedIn Marketing. To redeem a $100 LinkedIn ad credit and launch your first campaign, go to LinkedIn.com slash this week in startup. Microacquire, the startup acquisition marketplace. Start the right acquisition conversations at your own pace. Get free and instant access to over 100,000 trusted buyers with total anonymity. Say goodbye to brokers and meet your ideal buyer today. Go to try.microacquire.com slash twist. And NordVPN, improving VPN services globally.

Access content from over 50. different countries and stay safe online. Go to NordvPN.com slash twist or use code twist at checkout to get 73% off a two-year plan plus four bonus months for free. Okay, with us again today, friend of the pod, Zach Collius, who is an angel syndicate fund investor, friend of startups, amazing, amazing investor, and also formerly advertising tech executive, and he's going to tell us today a little bit about the changes afoot in the Google ecosystem. Yeah, that's exactly. Thanks for having me. I'm excited to be here. Always love our company.

Yes. I mean, when we do our ask Jason and Zachs, those have become quite a phenomenon. You get a lot of people mentioning, founders mentioning, they watch it. Yeah, no, people ping me about that all the time. You know, I just figured it's because you have this massive reach and, you know, the world listens to what you have to say. I'm just drafting off of you. Well, you earn your keep with your great commentary. So tell us, what is a foot? Yeah, yeah. So the big changes is, so traditionally Google and search advertising has been built on, in this we get really wonkiness out here, but it's actually really important, has built on what's called last click attribution.

And so the way that works is you go, you buy Google search ads. And I go to Google and I need some new tires for my car and I'm like snow tires for, you know, car. And boom, the ads come up at the top of it. Tire rack has paid Google to put their ad at the very top of that search result. I click on that ad. I go to Tire Rack. I buy some tires. They send it in my house.

All done. And Google claims credit for basically delivering that $1,000 in sales to tire rack. And so that's what we call traditional last click attribution. And, you know, Google's had that for 20 plus years now. And the entire industry is built off of that. Now, if you think about it, it makes sense when you're thinking about search. But for the rest of the advertising ecosystem, it doesn't make any sense at all. So when I'm driving down the street, I don't go click on a billboard.

Like, when I see a YouTube ad, I watch a television ad, I don't go click on those things. Those are things that put ideas into my head so that when I walk into a store or when I go, you know, like, decide what beer to order at the bar, those basically ideas are there to basically instruct me and how to buy. So you can think on one hand, you have bottom of the funnel sort of completing a transaction,

and the other you have effectively brainwashing. Don't in a very nice way. And so you can think about it kind of like a baseball game. In baseball, the rule is when you get around to the home plate, you score a boy. And so that's the way it's always worked, is all the points are scored in that last moment when you get to home plate,

even though getting around the other plate, is super important, you didn't really get a point for that. And now Google said, ah, well, we're going to change the rules. And so now if we're going to add credit to other ads that drive transactions, even if they don't necessarily lead to a click and a conversion. And so that's like changing the baseball game, where now if you get the second base, you get half a point. And so you can imagine if we change the rules of baseball,

where if you got the second base, you got half a point, it would change the way that the whole game worked. Everyone would think about it differently. And so that's what Google just did. Now, they claim it's a privacy thing. I think that's bullshit. I think it's, they've just decided that their media mix has shifted from being all search.

And now YouTube has become so big that they need to move proper credit to YouTube. And as TV, as digital TV has grown, they need to move credit there as well. And so it's a, it's really a strategic game they're playing. That is fascinating because you do have a fun. which you're using the analogy of coming around the bases. And it is fair that if you saw a YouTube ad and that eventually typed in the name of, you know, if we were talking about Coke Zero or something

and they had a new flavor, Cherry Coke Zero, you know, if I saw the Cherry Coke Zero ad before a Mr. Beast video, but I didn't click on it then because I wanted to watch the Mr. Beast video on YouTube. But later on I did a search for Coke Zero, and we knew that happened within, you know, whatever, 90 minutes or 90 minutes. or nine days, I don't know what the window would be. Yeah, you could say, hey, you do know that that video happened there. And what's the chance of it being a false positive?

In other words, the person didn't actually see the video or the video didn't contribute. I think it's very low. So I guess people could always ignore that data as well if they wanted to as a marketer. But this would be a wave. Does this not signal that YouTube is maybe, they're so bullish on YouTube. as a business, that they really want to get marketers to understand the power of that spend? Is that what's happening here? Yeah, effectively, Google is creating a black box where before they were saying,

hey, click, conversion, credit. And now they're saying, trust us, our black box will tell us where to give you credit. And we're going to start claiming conversions that didn't have a click, maybe. So, then, you know, they'll create, you know, treatment and control groups, and they'll create, you know, people who are shown ads and people who aren't shown ads. And there's a way statistically to do this in a relatively straightforward way. But at the end of the day, Google is now going to start claiming credits for conversions that maybe didn't get a click at all. So someone's on YouTube. They see a video.

They're like, oh, that's interesting. They wait, you know, a week. And then they go type it in directly and they go and buy something. They never go through the search funnel. They never click. Google's going to be like, oh, that's ours. We want credit for that. And so, and that black box, no one knows how it works.

And it's going to be interesting to see how it plays out. Because they do own DoubleClick, which does banner ads. They do own YouTube, which does video ads. And they do have, I think I said with the AdSense network is where you can put Google search ads on another blog or other website. So this will give them a little more. 360 view of how things are going. Does this mean more people will spend money over at Google's ad network maybe than

Facebook's? Is that what's driving this a bit is to build a more complete solution? This will have a huge impact on shift of dollars and spend and credit. And I mean, it will be a very significant impact. And yeah, it's going to be, because at the end of the day, like a lot of these advertising businesses, like if you're a tire rack, you, Tyraq is more sophisticated than this, but Google has a million of customers, most of them are not sophisticated to understand how these things work.

And so when suddenly all of a sudden they start to see conversions coming from someplace, they move their spend over there. And so this is where before a lot of conversions were occurring on Google search, now those conversions according to Google's measurement will be occurring somewhere else and they'll start shifting dollars and spend into the other places. And so this will have a pretty significant impact on SpendShift. Like it will be material. Wow, that is fascinating.

And the industry, is there a loser in this? Is there somebody who is very concerned about this? Because it would seem like ad buyers want to see more conversion. They want to have more information. So maybe this is in their best interest or not? Because they do seem to be very advertiser-centric. Are they not Google? It's hard to know, right?

Because in the old days, you could say, okay, a click occurred. We know the click occurred. We know the user came through this link, this URL structure. We know who they are. The backend attribution tech tools that maybe you license from Adobe or you license somewhere else, they can see that click coming in. It's pretty easy to be like, okay, Google sent us that person. Now, basically, that person maybe doesn't click on anything.

They show up from some path wherever. We don't know where they came from. We don't even know how they were affected because Google is definitely not going to give her user attribution level. This user saw these ads here, here, and here. here. And so, and Google's like, oh, that's ours. Whereas on the downstream, you don't know. And so

in some ways, you could see this if you put your evil hat on. This is a way for Google claiming more credit for things that they may or may not have done in order to extract more money from their advertisers. So this is a way, like if you're Google, this enables you to extend your continued growth in your advertising

share of wallet. And Facebook has really been the big driver. Facebook's done this for a long time. And Facebook's been the big driver in pushing Google down this path. And so, yeah, it's, we're going to see, you know. Well, we know Google has the credo to do no evil, so I can't imagine they would do anything. That would be unethical or in any way, not in the best interest of consumer. Never. Never. It's impossible. Listen, right now, LinkedIn is going to give you a hundred dollar credit towards your first ad campaign. I want you to linkton.com slash this week in startups

and get that hundy right now now why would you use lincoln marketing high quality leads we all need leads we're all running businesses here my leads start up founders your leads might be SaaS enterprise it might be cfos it might be cmos it might be ctos who knows everybody's got a different product but everybody is on lincoln we all know that because we all use lincoln every single day so if you're planning and launch a new campaign, you know your audience, your team is excited, and everything is going according to plan. We've all been there. Except you have that one thought in the back of your head. How can I be sure that my acquisition campaign will drive high impact leads for my sales team? Well, with LinkedIn ads, you don't need to guess because when you advertise on LinkedIn,

your message reaches people who are ready to engage you. LinkedIn equals business, business equals LinkedIn. You know this. It's very simple. So with 30 million companies engaging, and over 71% and professionals using LinkedIn to inform their business decisions, LinkedIn can help bring your growth to the next level. Don't wait to start achieving your brand and lead gen goals. Get a $100 ad credit toward your first LinkedIn campaign at LinkedIn.com slash this week in startups. Once again, LinkedIn.com slash this week in startups for the Hyundai, no spaces, no dashes, and terms and conditions apply because they're giving you a Hyundai.

Knowing what you know about these ad networks and the dark arts here, what percentage of clicks on the internet, writ large, cross everything, is, let's say, fraudulent or bot? If you had to pick a percentage or a range, what is the industry's take and what does Zach's take? I mean, it's a big number. Most of the fraud occurs traditionally, and this kind of actually opens a can of worms. Most of the fraud traditionally occurs around unmeasurable areas. So think about a click. You know, when you measure by the click,

if I drive 100 clicks to your website, you see those 100 clicks come through that URL string, those users show up. Now they're on your website. You can see what they do. You see how many of them purchase. And then you basically say, okay, I paid you $1,000 for those hundred clicks, and I got $10,000 in sales.

My margin is 20%. Therefore, I made $2,000 and marginal dollars. Therefore, I'm happy to have paid you, you know, a thousand dollars. And if they send you 100 clicks and 100 them are fraud and you get no dollars in sales, you're like, hey, by the way, I'm not paying you for those clicks. And so with a click attribution, you can pretty clearly delineate what is truly effective or what's not. Now, when you move away from clicks, that's where fraud starts to.

occur because now I can basically send a bot over to your website and you don't know where they came from and Google's like, hey, we claim credit for that purchase, but you don't know what they saw. And so it gets really smushy. Most of the fraud is attacking traditional stupid TV advertisers who go by

video ads online and you see it all the time, right? You're on some shady ass website and like 10 different pop-offs show up with all these autoplay videos and it's like total spam and like each of those advertisers is getting ripped. off, and they're doing the same thing with their bot traffic, and they're driving it at that, of those videos at those videos. The total percentage of the internet, I don't know. I mean,

I don't have access. It's a big number. It's billions and billions of dollars of fraud every year. And what the resolution to this is, is every system has some fraud, the credit card network has some fraud, and can the advertisers, the publishers, and the ad networks agree at the end of the day that the fraud is manageable and as you're saying if you sent me 100 clicks and it netted me

$2,000 in profits at the end of the day if 10 or 20% were fraudulent clicks I'm blending that into my cost per click I'm blending that into my ad spend just like a restaurant or a tire shop

or a catalog person might be like yeah we're going to have two or three percent or credit card company to say yeah it's going to be 2% 1% fraud and if you want to, you can pay a higher percentage for your credit card fees to not get signatures,

not look at the card. If you look at the card, you can pay less. I think that's why when you get coffee, they never ask you for your credit card or your ID. And when you buy a flat screen TV, they ask you to see the actual credit card, I guess. Exactly, yeah, yeah. Yeah.

Yeah, it, you know, what happened, the unfortunate thing is that it's the unsophistic added advertisers you get ripped off here. So if you're, you know, old school brand and you hire a stupid agency, they're going to waste your money, you're going to get taken to the cleaners. If you're like a small advertiser and you're not sophisticated and you don't have good technology, you get taken advantage of. So it's not that the fraud is evenly distributed, like sophisticated advertisers know how to measure and manage and deal with it.

And they can identify the vendors who are driving out of fraud and they get rid of them rapidly. The unsophisticated folks, they get taken to town. And it's, most of it's a lot of these old school big brands. You just see like, you know, the just big old, dumb, stupid brands and they just lose money. It's so interesting that they're not building up their internal capability

because, you know, you hire young folks who are super tech savvy, who are coming into the space as digital natives. And you just say, listen, figure out how these networks work, run a bunch of tests. You could build this muscle internally. It's strange that they don't, given how important these channels

are to them. I mean, the problem is, is it historically, you've got these CMOs who are old school TV guys, and they've been doing TV their whole life, and that's how they think about the world. And digital is, they've never really figured it out. But they've got to move money into digital because they have to look like they know what they're doing. And so they go to their agency and they're like, good, spend X percent on digital. Because they can't go to their board and be like, well, I can't spend a digital because

I can't figure it out. And so, and then these agencies, I mean, a lot of them are, good at TV and not very good at much else. And so they just take the money and they just dump it. They're like, they go to their vendors and they're like, eh, just go spend it. And the money just gets spent doing dumb stuff over and over and over again. Because it's the budget.

The interesting thing is, yeah. Both of those paradigms seem to be ending. The paradigm of that CMO is coming to an end. They'll retire at some point. And then, uh, we have a, um, a very interesting thing happened. I don't know if you're experiencing this, but I am inoculating myself to advertising,

you know, Hulu has a no-ed product. I have YouTube with pro with no ads. Netflix and Disney and HBO Max do not have ads. I would say that's the majority of my media consumption right there. And the idea of me watching ads, and when I pay for NBA League Pass, I paid an extra $40 a year,

I think, to not have ads, but show the local cameras in the arena. And my God, it was the best decision I've ever made. My kids do not watch advertising. It just doesn't happen in our, household. And what impact will that have over time? And do you think that that's going to be

a trend where consumers just pay that incremental dollar to get advertising out of their video streams specifically? Jason, the one thing you seem to forget is you're rich and not everyone else is rich. So most consumers still pay nothing and they still get advertised to. But the best way to think about it is you have a continuum. So like in the continuum, you have on one end you can think about it of like TV commercials. So when you're you're, you can think about it of like TV commercials. So when you watch a TV show, it's 30 minutes, but it's how many minutes of sight-sounded motion? It's like over 12. I think it's 12 right now.

Yeah, I think in an hour it would be over 12. Yeah, I think it's usually when I watch a 30-minute sitcom, it's usually 21 to 24 minutes, and that means that would imply six to nine minutes of ads. So you double that for an hour. And that's full interruption, site-sounding motion, where you literally are sitting there watching, like, commercials attempting to brainwashing. But you and I can remember TV ads we saw when we were kids. Like, I can remember Hulk Hogan's TV ads.

I can remember like the, the, the, my little pony. Bud bowl. Like, or, I mean, like, so, so we were effectively brainwashed when we were kids because back then we watched television recordings. And then on the other end of the continuum, you can think about, like, a data-driven ad that really knows you. So it knows what you buy. it knows where you live, it knows

everything about you. And that data can be used to deliver really valuable, useful stuff to you. It can be like, hey, here's the thing that we know you want you want, and that you will buy, and you're like, oh, I want that. And you buy. And those become so good that you don't even notice them as ads anymore, because

they enter into your life in a way that's useful and provides value. And so on that continuum, TV commercials know data, and so they have to interrupt a third of your life and just brainwash you. And on the other end, it's like, comes almost like it doesn't interrupt you at all because it's so valuable to you. And yeah, it's going to be interesting to see how it plays out.

All right. That's Zach Collius with us, everybody. You can find them on the Twitter. You can Google them. And if you're looking for that first 100K to $2 million, this is the guy who you want on your board or you want on your squad. So get that Zach check and get your startup grown. Stick with us.

We'll be back with more. Microacquire is a startup acquisition. marketplace that cuts out the middleman. Basically that means they help startups get acquired efficiently. If you've ever had to buy a company or you tried to sell your company, there's all these people in the middle. They're not looking out for you. Microacquire is looking out for you. To date, Microacquire has helped hundreds of startups get acquired and has facilitated hundreds of millions of dollars in closed deal volume. Over 100,000 buyers are on the platform right now. It's amazing. I signed up for it. I paid for it. Now they're an advertiser. It's crazy.

Thousands of startups are currently listed for sale on the site, and they've had hundreds of successful acquisitions so far, because they vet all of the deals they're putting up there, and they vet all the buyers. Founders get free and instant access to these 100,000 trusted buyers, while staying totally anonymous. This is not like an open marketplace. If you're a founder looking to sell, microacquire is free, private, and involves no middle men. On the other side of the marketplace, buyers simply pay $290 a year for every. access the platform like I did, because I might buy some stuff for Insight.com. Microacquire helps startups find buyers, simple as that. They'll help you start conversations that can lead to an acquisition in just 30 days for free at try.com microacquire.com

slash twist. Try.com.com. Go ahead, founders, and check it out. And if you're an acquirer or you're looking to beef up your startup's footprint, you really should just pay the $290 and peruse and see what you could buy there. It's a really cool service. All right, we have a special treat for you today. We have an entrepreneur that I've always looked up to when I was coming up in the tech industry, started his career by buying IBM PCs and upgrading them from his dorm room with memory chips, hard drives, started making 50, 60, 70 grand a month, and eventually decided maybe I'll even try to make my own computers. And those computers went on to change the world. That brand is Dell and that entrepreneur is Michael Dell. His parents.

immigrants immigrated from New York City to Houston. And that's where I found out about all of this amazing story comes from his new book. And the new book is, play nice, play nice, but win. So I think my mom always said, play nice. And you know what? He named it after what his mom told him. Play nice, but win. And it is quite a story.

The book is a barn burner. Buy it right now. Pause the podcast. listen to the audio book but if you're an entrepreneur man it's a hell of a story congratulations and welcome to the program Michael Dell

thank you Jason great to be with you the book's amazing and you basically tell the story of the origin story of Dell your family's story but also interwoven in a time shifting fashion

with the massive drama of taking Dell private that fighting with Carl Ican and then interdispersed in the story are amazing moments with Steve Jobs, battling compact, and everything in between. Why did you take the time now to write your autobiography? Well, I wrote a book in the late 90s, which was fun. And we'd accomplished a lot in the first decade and a half of the company. but certainly a lot had occurred in the last decade.

And I was also at a place where I'm much more comfortable disclosing things and being vulnerable. And I wanted to share a lot of the personal reflections and struggles and challenges and really what I was feeling during all those moments. And so that's what I did. And, you know, with the go private and it was the biggest take private ever, in technology and then we did the biggest acquisition ever in technology and transformed the company and then went public again. A lot of friends encouraged me to write a book about all that. And so here it is.

Yeah. And it's a great story. I mean, the parts I love about it is the origin story. Pretty amazing to Ving. You were coming of age in the 80s, watching all these PCs. and like myself, you had a subscription to Bite magazine, to PC magazine. You became friends with Jim Seymour, the columnist, who I didn't know was actually in Austin, but you were obsessed with business at a young age, and you saw this opportunity in PCs.

What was the opportunity you saw in the personal computer? When did you see it? And then take us to that moment when you decided, I'm not just going to upgrade people's computers and make a couple of grand doing that, just saying, you know what, this actually is a company. I'm going to go direct to consumer. Well, yeah, I was really fortunate, you know, to be, first of all, in a junior high school, public junior high school in Houston, Texas where there was a teletype terminal. And I learned about, you know, Radio Shack and the TRS80 and Byte magazine.

It was kind of the dawn of the microprocessor age. And so grew up with all that through junior high school and high school. and, you know, it was kind of a fun thing to do and to make some extra money. And I was teaching kids how to program and upgrading their dad's computers and that sort of thing. It wasn't until my parents told me that I needed to focus on my studies and, you know, get serious about college, that I really decided, well, this was something more. This was something I really wanted to do for the rest of my. my life. And, you know, I was always fascinated with the power of calculators and computing machines and the idea that anybody could have their own personal computer program it. That was just an

incredibly empowering and exciting idea to me. And, of course, I had no idea that, you know, would go from a million or two million computers to billions of them. And, you know, now, you know, five billion people walking around with smartphones. It's an incredible world that's that's evolved in the last, you know, several decades here. Yeah, and you tell this great story of, you know, saving up money and then going to buy your first computer, your dad's support for that. Maybe tell that story of like when you actually bought your first computer. Yeah, so I'd read in Byte magazine about the Apple 2.

And it was sort of a, you know, obviously a big. leap from the Apple one and, you know, the TRS 80 was was okay, but the Apple 2 was, you know, highly programmable. And I had saved up enough money, you know, doing stamp auctions and all sorts of other kind of entrepreneurial things as a kid that I had the money to buy one of these. So I, you know, convinced my parents to let me buy one. And, you know, first thing I did was take it apart because that was sort of what I did with all electronics because you couldn't really understand how it worked unless you took it apart. And, you know, it was, it was a super fun time because computers then were easily understandable. You know, today, you know, it's kind of

hard to open them up to begin with. But if you do open them up, you have a bunch of black boxes, which are, you know, massive ASIC chips that combine all sorts of different functions. Then every single chip, you could understand exactly what it was doing. And you could actually program it yourself. You could reprogram the bios. And all of that was just, you know, incredibly exciting to me. And you had to open it up to actually put more memory chips in. And they didn't have, there was no internet connections at that time.

There was no Ethernet. I mean, to upgrade the machine was a requirement. It was kind of like owning a muscle car or something. at that time, which I think led you to see that first opportunity. Was the first opportunity really that you realized this was too complicated for people to upgrade their own machine, so I'll just do it for them? Or was it the PC, I guess it was the PCAT or the PCXT? I'm not sure which one you, or maybe it was just called IBM PC at that time, but you

were finding PCs from around the country arbitraging them and then basically adding memory to them and taking the spread on it for people. Yeah, I had a couple of businesses. I had the business of, you know, there was an inefficient system of how these IBMPCs were being, you know, allocated across the country. And so I had this kind of flying by business where I'd find too many machines in one city and not enough in another city. I, you know, generally on the weekend when I was in when I was in school here in Austin, I would, you know, take Southwest Airlines flight to a. city, rent a U-Haul truck, loaded up with 50 or 70 PCs, fly it to another city, you know, take, you know, make it, make a couple thousand bucks and, you know, head back to Austin.

That's hilarious. I mean, you literally were arbitraging city-by-city inventory issues and selling these to dentists, et cetera. Your dad was an author. Well, no, that I was selling them really between computer stores. And the other thing I was doing was I was upgrading the IBM PCs, either buying the basic stripped down IBM PC, put more memory in it, put more floppy drives in it.

Eventually the hard disk drives started to come along before IBM had the XT. You could add a hard disk drive to a PC. and I would buy hard disk drives and controller cards, write some software, make cables, and make a kit to upgrade an IBM PC to have a hard disk drive, which was a big deal at the time because, you know, popping drives in was like super slow. So all of that, you know, kind of I got this incredible view into not only how people were using them and the power of that, but the whole. distribution system was really inefficient and it just looked like a huge opportunity.

Okay, in 2012, childhood friends came together to build NordVPN after spending time apart in different areas of the world. While separated, they saw a growing need for an easily accessible internet security tool so they created their own VPN, virtual private network. With NordVPN, they're helping people stay safe online and improving VPN services globally. So with NordVPN, you can access content from over 50%. 59 different countries by changing your virtual location with one click. It's so elegant and simple to just say, I want to be in the UK now. I want to be in Australia.

I want to be in New York. You know what? I use it. And sometimes I pop open my iPad and I'm in Italy. And it says, oh, you're in Italy. You can't use Disney Plus. You know what? My kids need to watch a Disney film.

Now, on top of all that, do you know how you get hacked? You get hacked because you're on public Wi-Fi. If you use NordVPN, you're just not going to be subject to all those open Wi-Fi hacks. So here's an amazing deal. Go to NordvPN.com slash twist or use the code Twist, TWIST, and you will get 73%. 7.3. Not 7%, not 3%, not 3%, 73% off your two-year plan plus for bonus months for free. So for U.S. customers, NordVPN will cost you about one cup of coffee per month, about three bucks.

Claim this offer fast, set it and forget it, and protect yourself forever. It's for a limited time only. That's one of the things I'm struck by in the book is every step of the way, you were not too proud to just take whatever business opportunity was there, capture it, but then you kept looking, what's the next opportunity, what's the next opportunity, the next opportunity, and then eventually the idea you did a kind of your own little secret project to buy the chips yourself and make your own products.

And customer support was at the core of that and making it personalized. But you, that, that innovation of personalizing a PC at the time did not exist in the world. You had to hire somebody to personalize your PC, but that wasn't a function of what you wanted to do, something you had to do because you didn't have money and you were taking people's orders over the phone, correct? Like you sort of stumbled into the customization of a PC. Well, you know, I kind of built the thing that I would have wanted and actually did want

as somebody that was using the technology. And because we didn't have enormous amounts of capital, we had $1,000 to start, there was no inventory. So we actually created an incredibly efficient supply chain because we had no capital. And the supply chain was the customers told us exactly what they wanted. And we then got that from our suppliers. Almost the second after, you know, they told us. Now, of course, it all became electronic over time and, you know, internet, people clicking and, you know, you have this super elegant supply chain now that, you know, runs like a top. But it, you know, it all started with a, with a, you know, fairly simple idea that if you don't have to predict what the customer wants, because they're telling you, you don't actually need any finished goods inventory. So you can be way more capital.

Apple efficient, you know, if we hadn't figured that out, it probably wouldn't have happened. And there's so many things that, as you read the book, you know, there's so many things that could have gone wrong in the first two, three, four, five years, which is, I think, true of many startups. Well, including the fact that when you're at, when you went to Austin, which college did you go to in Austin? I forgot. University of Texas.

University of Texas. And that's in Austin, yeah? Yes. And there's this great moment where your parents, though. know that you're doing a PC business or they're kind of hearing from their friends that you're doing it and your mom and dad decide they're just going to show up in Austin. So they call you from the airport and you're frantically taking all the PCs and putting them in your roommates bathtub. But your parents were absolutely mortified that you were doing this. They,

like any good parents, wanted you to be a doctor. They wanted you go to pre-med and you had to break their hearts, didn't you? Yeah, they were, they were, you know, horrified at the idea that I would give up the opportunity for a great education. Yeah. And, you know, at one point, they, they, you know, I'm sitting there in a, in a hotel room with, with my parents, my mom is crying, I'm crying, you know, and she's, you know, my dad is, you know, what are you going to do with the rest of your life, you know, all, all of that kind of, you know, guilt trip stuff. And I talk about it in the book is a very emotional moment. By the way, when I read the audiobook, you know, to prepare for this, it was way more emotional just reading it than, then writing it. But that's another story. Well, oh, you read it

yourself? I read it myself, yeah. And see, they always try to stop you from doing that because they think you're going to quit, but you have to read your own autobiography, you know, autobiography. Well, there's another, there's another funny part about it. So I'm reading the audio book and I get to the end and they say, oh, we don't usually do the acknowledgments. And I said, oh, we don't. Well, in this book, we do the acknowledgments. Of course. It's important to me. I mean, this is like, this is like, you know, my people's, my life. So anyway, so my parents are crying. I'm crying. They, you know, make me promise, you know, nobody wants to be there, you know, watching their mom cry, right? Right. It's brutal.

So they make me promise to focus on my schoolwork. And I tried to do it. But it was actually, you know, in the days after that that I really decided that this was what I wanted to do. Yeah. It is like a seminal moment in every young adult's life, especially entrepreneurs where you realize this is the path that few people take. But I have no choice but to take it. You find out that your university. allows you to take a semester off with no penalty.

So you do that and then you break the news to your parents, but you can always go back. But we all know where the story went after that. Yep. Yep. So at some point, there's an inflection point and you start selling a heck of a lot of PCs and then the company goes public. How old were you when you took the company public and how many people were working at the company at this point? I was 23 years old when we went public.

It was 19... 23. I was, it was 1988. And I think we had about maybe 150 or 200 people. Wow. Something like that. And we were growing at about 60, 70% a year. What is the...

Yeah, we grew 80% a year for the first eight years. and 60% a year for the six years after that. So if you start with any number and you put those numbers in, you get to, you know, 10 plus billion. Think about just the craziness of that. Were you the youngest public CEO ever at that point at 23? Might have been. I actually am still the youngest CEO to ever be in the Fortune 500.

Right. Even with all the greats that have followed, followed. But, you know, yeah, started, started early. What was it like going public back then versus today? Well, I think our IPO was like $30 million or, you know, was like a seed round, like a big A. Exactly. Yeah, you got to adjust for inflation. But it was the only source of capital.

You know, we were at the point where we were growing so fast and expanding into other countries and hiring tons of people, even with the efficient supply chain, we needed capital. It was the only place to get the capital. And we actually did a private placement before we went public, you know, about nine months before. You started to go to China at that time as well. What was going to China in the late 80s like to look at the supply chain? What were the factories like? What was that world like at that time?

And also Japan, I guess, was even bigger, right? I think. Yeah, it was, you know, the component supply and, you know, advanced technology, a lot of it was in Japan. And also, you know, Korea, Taiwan, China was sort of just getting going. as sort of a place to process, you know, capital and labor, and it was kind of basic assembly. So you had a lot of the more simple, you know, components and ingredients that were being starting to be built in and around the Hong Kong area and the Shenzhen area. And so, you know, I would go over there and, you know, meet with the companies and tour the factories

and, you know, really, really understand everything that was going on. Yeah, Akihab, was that, the Akihabra district in Japan, like where all the components were? In Tokyo, yes, Akihabra. Yeah. It's crazy. I used to love going there, still love going there. I know. Fascinated with technology and gadgets and gizmos, and they have, you know, the most amazing

display of all that there. Yeah, people don't know about Akihabra, but I found out about it when we started in gadget, at the blog, somebody who was a super fan of it started emailing us and they're like, hey, here's pictures from Akihabra of like cool stuff. And we're like, okay, we'll pay you $10 per blockpost to write about Akihabra. And we would have all these incredible things. But you go there and there's a building and, you know, this is the robotics building. And as you go up the floors, it's like it starts with the components. And as you go up, you get like more fully built robots and there's a floor for water robots and flying robots and crawling robots and just one

building after the next, it's like a geeks paradise. It's super, super fun. Yeah, and I started, I started going to Japan and then in 1987, you know, we started what we called Del Far East, which was our kind of technology liaison and procurement organization for Asia. And we were working with all the leading Japanese companies because we needed their displays, their semiconductors, their optical disc drives and, you know, floppy disk drives at the time. And, you know, all the, components and ingredients, you know, the Japanese had had great technology. They still do, of course. You had a great moment. I think it was in South Korea where you looked at the menu and you're like, yeah, three choices. Kimchi, one, two, or three.

When you were in Korea. I mean, it's not like that anymore, but when I was there, that's what it was like. So the company goes public. It starts to grow. And you have all these great stories of meeting Steve Jobs and also becoming friends with Bill Gates. And then I think it's a good transition to start talking about the company going private and your call ICAN stuff. But I just love this era of time where Steve Jobs actually came to Austin to show off. the Apple 2, and I'm not sure when you first met Gates, but make me take us through.

That was actually used to 1980 when I was in high school. He came to our Apple user group meeting and spoke. What was he like at that time? It's just hippie eating fruit and just crazy. What was jobs like at the time? What do you remember? What I remember is it was captivating. And, you know, he, you know, he, he spoke in broad, you know, uh, terms and, and, uh, it was, it was definitely, you know, highly memorable and inspirational. Yeah. And when did you first meet Gates? And then I want to talk about the story where Jobs wants you to put Mac OS on every

Dell PC. You know, you couldn't make an IBM, uh, compatible computer without MS DOS. Right. So, you know, you definitely, you know, went to Microsoft, you know, and, you know, so I spent a lot of time with Bill in the early days, you know, licensing DOS and then through all the adventures of Windows and beyond. But that, that, you know, kind of started around 85 when, you know, when, you know, when we started making, making our own, our own machines. our own PCs. What was he like at that time? You know, Bill, peak Bill Gates, you know,

in Microsoft taking over the world mode. He was aggressive and, you know, geeky and and, you know, definitely, you know, wanted what he wanted, you know. Yeah.

But, but, but, but also, also, you know, we built a strong partnership and it was it was yeah for the most part of win-win how was it negotiating with him like he was a frontline negotiator i understand and pretty aggressive about this is what you're going to pay for the operating system and you're not going to work on anybody else's operating system and just his way or the highway is true i wouldn't quite say it was that extreme and we actually had other oses i mean we've licensed

Unix from AT&T and tried to develop our own version of Unix in the late 80s. That didn't really work out. But yeah, he was aggressive, but the stories probably exaggerate some of that stuff. Yeah. And so Jobs gets kicked out of Apple and he decides to create next. And then he starts pitching you on, hey, maybe Dell should make workstations and the workstation business. You don't do that.

but then he gets back inside of app because there's no apps for Next. I mean, you could buy a Next Operating System, but there was literally nothing you could do with it, right? Like you could use the calculator and there's no apps were built for it. Yeah, if you go online, you search Next Operating System, Next OS, and Dell, you'll find some remnants of things

that were done. You know, it never really amounted to much. But, you know, as you know, that NextOS became Mac OS. Yeah. And so you know, Steve had this idea of licensing the macOS to us, which we were pretty interested in. But, you know, he didn't want us to pay for every copy of macOS that we used.

He wanted us to pay for every PC we shipped and just ship it on every PC because he was afraid that, you know, we would wipe out his hardware business. And ultimately, it wasn't, it wasn't a deal that made sense and, you know, it didn't happen. See, I think this is like a seminal moment in the history of both companies that I wasn't aware of. But if you think about that moment in time, Dells were booming. People are buying them like crazy. He wants you to put Windows and MacOS almost like a dual boot situation on every Dell. Yeah, the way it would work.

That's right. The way it would work is the machine would turn on and it would say, you know, press one for Windows and two for MacOS or something like that. Wow. Then it would... Load the operating system. We knew how to do it technically. It wasn't a big technical problem. But if you think about that moment of time,

Apple just could not get market share from Windows. Windows was crushing it. They were moving much faster. They allowed any number... Anybody could make hardware for Windows. Their share of PCs peak, you know, before IDM introduced the PC. Right.

So just going through the scenario, the what if, if Steve said, you know what, just give me a dollar for every time they, every PC you ship instead of probably he asked for 50 bucks or 100 bucks. Oh, you mean if he'd asked for a dollar for every unit? Yeah. Because what did he ask for 50 bucks or something, 100 bucks? It ended up being a kind of an obscene amount of money.

hundreds of millions a year because of the number of machines that we were shipping. Right. You know, by that point, we were shipping, you know, tens of millions of machines per year. So, but imagine the scenario when he said, you know what, I just want to beat Microsoft. I want there to be more MacOS machines than Windows machines.

I'll give it to you for $100 million flat license fee. You take the deal or $50 million or whatever he gives it to you for. How would the industry have shaped up after that? Yeah, it's a great question. And one of the other open questions then was, okay, you're offering us this deal, which isn't very good right now, right? What happens in three or four years? And he wouldn't commit to continually offering it to us, you know, in five years or ten years,

which I didn't like that at all because, you know, it could have been a situation where We created a whole bunch of new users and then we couldn't create a follow-on product, which wouldn't be a good strategy for us. Take us through the laptop era because that was something. I was in IT at that time in the early 90s, and lugables came out, and there were, Dow had one and Compact and HP. We're all coming out with these seven, eight-pound laptops. And I think Gates was on this very early.

Apple had one eventually but it seemed like they really sucked and people were down on the market but you stuck with it explained that decision making and what it was like because these things didn't even have batteries at the time I believe they were just plug in lugables

that were what eight pounds, nine pounds? Well no they were much more and Compact actually started with the original lugable and the thing was basically like a huge briefcase I think it weighed you know, 15 or 20 pounds, and it was basically a transportable desktop computer. You had to plug it in. But then, you know, as you started to have better battery technology first nickel

metal hydride and then lithium ion, as you started to have the transition from, you know, CRTs to LCDs, the miniaturization, you know, it was clear that you were going to be able to have portable computers. And the other thing it needed to happen was the semiconductors needed to use less power because they were designed for a, you know, continuous active current. And that was just, you know, way too much power and they wouldn't have long battery life. So, you know, we, everybody in the industry was focused on how do you, how do you make, you know, a machine that's the size of an eight and a half by 11 sheet of paper, right? that's not super thick.

And you can go find videos of me proudly displaying, you know, these machines, which are kind of laughable by today's standards. You know, today it's like super thin laptops and incredibly powerful. But back then, you know, the idea of being able to take your computer with you was just amazing. You know, we had modems. There was no wireless technology. but all that was part of the origins of what we all enjoy today.

And take me to the moment tablets came out. Do you remember seeing like the early prototypes of tablets? And what did you think of that technology, what eventually became iPads? But obviously Bill Gates was super interested in this idea of flippable laptops where you could have a pen, et cetera. But he missed it and jobs figured it out. why?

Yeah, there was a lot of focus on pen computing. And as you said, Gates and Microsoft had focused a lot on that, but it never really stuck. And, you know, Windows was never really built, you know, to work well with a pen. You know, and then jobs for, you know, all of his genius, you know, kind of went from iPhone, you know, to iPad. which was a great easy-to-use device. I think at the time, one of the things that I remember about that, not only was it high growth, you had all sorts of Android tablets that were springing up then. We got in that for a while, didn't turn out to be a particularly good business,

sort of an overcrowded space. And then it kind of waned as people saw that this, was a great device, but not necessarily a replacement for the phone or the, or the PC. And, you know, if you think about it, you know, inside a company when we sell mostly to businesses, are you going to, are you going to pay to have every person in the company have a phone, a tablet, and a PC? You know, so you started having these convertible, you know, laptops that would flip over or detachable two and ones and that sort of thing. And, you know, I think one of the things that that kind of enabled us to go private in a way, right,

was this idea that the smartphone and the tablet were going to just take over the PC, nobody would buy PCs anymore. Right. And, you know, it got to a point where, you know, our valuation, I thought was pretty ridiculous given the future prospects of the company. Yeah. What was the valuation back then? And it's a great accounting of basically people coming to say, you know, we think we

can take this company private. And it was like, is that even possible at the time? And it's kind of like a barbarians at the gate kind of moment where you just have all of these private equity folks. And then eventually, you know, the, the, the sharkiest guy of all, Carl Igan comes in. there. The joker. The joker.

He literally is like the joker. He just, I'm going to cause chaos. And he's like, should be retired. And he's just throwing bombs and burning people's money to try and make an extra three bucks or share or something. It's kind of a sad figure in a way. Or, or 10 cents a share. Or 10 cents a share.

Yeah. So, so basically what happens is all the predictions become nobody's ever buying a PC or a laptop again. Dell equals PC and laptop. even though you had a huge server business at the time. But basically, server storage, software services. We had acquired tons of companies, built all kinds of new things.

But nobody really cared. You know, they associated us with the original business, which is still a great business, by the way. We're shipping more than ever. And we had 27% growth last quarter and PC revenue. Well, I mean, that's the great irony of it. You know, these machines have become so good. But if you look at today's modern laptops, I mean, the jump in cameras, audio, the speed,

you know, the speed of Wi-Fi, everything has just come together to make them incredible bargains as a device. For $1,000 or $2,000, you have a machine that is extraordinary. Right. And in the last 18 months, I think everybody got this real, you know, crystallization of how, you know, the PC was the way that they connected with whatever they were doing in the world. All right. Healthcare, education, work, entertainment, every aspect of their life.

The PC, you know, was at the center of it. It's not to say they weren't using other devices too. You know, I think it's an and, not an or. And so going back to 2012, 2013, that sort of situation, you know, created this opportunity to go private and, yeah, it was a lot of fun. Going private. How did that help you with running the business and sort of reorganizing it, reframing it for the public markets and eventually going public again?

Yeah, I felt the company needed to transform and move faster to create all the new capabilities that we've been able to build. and, you know, being public, your transformation is just rate limited. You know, the market wants you to deliver certain things. And actually, the market didn't like the investments we were making in the new areas. And, you know, they wanted near-term earnings out of the existing business. What was it? Yeah, what acquisitions turned out to be the best ones, the most transformative?

Well, certainly the massive one that we did after we went private, right, was EMC and VMware. And that was the biggest merger acquisition ever in technology. And, you know, that's worked out super well. We added about 30 billion in revenues in organic growth on top of the acquired companies. and built a number one position in basically every form of cloud infrastructure, you know, storage, you know, compute, you know, backup, cyber recovery, you know, PC revenues as well. How do you look at Amazon Web Services as a competitor and just what they were able to build. Well, they've done a great job. I mean, you know, the public cloud is continuing to grow.

You know, we see it as kind of co-opetition. And, you know, customers want not the public cloud or the private cloud. You know, they want both. They want kind of this multi-cloud environment. And increasingly, we're seeing workloads showing up, you know, in many, many different places. a ton of growth at the edge. And, you know, as we look at everything in the world becoming intelligent and connected, the growth in computing at the edge is tremendous. And companies are figuring out where's the right place for any given workload. We also see, you know, a lot of startups that, you know, kind of start in the public cloud and then they get to a certain scale and they say, well, you know, we're spending incredible amounts of money here.

It's kind of like we're living in a really nice hotel, you know? And so, gee, you know, let's go to a Kolo, Dell buildout infrastructure for us. We can still pay for it on a consumption basis. And so, you know, it's still OPEX. It's not, it's not capex. But it costs a lot less. And so you see lots of different models emerging beyond just everything to the public cloud. I'm curious as we wrap here and encourage everybody to buy the book, play nice.

But when you take a pause here and just go buy it. And I'm going to listen to it again with the audiobook. Because I didn't actually get to listen to yours. I listened to a computer speaking to me because you accept me a nice early PDF. I'm curious what you think of what is going on. China. I know this is delicate because I'm sure you have deep relationships there. But we've seen, you know, some changes in how they look at entrepreneurship and the markets. How should America manage this relationship with China and the region, you know, around it?

Well, I think there's a real risk of a bipolar world, you know, emerging. And we may already be in the midst of that. I mean, we have a significant business. China, right? We, you know, sell our products in China, and it's our, it's our second largest market to sell our products after the United States. So it's quite substantial. And we do a lot of things in China that are just for the Chinese market. It's also a place where a lot of our suppliers, whether they're Chinese or not, have located their factories because China has made itself a really efficient place to process capital and labor. And they've, you know, deterministically invested in strategic industries. I think, you know, the U.S. is now starting to wake up to the fact that it

needs to invest in strategic industries. And you see this focus on semiconductors, for example, which I really applaud because, you know, having all of that go, you know, overseas is not, it's not a wonderful thing. Yeah. So, and certainly as, you know, as we think about security and 5G and how embedded all these technologies are in the fabric of every aspect of our lives, you know, it's really important that we understand, you know, where the technology comes from. And we're quite involved in making sure we have a secure supply chain to, you know,

help build that secure world. And entrepreneurship in America seems to be, you and I get to see companies because we both like to angel invest in them and invest them. So we see the best of it. But we're also seeing something generational, maybe kind of people leaning a little bit socialist or maybe less enthusiastic about capitalism as we grew up. I think we're both Gen Xers. And it was kind of awesome to start a company.

And the technology space was something that was revered and we were loved and considered heroes and rebels and pirates. And it's awesome what you're doing. And now all of a sudden these companies are very big, including yours, including Google, Facebook, etc. They have bigger impacts. And so maybe we're seeing a little bit of concern. Do you think some of these big tech companies should be broken up and that would be better for entrepreneurship? And then just generally, young people and their view of capitalism seems to be waning at the margins. What are your thoughts?

Yeah, you know, I think... You and I talked about this over sushi in a major way for hours. We did. We did talk about this. Look, I think there are occasional roles for government when some of these businesses get too big and too powerful to step in. You know, I am a free market capitalist. I'm not going to apologize for that. It's just what I am and it's what I believe.

And look, I would be hopeful that... you know, more people will will have self-determination, right, as their guiding principle, right? And they'll want to go start companies. I mean, the great news is in America and in many places in the world, there's a lot of capital and a lot of bright, talented people who want to go start businesses. And they're not sitting around complaining, waiting for the government to fix it or, you know, blaming on somebody else. And I think those are the people that are going to build the future. Yeah. And, you know, that's kind of how I think about it. Yeah. Less so the people may be complaining on Twitter about how unfair the system is. When if you look at the system,

objectively, there's more capital available than there ever has been. More diversity we're seeing intact. I mean, it's pretty extraordinary how much things have changed and the opportunity seems greater than ever. It does seem nice that Apple lost this case for the, because I'm a free market fan as well, but with the app stores and being closed, you know, something Apple always loved being,

you know, from Steve Jobs on, it's kind of in their DNA. I'm wondering how you think about, you know, them losing the ability to control apps or maybe just payments right now they lost, but do you think it should be more open like Windows is, Android is, allow people to side load stuff if they want to?

and that's a good direction to go in? You know, I'd say, I'd say I kind of like how Microsoft is doing it. It's more open. We certainly have more choices. But I'd even like more choices than that, you know, as a Microsoft partner. So, you know, you're not going to hear me argue that, look, I think open systems and the ability for a strong ecosystem to innovate are what drives a lot of progress. Let's take this example of kind of 4G and 5G.

What's happening with 5G is you have this disaggregation of the hardware and software layer, and all the functions in the network are becoming pieces of software. And there's an enormous ecosystem of new companies springing up that are building those pieces of software, whether they're here in the United States or or in Ireland or Israel or, you know, Singapore or wherever, right? And so that kind of software-defined network to telco creating this open ecosystem, you're going to get way more innovation, way faster than kind of the, you know, proprietary monolithic stacks that you have from the kind of historical telco world.

So that's going to be better for customers. It's going to be better for innovation. It's going to be better for progress. So that's the side I'll find myself on. It feels like there's another step function coming in access to broadband and just ultra-broadband, people having gigabit speeds on their mobile devices, et cetera, kind of enable a whole new class of applications. And then of course, Starlink, what Elon's doing with satellites. I mean, the ability to beam high-speed internet anywhere from lower Earth orbit satellites,

what impact you think that all has? Yeah, that's amazing. And, you know, if you just think about, you know, what's happened in the last three or four decades, you know, that I've been doing this, I think it's all just a pregame show to what's about to come. Really? What's about to come? Well, you get these low latency networks where every single thing in the world becomes intelligent and connected. It generates enormous amounts of data. all that data used with AI and machine learning turned into competitive advantage and better outcomes for students, patients, business, society, etc.

I think every aspect of the world gets upended, reinvented, reimagine. That's super exciting. And I think it's going to happen faster than people think. and I think it'll create tremendous opportunity. And it'll be a great one for many entrepreneurs. Well, listen, I want to talk to you for about five hours. But apparently, despite all your massive success and taking this company private, public, private, public again, you've got to get off this call to do a sales call. Michael Dell is still doing customer support calls.

You're on a customer call after this, correct? Yeah, I mean, I love meeting with customers. I thought that was my job. It's kind of how you learn, right? You talk to your customers and you ask them, how are we doing for you? How's it going? And all of that, all of that is important. And so, yeah, my next call is with a great customer.

And just to end, this pandemic, is it going to end? And what will going back to work look like? What do you think? Like, it's just going to be a permanent work from home thing or you're old school and you believe people need to be in an office to make great world class products? I mean, you do have all these great monitors now and everybody's home setup seems to be working. So it's work from home here to say? I think work from home is here to stay. I think we have catapulted into the future.

And what we had in the last 18 months was kind of a glimpse of what the future is going to look like. I think it'll be hybrid. You know, we'll come back to physical offices at times for special events and to, you know, be together and to, you know, innovate and collaborate, you know, in a way that we can't do over a screen. But work is something you do. It's not a place. And I think we've all, you know, had that crystallized in our minds in the last 18 months. And I think we're all better for it.

And people certainly love the flexibility. You know, each organization will decide what's right for them. But, you know, hybrid's here to stay. And it turns out you need a lot more of everything we sell to do that. And look, I didn't make up this game, but it turns out you need a lot more of everything we have to play. Yeah, absolutely. All right, listen, Michael, thanks for coming on the program. Congrats on the book.

It's amazing. Everybody go buy it. And hopefully I'll see you again soon when I'm in Austin. Awesome. Good luck on your customer support call, Michael.