In Conversation with Michael Dell

You might be the only founder-CEO who’s stayed at the helm through so many eras—mainframe-to-PC, PC-to-Internet, cloud, AI. From the outside it looks perfectly planned in retrospect, but was it really? How do you survive and be so resilient across all of these eras?

Part of it is waking up every morning and asking what is the most right thing to do at this particular moment. Take AI: we knew that data was valuable, but for years and years, most organizations just stored and protected it; they didn’t actually use it. We hypothesized that at some point the data would be unlocked. Machine learning started, and a few organizations figured things out. But if in 2019 you asked the top hundred AI scientists whether large-language models would change everything within five years, ninety-nine would have said no. 

History shows that predictions are mostly wrong; nobody really knows. So you react to the situation, but with frameworks and constructs in mind. We knew AI would be big—we just didn’t know when or how, and nobody did.

So the takeaway on AI is partly timing. What about earlier eras—the cloud shift, going private, moving from PCs to everything in the data-center? How much of that was premeditated versus reactive?

We went from PC to server to storage. The motivation was clear: we built microprocessor-based systems, and eventually CPUs, OSs, and networks became powerful enough to replace mini-computers. We tried servers in the late ’80s and it was too early. We got serious in the mid-’90s, as Microsoft’s Windows Server and Linux rose. Networking finally linked machines (computers were not connected together, which sounds ridiculous now); client-server emerged. We had this killer business model; our supply-chain and direct model made the PC-to-server jump logical. Server-to-storage, adding services, adding more capabilities became the logical thing to do.

Interesting. Networking and AI both feel “slow, then sudden,” but servers felt like “we knew, tried, paused, tried again.”

We introduced the server in 1989 and it was just too early. We had our own version of Unix, that was too early as well

Was it too early for the market, meaning that customers weren't ready?

Yeah, the market wasn't big enough and there wasn't enough of an ecosystem out there.

You seem to build duration into everything that you do. For instance, you have a 35-year marriage; you don't drink; you regularly exercise. Why?

Because the opposite is horrible. I don't want the opposite of those things. It's pretty simple.

You come from means that are pretty different than how your kids grew up. Yet, knowing what I know about Zach, your son and founder of Base Power, your children have grown up extremely ambitious. How do you keep your children motivated as a parent?

That's a great question. Some of it is definitely the genetic lottery. Every child’s different; some have intrinsic motivation and some don't. I'm not calling my children every day and saying you need to do more. They want to do what they're doing and that's great.

My kids definitely grew up in a comfortable environment, but that doesn't mean we did everything for them or made it easy. In our house, the rules were the rules. If you wanted something, you had to work hard for it, or save your money, or whatnot.

The thing with parenting is you have to be helpful but not too much. And you have to figure out when you want your kids to make mistakes and to learn from those mistakes and to understand that actions have consequences in the real world. You want them to be responsible and productive and I think that starts with a good example. Our attitude was that you can do what you want within reason, but certain things are expected of you.

Is there a way a parent can foster curiosity? Is it as simple as exposing a child to a hundred different activities and hoping that they get obsessed with one as much as you did with breaking electronics as a kid? What's the means?

I was really fortunate. My parents didn't quash my curiosity. I took apart televisions, telephones, anything that was around the house. They understood that I was curious and liked to learn about things, and did not stomp that out. I was really fortunate in that way because a lot of parents could have said, "What are you doing taking all this stuff apart?" and demanded that I stop.

Not only did they stop from quashing it, but they tolerated it. In addition to solely tolerating the behavior, did they lean into it in a way? Encourage you to pursue technology or engineering?

They didn't create any barrier for me to explore the things that I wanted to explore. They were loving, caring, nurturing, and as long as I stayed in school and did right, they were there for me.

In those teenage years, your parents resisted your desire to purchase an Apple II at first. What was the theory behind that? Was there a concern? Was it purely financial? Did they know you would just break it apart like every other gadget in the house?

They just didn't understand what I was doing. I was doing a ton of things and it was hard for them to understand what and why.

Got it. So it started as resistance and then it ended in tolerance, similar to you breaking all the other electronics around your home.

Yes, and over time I had earned my own money. So it wasn't their decision.

You didn't get into the same prestigious grade school as your brothers. Did you care?

Not really.

Why not? Do you think your brothers would have cared? I ask because I'm trying to separate nature versus nurture in that you all grew up in a similar household and were taught similar things, but it seems like you were wired a little differently than your siblings.

We were all pretty similar, but I'd say my risk appetite/tolerance was different. And that's clearly been a feature of my being. If I look at any particular thing, it never seems like a particularly big risk to me. Maybe it will work, maybe it won't work. Let's try it and no big deal if it doesn't. It's not life or death. It is just a risk.

That's interesting. The risk of failure was probably more mental than anything else in the early days.

Exactly. My attitude was, "I'll start this company and if it works, great. If it doesn't, I'll just go back to college.”

If we go even earlier, were there areas where you honed the ability to not care what other people thought of you? 

I just never really cared much about what other people thought. I mean, let's say you were my friend and I cared about what you thought and I asked you and you thought it was a bad idea.

I really didn't care. I thought it was a good idea and most of my friends didn't really understand anything about what I was doing.

Was there something special driving you to want to be something more? Was it proving something to your parents? Was it proving something to your brothers? What was it that kept you going?

It wasn't really wanting to be something more. It was just curiosity and obsession. I had the opportunity to do something interesting and I was excited to go with it. 

I was interested in the role that technology was playing in the world. And I knew that there was probably an opportunity there. I wanted to learn all about it because I was curious. I wasn't thinking that this was going to be a giant company or people would know what I did. I didn't care about that.

It sounds like you were just going with instinct and following your curiosity. If for some reason you grew up in a slightly different circumstance where you weren't exposed to computers, do you think you would have ended up starting something no matter what? Maybe in a different industry?

Probably, yeah. I would have never gone to work for a big company. The idea had no appeal to me. I would have rather started my own company.

When I was a kid, I used to see people that had started companies. These were the people that I admired and I learned about. Ted Turner, Charles Schwab, and others.

It’s 1988, you're 23 and the company is going public. Nobody else at 23 had taken a company public. Did people look at you in a different way for being young, whether investors or bankers or whomever?

Lee Walker was the president of the company, and he was maybe twice my age. People would talk to him and he buffered their doubts.

In all honesty, back then it wasn't super complicated. If you were a company of that size at that time, the only way to get capital was to go public. There was no private equity, it just didn't exist. We were growing super fast and we needed capital, so the only route to get that capital was to go public.

Did you feel some level of impostor syndrome?

Not really. There were other people that had started companies that were successful. For example, Bill Gates and Steve Jobs. They were just 10 years older than I was. So they had normalized it in the sense that there were people who had blazed a trail before me. 

A 23 year-old CEO was unusual, but not something that had never been seen before. What I do remember is that when I went to Japan, it seemed highly unusual and the cultural differences were even more stark.

In the United States, the general thought was, "Okay, we have a 23 year-old entrepreneur in computers from Texas. Okay, we get this."

If the venture capital factory had existed the way it does today, would you raise a seed round and then a series A, series B, series C? Do you think you still would have avoided it given that you were profitable most of the way?

We didn't need capital. If somebody had showed up and said, "I want to buy X percent of the company for this price," I would have been pretty skeptical. I had a lot of early skepticism.

I feel like there are a lot of companies that are born unprofitably and stay unprofitable for so long, because that's what they're taught. And more companies have too much capital as opposed to too little and that can be a real curse. The fact that we didn't have capital caused us to create a lot of the foundations of our business model that allowed us to be very successful, which led to a structural competitive advantage that allowed us to flourish.

Yes, constraints bred creativity. I love the story about you placing a big Dell billboard and right outside of the Compaq office [Billboard read: "158 Miles to Opportunity," with an arrow pointing towards the Dell HQ]. What gave you the boldness to so directly challenge an established rival?

We needed engineers. We could hire them out of school, but it would take time to train them. And we needed engineers who knew how to design microprocessor-based systems.

Compaq had them; we had success hiring people from Compaq as their culture was more like our culture than IBM's culture; and we wanted more. And so somebody came up with the idea of putting a massive billboard right outside their headquarters that said, “150 Miles to Opportunity” pointing to Austin. Culturally, it worked: UT grads could come home.

I love how bold you were and how you just went for things. As the CEO, was there emotional attachment to any of your ideas or did you just double down and do whatever was working well?

It's all about the objective function and the objective function was success. Not emotional wins. We basically said, "Okay, this works. Let's do more of that. Doing this doesn't work.We won't do it anymore.”

Okay, so the internet now comes around. What were the first thoughts that are going through your head as you're reading the news about the internet? Is it a shock to the system that could disrupt Dell? Is it we need to reinvent what the PC means to be better poised for the internet?

The history here is that we had tried all kinds of ways to connect with our customers—direct advertising, direct mail, sending catalogs, calling the customer on the phone, sending them a fax, et cetera.

As the World Wide Web came along, I built a machine and I put Unix on it. I got a direct connection online, and as I was browsing the World Wide Web, more and more websites were popping up. My immediate reaction was amazement, and I thought that we can put our catalog online and people can go and see it. We could then make it interactive, and then eventually we could convince customers to order online.

That was the early days of e-commerce, and you saw Amazon and other companies start to sell online. It was then that a light went off in my head. I thought, “Oh my God, everyone's going to have this thing.” It was unbelievable, and we immediately felt the urgency to do this right away. It sounds ridiculous now, but at the time it was like manna from heaven.

Was that a huge market share gaining moment in direct to consumer?

It wasn't necessarily just direct to consumer because it didn't change the fact that we were still 85% non-consumer. We created the online configurator and all these things where you could customize the machine and learn about it. There was a whole art form to how we romanced our products online, like with spinning images and other things.

I remember. I felt it when I was a child, spending hours on that configurator.

Okay, so fast forwarding a bit to when you took Dell private. You raved about Silver Lake repeatedly in your book because they were a partner that understood the business at its core versus just asking about what was going to happen next quarter.

Fast forward to today when you're a public market company. What are the things that hedge funds, long-only/long-short investors are doing to impress you that make it worth spending your time with them?

Honestly, I don't spend too much time with them. I don't do the quarterly earnings calls though I meet with buy side investors that have a meaningful stake in the company and like to understand what their questions are. Some of them have super insightful questions, and I can learn a lot from them whether during the year or at our annual meeting with investors.

It seems easier than ever to stay private forever. Whether Stripe or SpaceX. you can be private indefinitely. Do you think that's the case?

I think it's more possible now than ever. But you can do it either way: public or private.

Is there a way to fix the short term shot clock approach of the public markets?

I think part of the problem is the companies and part of the problem is the investors. It's not completely a market problem or company problem.

We think we've more or less fixed it; we're focused on outcomes and results, but we're much more focused on the medium and long term.

You said you wouldn't work at a big company, how do you get other people to work at a big company? It seems like there are some executives who have been around for decades. How do you get people to stick around forever?

Well, you don't want everybody sticking around. You want the ones that are delivering and helping you succeed.

Part of it is, how do you grow and develop talent? How do you prepare people for bigger responsibilities? How do you encourage the kind of leaders that you want to create? That's just a combination of how you lead and the culture that you build. We've increasingly been growing talent internally, which is the right way to do it. If you have a company that's been around for a while and you're constantly replacing people with those from the outside, you're not being very thoughtful about how you develop talent for the future.

Having a revolving door of people that work at companies for a year or two and then leave is generally not a good formula for success. So we try to attract people that want to be at the company for a long time. If they work hard and they're capable, they'll have opportunities to learn and grow and succeed. It's not that complicated, but I think we have a culture that attracts people that want to stay and contribute and be part of something important, something special.

There's a line in your book that goes “What got us here won't get us there.” I think that was in reference to some leaders around the table and knowing when to move on. How do you know when to move on?

When you're starting or growing a business, you have a fundamental choice to make: are you going to limit the business by the business and its intrinsic opportunities (business model, market size, etc) or by a particular set of people. That's the choice.

If you decide that you're going to limit it by the set of people, then whatever those people can do, that's the business. If that's not the limit, then it's the business, itself.

But then all sorts of things happen along the way. I'll give you a little story about this. This is really interesting. So 1987, the year before we went public, we needed a CFO; so we hired a former treasurer at Standard Oil named Don Collis. We went public, and everything's great.

Fast forward a couple of years, the business is 10x bigger, and Don's struggling to be CFO.

So we say, “Don, this job's getting to be a really big, complicated job. We'd like you to be treasurer.” He goes, “Okay.”

So Don becomes the treasurer, and we bring in a new CFO, and the company, over many years 10xes in size. Then being the treasurer becomes a bit too much of a job for Don.

So we say, “Don, we'd like you to be the Director of Investor Relations. He said, “Okay, you bet.” Don made several hundred million dollars by not leaving the company. If he'd left, he would have made a couple million dollars, but he segregated his ego. His job was equally complicated and difficult at every stage, but because he didn't get so wrapped up in his ego, he ended up having an incredible career.

That’s about executives being able to grow at the pace the company's growing or faster and it always begs the question in my mind: How do you value CEO growth? Because CEOs are humans too, and they've never been trained for companies growing that fast, either. How have you seen the CEOs who have scaled with rapid growth and those who haven't?

Great question. I think you want someone who's very self-reflective about what they're not great at; very resourceful in attracting and growing talent; and not trying to make all the decisions themselves.

As a business grows from early-stage to mid-stage to later-stage, the CEO is going to be doing less and less of the hands-on and dedicating more time to strategy and resource allocation. It's not that the CEO is uninvolved, but he/she is involved in a different way when there were one-hundred people at the company. You want someone who is able to do that and grow in that way.

Earlier you mentioned taking risks, and that starting Dell never really felt like a risk to you. I have a question about risk as it pertains to buying EMC. 

There is Charlie Munger’s “avoid multiplication by zero” rule: even small chances of catastrophic loss can wipe out all gains—anything times zero is still zero. To an outsider, EMC felt like it could be one of those risks. I imagine to you, it didn't. What was the difference in information or perception that you had that made this look like a can't lose situation?

I wouldn't say it was a can't lose situation, but I knew that we had multiple ways to win and I thought the downside was pretty heavily protected. 

Everyone assumed that because of the cloud, EMC and VMware were dead, which was completely wrong. This was the same as assuming that Dell was dead because of the smartphone.

Servers and storage go together like peanut butter and jelly; there was a big opportunity in bringing together the leader in servers and the leader in storage. You could go to all these customers and say, "Instead of having to buy all these different pieces from all these different companies, we'll provide everything for you all in one place." We hypothesized that a lot of customers would say, "Great, I would rather do that than have to go assemble twenty different things. You're going to make it easy for me." Based upon that, we thought that we would be able to organically grow several billion dollars in revenues. As it turned out, it was way more than we thought. We added nearly $20B in organic revenue growth.

And we had another way to win: VMware, which we doubled in size in five years and made way more valuable.

We came up with this very clever way of buying this $67 billion business with their balance sheet and $4B of our equity. It was a big bet, but I thought it would work.

Was the financing structure the reason that you say the downside was limited?

Not necessarily. It was more that there were multiple ways to win. Regarding the financing, we had to pay down the debt; there was no success here without paying down the debt. 

Luckily, the PC business continued to generate strong cash flows. We had a great server business; they had a great storage business; VMware was a great business. All those businesses generated tons of cash flow so the path to paying down the debt was clear.

And if we went to our customers and said, "Now you can get all of this from one company," we would gain share. We were making their jobs easier and we benefited from it.

Okay, so it didn't feel too risky then. Was there ever a time in the business's history where you felt you just stepped back and thought, "I might be playing with fire here?”

I remember in the first couple of years, there were all sorts of things that felt that way. We could have gone out of business at any moment. We were fighting for survival, dealing with FCC approvals and things that felt existential

Dell is now 41 years old. How does Dell live to 100 years? Is that even an aspiration for you?

I think we can, but we have to keep evolving. This is what the company has constantly done well: understand how to solve valuable problems and make life easier for customers. There's plenty of opportunity to continue to do that. What will be the most important things in ten to twenty years? Nobody knows.

I'm not dismissing the importance of expeditionary teams, advanced planning, and advanced research/experiments. However, if you're relying on your perfect ability to predict the future versus your ability to be agile and to adapt to circumstances, you're going to do much better adapting or in creating a set of capabilities that allow you to adapt.

In an alternate universe, there's a world where Dell is one of the four or five hyperscalers out there. Was that ever a path that you’d considered going down?

I think that ship sailed by maybe 2014 or 2015. At that point the world didn't need another hyperscaler. Maybe we should have done that, but you can always play coulda, woulda, shoulda.

Okay, so Dell in 100 years. I hate to break it to you, but you might not be the CEO in 100 years.

Well, maybe my AI will be somewhere involved.

I haven't had that thought before, but I wouldn't be surprised if there was an AI-regenerated version of a CEO in the future.

Well AI is just incredible and fascinating and nobody quite knows what path we're on here. But wow, it's exhilarating to see the pace of the models improving. 

All we have to know is that no matter how you do this, it requires incredible amounts of computing power and data, which are the businesses that we are in, so we love that. We don't know what the models are going to be or how they're going to affect the economy or society, but we do know there's going to be more of what we're providing needed.

True, true. So, though you won't be the CEO in 100 years, how do you know when to hang it up?

You can probably do that by a process of elimination. At some point, hopefully not anytime soon, you'll probably be physically incapable. That would be a stop right there.

Personally, I'm not thinking about it anytime soon. What I try to do is have a company every year that is a little less dependent on me so that it can continue to operate without me. And I think that's happening. It's much less dependent on me than it was 20 or 30 years ago, but I'm still the CEO. And, back to your earlier question about developing talent, we have many incredibly talented people at this company. The key is: how do you challenge them? Prepare them? Test their thinking? See how they think? You do all of that to make sure the company's prepared to continue to grow.

Tell me about the philanthropic efforts.

Every year I spend a little bit more time on philanthropy and a little bit less time on Dell. It's a big opportunity to figure out how to repair the world a little bit and to make a difference in it.

We focus on children in urban poverty in the United States, India, Israel and Africa, and we've tried to make a meaningful change so that the trajectory of these kids can be different. And, more importantly, leave and have them stay on that trajectory without us.

In the United States, we have done a lot with charter schools. We've had lots of success creating and helping to build great charter schools. Additionally, we've done a lot with scholarships, particularly for Pell Grant eligible students. College is not a perfect thing, but it's a pretty reliable way for people who would be eligible for a Pell Grant to get into a better situation than they were in.

Additionally, we've done a lot in microfinance and a good amount of investing in businesses that have a social outcome and then using those profits back at the foundation to do even more of that. The compound effect of that over a long period of time is substantial.

We've fought against discrimination of successful minority groups. You see some places where anti-Semitism has been thriving and we are supporting efforts to combat that because we don't think people should be discriminated against for any reason, whether they're successful or not. In particular, universities that discriminate against minorities who are successful make no sense to me. Universities are meant to be a place where you learn about things and expand your view of the world, not shrink your view.

A lot of young founders today would give an arm and a leg for their companies to end up like Dell. Is there a North Star for you, even at this large scale, as you think about great leaders of the past or present, or even those that you aspire to be?

I've never really connected with the idea of aspiring to be like somebody else. I admire and respect the achievements of many great leaders and reflect on what I can learn from their successes and failures. Sometimes I want to adopt certain practices or approaches I’ve seen in them, but I don’t need to become them to do that.

Yes, be the best Michael you can be. One hundred years from now, is there something that you hope to be remembered for?

Being a great dad, a great grandfather, a great husband, those would be the most important things to me.