Michael Dell, Founder of Dell — How to Play Nice But Win | The Tim Ferriss Show

Tim Ferriss 0:00 [upbeat music] 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 MichaelDell. Michael is chairman and chief executive officer of Dell Technologies, an innovator and technology leader providing the essential infrastructure for organizations to 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 & 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/podcast, but for instance, as we mentioned, on Twitter, at MichaelDell. Michael, welcome to the show. So nice to see you.

Michael Dell 1:27 Great to be with you, Tim. Thanks for having me.

Tim Ferriss 1:29 And I thought we would just dive right into the action and begin with a story to pull people into your life [laughs] and, uh, the many adventures that you've had. You open 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?

Michael Dell 1:55 Yeah, well, it wasn't Meatloaf the, the band or the musician. Uh [laughs]

Tim Ferriss 1:59 [laughs]

Michael Dell 1:59 It was about, uh, halfway through the go private, and, you know, 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 basically didn't have any plan for the company, and, you know, that was my objective, was to understand did he really have any cards, or was he just trying to get me to, you know, raise the price a little bit? And I describe this very dramatic, you know, moment, [laughs] and I'm at his house, and it's very clear to me that he didn't have any plan for the company, but it was a fun and exciting moment about halfway through the go private.

Tim Ferriss 2:45 Now, for people who don't have any context, who is Carl Icahn? Let's, let's just start with kind of defining some of the players here, and then we're gonna bounce around chronologically. But for those who have no idea who that is, who, who is Carl Icahn? What does he do?

Michael Dell 3:00 So he's a pretty famous financier, sort of corporate raider, greenmailer, and general troublemaker who, you know, kind of finds his way into transactions where he can try to cause trouble and get people to buy him out, and, you know, 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.

Tim Ferriss 3:39 [laughs]

Tim Ferriss 3:40 Okay. So, so if we, 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 wanna go back to childhood and the beginnings, and then we're gonna jump around chronologically. But where does the title of the book come from?

Michael Dell 4:04 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, they would tell us, "Play nice but win," and it kinda stuck with me as a pretty good life philosophy, you know, to be fair, to be ethical, to be forthright i- in, in what you're doing, you know, in your dealings with others, but also don't forget to win, right? [laughs]

Tim Ferriss 4:33 [laughs]

Michael Dell 4:33 And so some people just, just remember the play nice part, but there's also that, that win part which is also important. But yeah, that's, uh, one of my earliest memories is our parents telling us, "Play nice but win," and so it's something that's stuck with me and something we talk a lot about at Dell.

Tim Ferriss 4:51 And, uh, 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 said, "He really is just the nicest guy [laughs] imaginable, and his whole family is nice." [laughs] And that has been my experience, and it's always fascinated me because I imagine many people listening will immediately conjure counter examples 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 constrained, if you're taking certain options off the table because you view them as unethical or otherwise, that, 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?

Michael Dell 5:51 I think life is a, is a long journey, and, you know, your, 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, and nicely It comes back around to you in very positive ways. And it's, it's just a, you know, it's, it's certainly what I feel comfortable with, but it's also a lot simpler way to live your life from my perspective

Tim Ferriss 6:19 [laughs]

Tim Ferriss 6:19 If we go back again to, I guess, your adolescence. Now, this, 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, a context and a pretext [laughs] for doing it when I have these interviews. And what I'm looking at here from an interview is what the journalist 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 at 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, are those statements accurate? Is- was that part of, of what happened in terms of the, the secrets to the success with the newspaper subscriptions?

Michael Dell 7:10 Yeah. Yeah, that's very accurate. Yeah.

Tim Ferriss 7:12 And h- how did you arrive at, if you remember, recruiting friends to look at the public records? I g- I, I suppose that's just not something that would immediately occur to a lot of 17-year-olds.

Michael Dell 7:27 I remember exactly what happened. I got this job, and I was a telephone solicitor, and I worked at the Houston Post in Houston. It's now defunct. It's, 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 'cause I got an award. I thought 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? [laughs] And, and one of the easiest things was you just sounded like the people you were talking to. So, [laughs] you know, you, you just sort of picked up whatever accent they had. I won't do any of those for you today.

Tim Ferriss 8:25 [laughs]

Michael Dell 8:26 But, but, uh, I, I think I got reasonably good at that. I also noticed that there were some trends of people... 'Cause you talk to these people and you're, like, you know, 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 just, you know, relocating to a new place. They were getting a mortgage, something like that. And I figured out that in Texas, as in many states, when you wanna get married, you have 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 wanna 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-

Tim Ferriss 9:30 [laughs]

Michael Dell 9:30 ... which is, like, the perfect address to send this offer to, you know, get two weeks free for the Houston Post, and then if you wanna continue it, here's the deal. And so I started in Harris County, which is where Houston is, is centered. But then, you know, there's, like, 16 surrounding counties, so I hired a bunch of my buddies. You know, we had Apple II computers back then, and we'd go to these counties, type in all the names and addresses. I did this massive direct mail campaign. And yeah, that's when I was 16, 17 years old.

Tim Ferriss 10:06 [laughs]

Michael Dell 10:08 A lot of fun.

Tim Ferriss 10:09 It sounds like a lot of fun. I mean, you've deconstructed the system. And was anyone else doing this or were you doing this by yourself? Were you the sort of lone ranger in this approach?

Michael Dell 10:19 I was kind of a lone ranger, but I hired some of my high school friends to go to some of these counties 'cause there were 16 of them and I couldn't really do it all myself.

Tim Ferriss 10:30 Mm-hmm.

Michael Dell 10:31 The other thing that was happening in Houston was it was kind of a boom town at the time, and sort of like, you know, in Austin now, there's, like, all these condo complexes and apartment complexes going up, and you just go up to the, you know, person sort of running the thing and say, "Hey, you know, I've got this great offer for all you new residents. You know, c- can you please put this in the welcome kit, you know?" And th- 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 subscriptions.

Tim Ferriss 11:03 And around that time or in your, let's just say early mid-20s, were there any particular entrepreneurial heroes or figures you looked up to or tracked closely, read about, anything like that?

Michael Dell 11:18 I think it actually started, you know, before that. When I was a kid, I mean, I saw, you know, Charles Schwab, who started this Charles Schwab business, which was pretty cool. Ted Turner, Fred Smith from Federal Express, you know, William McGowan, who had created MCI, and then of course Bill Gates and Steve Jobs, right? Who are about 10 years older than I am. And all of that was super interesting to me. My mom was a stockbroker. You know, in our family, w- we didn't talk about the football game or things like that. We talked about the economy and oil prices and which stocks, you know, were interesting, and I was really intrigued by all that. And so those entrepreneurs were definitely inspirations.

Tim Ferriss 12:09 You wrote your first book in 1998, so you've taken a 20-plus year break. ... on the books, and I've, I've read that at the time that you published that first book, you didn't feel comfortable disclosing perhaps as much as, 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, uh, you weren't comfortable talking about then that you are comfortable talking about now.

Michael Dell 12:38 Well, there's so many things. I mean, I was, I was not really comfortable with vulnerability in my 30s when I wrote the first book as, uh, you know, in the way I am now. So one of the stories, I talk about how I got arrested [laughs] .

Tim Ferriss 12:54 [laughs]

Michael Dell 12:56 Uh, probably not a story I would have told, you know, 20 years ago, but you know, I was, I was sort of a irresponsible young guy, you know, running around in fast cars and got way too many traffic tickets. And one time I got, I got one too many and, uh, got pulled over, and literally, you know, I was taken downtown in the back of a Austin Police Department, you know, cruiser, fingerprinted and everything. Fortunately, they let me go. Felt really bad about it 'cause I always had a lot of respect for the police and any, any member of the public service. But, um, yeah, there, there, there's, there's a bunch of stories in there about, you know, things that went wrong and, and mistakes made, and I wanted to kinda tell the raw and authentic story about how the company, you know, really got going, and there were, 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 kinda surprised by it, but you know, maybe I shouldn't have been surprised.

Tim Ferriss 14:07 [laughs]

Tim Ferriss 14:09 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 that stick out to you. Uh, are there any particular formative experiences that fit into either of those categories that come to mind?

Michael Dell 14:26 Yeah, I'll g- I'll give you two that happened in the, both in the late '80s, right about the time, you know, kind of in the, the year after we went public, and we did a, a pretty public face plant as it were. Uh-

Tim Ferriss 14:41 [laughs]

Michael Dell 14:41 ... you know, the, the first one was we were ramping up our technical capability and, you know, sort of getting bolder and bolder in engineering, and we... You know, it was, it was around the time of the '88 Olympics, and we had this big program that we, we code named Olympics, right [laughs] and, uh, and it, it had multiple microprocessors and all kinds of new inventions, and turned out to be way too aggressive and bold, and it, it failed. Now I think the lesson from that was to be a lot more pragmatic and focused in 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, and led us to a lot of growth. One of the other big mistakes we made around the time, you know, now a lot of people talk about Dell supply chain and just-in-time inventory and all that great stuff. Well, turns out, you know, the, the [laughs] 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, and we had designed our products with the older type and got caught in a real mess which, you know, caused our, you know, fledgling company to, you know, alm- almost go out of business and, you know, stock to go down. It was, it was really embarrassing, but painful lesson that we learned, and that became the basis of, you know, a, an enormous muscle that we built around just-in-time inventory and supply chain excellence-

Tim Ferriss 16:37 Mm-hmm

Michael Dell 16:37 ... that served us incredibly well and went on to fuel all sorts of successes for us.

Tim Ferriss 16:43 You know, it makes me think. There's of, of so many examples that come to mind, like, uh, 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, right? 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, uh, do you view these 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?

Michael Dell 17:30 Uh, no, I was super bummed about it [laughs] .

Tim Ferriss 17:33 [laughs]

Michael Dell 17:34 Uh, and, and, you know, unhappy, but it just made me wanna go at it harder.

Tim Ferriss 17:41 Mm-hmm.

Michael Dell 17:41 And I, I probably didn't internalize the lesson in the moment as, as much, but you know, there's no such thing as success by itself, right? You know, failure is, is always an ingredient of success, and in a, in a business when you're doing new things, it's always experiment, try, fail, learn, do it again, and then, you know, finally, hopefully maybe you get some success, right?

Tim Ferriss 18:09 Mm-hmm.

Michael Dell 18:09 [laughs] But failure is a, is a key ingredient in any success.

Tim Ferriss 18:15 When you mentioned, uh, this, this might seem off topic, but I'm curious 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?

Michael Dell 18:34 Yeah, you know, I think, I think it's a function of age somewhat and just maturity. And, you know, uh, also I would say, you know, when I started, I got off to, to an early start in, in life, and I found myself in the position where people were always asking me for things, right? It was pretty uncomfortable because [laughs]

Tim Ferriss 18:54 Yeah. [laughs]

Michael Dell 18:55 And so I kinda developed a little bit of a Teflon coating, you know, to, to distract or deflect those requests, and at the same time, I'm pretty introverted, maybe deeply introverted, right? [laughs] And so all, all of that combined sort of, you know, left me in the situation where I wasn't very disclosing, wouldn't really ex- explain, you know, failures or what was going on. So I think, I think some people, you know, sort of looked at the, the origin story or the first, you know, decade or so, maybe we didn't really explain, you know, all the, all the difficulty that, that went into starting a business like this and I wanted to talk about all that.

Tim Ferriss 19:43 Hmm. What were the toughest periods for you personally with respect to the business and the trajectory that it, that it has had? Were there any particularly dark days that come to mind? And s- specifically I just wanna talk about what got you through that period, what happened, and how you coped with it. Ex- uh, certainly with the success ingredient you have the, the failure component, and I would love to explore that a bit just to, to humanize the, the entire journey that you've been on.

Michael Dell 20:19 I would say I'm pretty high on the determination and, and grit scale [laughs] and so-

Tim Ferriss 20:24 [laughs] Yeah

Michael Dell 20:25 ... was always looking through to the other side, no matter how dark it was. I mean, there, there were periods certainly in the early '90s where we had grown really fast and everything started to fall apart. We kinda went from a half a billion to two billion in revenues in a very short period of time. You know, 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.

Tim Ferriss 20:55 Wow.

Michael Dell 20:55 And everything started to fall apart. You know, 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 it seemed like every day, every month, the news just kept getting worse and worse. And yeah, I mean, it's a problem you have to solve, but certainly, you know, 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, right, to make this work [laughs]

Tim Ferriss 21:40 [laughs]

Michael Dell 21:41 They move their whole family to Austin, right, to help this company grow, and you know, if I, if I screw it up, it's gonna be not only really bad, but embarrassing and, and a, and a great tragedy.

Tim Ferriss 21:57 Hmm.

Michael Dell 21:58 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 [laughs] which-

Tim Ferriss 22:11 That makes, makes things hard. [laughs]

Michael Dell 22:13 Yeah.

Tim Ferriss 22:13 Yeah.

Michael Dell 22:13 And I'm the CEO of the company. It was just a short period of time, but it was, you know, pretty weird and if you go back and look at the press, I mean, there were times when it was totally unclear what was gonna happen, and yeah, those were some pretty dark moments. I mean, fortunately, you know, my, my wife was there supporting me and I had, you know, lots of friends that were encouraging me on, but yeah. What is it, uh, Winston Churchill, you know, if you're going through hell, keep, keep going.

Tim Ferriss 22:47 [laughs] Yeah.

Michael Dell 22:49 So that's what we were doing.

Tim Ferriss 22:52 Well, l- love to tie that into the, the introvert piece. So I also play the extrovert on occasion, but am deeply introverted. But, you know, my girlfriend's the opposite. 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, uh, particularly during those crunch times, what type of self-care did you have for yourself or what did you do to recharge, uh, or how did being an introvert play into that? You can tackle that. I know it's a, a number of questions combined into one, but I'm just curious about how you factor that in, if at all.

Michael Dell 23:46 Well, to, to recharge, it's, it's sleep. Now I'm a big-

Tim Ferriss 23:50 Yeah

Michael Dell 23:50 ... fan of sleep and we've, we've had some separate conversations about that.

Tim Ferriss 23:54 [laughs] Yeah.

Michael Dell 23:55 And you know, exercise, going on a long walk in the woods, sometimes with my wife, sometimes by myself or, or, or with a friend. But the on stage stuff, it's all an act, right? [laughs]

Tim Ferriss 24:11 [laughs]

Michael Dell 24:11 I mean, it's, it's not my natural state of being, but of course you have to do it and it's important to do it, you know, 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.

Tim Ferriss 24:36 Yeah. I wanna ask you two questions. I'll- I'll keep them a little simpler. The first is about that- that hypergrowth 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- to rebuild? Would you give advice to someone in your similar position to add constraints of some type or do something differently?

Michael Dell 25:10 I think on the one hand, we- we needed to balance our growth with also liquidity and profitability, just 'cause we were running out of capital.

Tim Ferriss 25:21 Yeah.

Michael Dell 25:21 And our new CFO that joined us helped me understand that and-

Tim Ferriss 25:26 [laughs]

Michael Dell 25:26 ... and figure it out. On the other hand, if we hadn't gotten larger and scaled, we probably would've gone out of business anyway, right?

Tim Ferriss 25:35 Mm. Yeah.

Michael Dell 25:35 So- so it was a bit of a- a difficult choice that we had to make.

Tim Ferriss 25:40 Mm.

Michael Dell 25:40 And, you know, fortunately, we're still here to tell the story. [laughs]

Tim Ferriss 25:45 [laughs]

Michael Dell 25:45 Uh, but I- I think to answer your question, you know, if we had- if we'd only grown from 890 million to 1.3 billion, I think we might have been too small and on a trajectory just to be eliminated in- in the industry.

Tim Ferriss 26:03 Mm.

Michael Dell 26:03 And of course, we- we went on to become much, much larger to, you know, like 100, over 100 billion this year. But yeah, we had to kinda go for it.

Tim Ferriss 26:12 Yeah.

Michael Dell 26:12 And it's always hard to rerun the simulation. You know, there are definitely things you would've done differently, but, you know, it's worked out pretty well-

Tim Ferriss 26:23 It is [laughs]

Michael Dell 26:23 ... for the most part.

Tim Ferriss 26:25 You know, it seems to have worked out quite well, and you- 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. Because most people listening will be f- 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 will know what an IPO is. But I suspect a- a very small percentage will know anything about then taking a company private w- and why someone would want to do that. So could you just walk us through what happened and how you thought about it?

Michael Dell 27:01 So the company had gotten, you know, quite large, and the growth started to stall out, and we knew we needed some new horizons of growth. And we started investing in new areas like software and services and security, and started, you know, acquiring new companies. And the more we did that, the more the financial investors kinda didn't like it. [laughs]

Tim Ferriss 27:32 Mm. Right.

Michael Dell 27:32 And- and they kinda just kept associating us with the original product of the company, the PC, okay? 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, y- you're really not gonna need a PC anymore 'cause you'll do everything on your phone or you do everything on your tablet. And we kind of had the view that, well, those devices are great, but it's gonna be an add, not an or, when it comes to these devices. And, you know, when you're making all these investments and doing all these things but your stock price is going down, it's kinda depressing, right? [laughs]

Tim Ferriss 28:19 Yeah.

Michael Dell 28:19 But at some point it goes down low enough where the capitalist in me, I can't- can't get that out of me, uh, 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 gonna buy back all the stock from the public shareholders." You basically pay a premium that is, you know, you pay a price that's higher than the then current price so the public investors get some of the benefit of the transformation strategy if it's successful, without taking on any of the risk.

Tim Ferriss 29:03 Mm-hmm.

Michael Dell 29:03 And then we, as the owners of the company, you know, myself and- 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- the quarterly earnings, you know, shot clock that- that is there, you know-

Tim Ferriss 29:25 Right

Michael Dell 29:25 ... when you report, uh, e- every single quarter. And so I thought it was a relatively straightforward thing to do. It turns out, you know, it's a lot harder to buy your own company back, and- and we had the Joker showed up, Carl Icahn-

Tim Ferriss 29:41 [laughs]

Michael Dell 29:41 ... to, uh, 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- of 2013. And then, you know, we just started investing, uh, super aggressively in research and development, hiring more salespeople, and it was working. We

Michael Dell 30:12 were generating tons of cash flow, and we decided to sort of quadruple down. And after we'd done the biggest take private ever in technology, we said, "Let's do the biggest merger acquisition ever in technology." We bought- EMC and VMware and created, you know, the, 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 capital structure and, and we had transformed the company in a, in a material way, and so it was kind of time to go public again in late 2018.

Tim Ferriss 31:00 Okay. I have, I have some follow-up questions. This is, this is extremely interesting to me because I remember watching from the sidelines. I remember when this happened, but I was only getting the, you know, the headlines, but also getting the interpretation of sort of commentators, right? [laughs] Not the people actually on the field. First thing I have to ask, and I'm em- I'm embarrassed that I need to ask this, but what, in this context, what is a tracking stock? You mentioned a tracking stock.

Michael Dell 31:24 When we acquired EMC and VMware, combined with them, it was like $67 billion. But we didn't have $67 billion. Uh, [laughs]

Tim Ferriss 31:35 [laughs]

Michael Dell 31:36 We had the equity in, in Dell, we took on, uh, substantial more debt, and to compensate the shareholders, we gave them a combination of cash and a tracking stock 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, the EMC shareholders. Tracking stocks are kind of arcane. You don't really see them very often and, you know, the tracking stock appreciated well, but it still traded at a substantial discount to the underlying VMware shares and, you know, a better way to do this was to align all the interests of, of shareholders, which is why we ultimately combined with the tracking stock in, uh, late 2018.

Tim Ferriss 32:39 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, and how did you sort of mitigate the likelihood of ending up in those?

Michael Dell 32:58 Well, when you take a company private, basically you're putting it up for sale, right? [laughs] And anybody can buy it. I wanted to be the person who was gonna buy it a- 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 worth, otherwise I wouldn't be buying it, right? [laughs]

Tim Ferriss 33:21 Yeah.

Michael Dell 33:22 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've either had to top that offer or, you know, at some point get priced out. And of course, you know, the process can cause a lot of disruption. It can, you know, uh, be used by competitors who can create fear and uncertainty and doubt in the market-

Tim Ferriss 33:49 Yes

Michael Dell 33:49 ... about your business. You know, imagine the family members inside the, the, the company, you know, reading about this or hearing about it on TV and wondering, you know, what's going on with this company and, you know, 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 gonna run the company and it wasn't gonna be me. It was a pretty messy, ugly process.

Tim Ferriss 34:20 Mm. With respect to ultimately going public and I, and I suppose I should just add as context, so I know a fair number of public company CEOs and, you know, 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." [laughs] This is ridiculous, right? And it bothers them a lot. And then, you know, I know the CEOs of some very, very large privately held companies.

Tim Ferriss 34:51 Ultimately was the decision to go public again necessary because shareholders needed liquidity? Is that how the decision was made?

Michael Dell 35:01 I wouldn't say it was necessary because shareholders needed liquidity. None of the shareholders have really accessed liquidity in any material way.

Tim Ferriss 35:11 Yeah.

Michael Dell 35:12 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 w- we kind of expected was gonna happen, which is great to see it in, in print. But I would say one of the things we did during the go private was we reignited the entrepreneurial spirit of the company-

Tim Ferriss 35:38 Mm

Michael Dell 35:38 ... 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? [laughs] We're thinking about, you know, the medium term and the long term, and we've reoriented the business and, you know, it's, it's working. We had 15% growth this last quarter and at our size that's substantial growth rate.

Tim Ferriss 36:08 Yeah, 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?

Michael Dell 36:22 Yeah. Jamie Dimon from JPMorgan Chase was particularly helpful, and there's one story about the combination with EMC and, and VMware where he comes with- Egon Durban from Silver Lake 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, uh, well, you know, "Do you have the money?" [laughs]

Tim Ferriss 36:52 [laughs]

Michael Dell 36:53 It's like $67 billion, and Jamie just says, "Yeah, yeah, they have the money."

Tim Ferriss 36:57 [laughs]

Michael Dell 36:59 So that was it. That was, uh, he- he said it, and, uh, he has stepped in and helped our company many, many times and super helpful, thoughtful, and been a great friend.

Tim Ferriss 37:11 Hmm. I'd love to ask about investments, but maybe not in the traditional sense. Uh, 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, right? And just to give an example, I think, uh, Warren Buffett, when, when he's asked this question, your best investment, he talks about a public speaking course, I believe it was, with the, the Dale Carnegie Institute or something along those lines, because it multiplied and so many other skills. It was complimentary to so many other things that he was focused on. So it could be really anything at all. Does anything come to mind that would fit that question?

Michael Dell 37:56 Yeah. Well, certainly for me, my best investment by far would be the $1,000 that I invested in starting our company, right? [laughs]

Tim Ferriss 38:07 Mm-hmm.

Michael Dell 38:08 So that one has turned out to be certainly one of my all-time best investments.

Tim Ferriss 38:12 [laughs]

Michael Dell 38:13 But, you know, my mother, may she rest in peace, she recognized when I was in about the second or third grade that I, I was stuttering. I had a pretty bad stuttering problem, and she got me a speech coach. And, you know, it seemed like every day, I don't... It probably wasn't every day, but [laughs] it seemed like every day after school I would go there, and the speech coach would work with me, and after about six months, I kinda stopped stuttering.

Tim Ferriss 38:45 Huh.

Michael Dell 38:46 So it wasn't an investment I made, but my mother kinda knew what I needed at that particular point in my life and, you know, that was clearly a great thing 'cause it could have held me back otherwise.

Tim Ferriss 38:56 Yeah. How do you think about competition? And I'm leaving that very broad, or could you tell us a story about competition? Either will do. I'm just curious, and this kinda comes back to one of my original questions of whether or not you have to change your playbook or opt out of certain competitions given you have this North Star of playing nice but winning.

Michael Dell 39:24 Well, there are certain kinds of things that y- you just opt out of because you're not willing to play dirty. [laughs]

Tim Ferriss 39:32 Yeah. [laughs]

Michael Dell 39:32 And I'd say you see some of that in, in certain countries around the world. I won't name any in particular, but you know who I'm talking about. [laughs]

Tim Ferriss 39:40 [laughs]

Michael Dell 39:41 And so we kind of avoid those things. And, you know, 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, right?

Tim Ferriss 39:58 [laughs]

Michael Dell 39:59 You could totally be setting the wrong benchmarks, right, if you're measuring yourself against, you know, a competition that's- that's not really that great. And y- you can also learn a lot about what not to do from competition.

Tim Ferriss 40:14 Hmm.

Michael Dell 40:15 Right? But I actually think it sounds kinda, kinda trite or quaint. You know, y- you learn a lot more from your customers than, than you do from competition. And-

Tim Ferriss 40:28 Hmm

Michael Dell 40:28 ... you know, we always talk about having big ears and designing the company from the customer back and solving the unsolved problems of customers. You're not gonna get those things from, from the competition, uh, as, as much as you will from a real understanding of what the customer is trying to do.

Tim Ferriss 40:52 You have been a true pioneer in, I suppose, what, uh, what all the kids would call, uh, DTC these days, direct to consumer. I mean, you, you have tested and tested and refined and refined and, and in the beginning certainly pioneered a lot of approaches. I would be curious to hear, since that the direct to consumer model is, uh, much more prevalent now than it was when you started, 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?

Michael Dell 41:31 I think there are many, many flavors to it. You know, 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 sort of retail versus direct to consumer or direct to customer online context. You know, if you have 10,000 retail stores and you're trying to predict what people are gonna go in those stores and buy, yeah, you can have, like, really sophisticated AI and try to guess that, but ultimately it's just a guess, and you're having to stage and, you know, prepare all sorts of things and anticipate, and ultimately it's gonna be wrong and to some degree, right? [laughs] And demand's gonna change, and unexpected stuff is gonna happen. Whereas if you have perfect information and your-- 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, you know, 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-

Tim Ferriss 43:13 Hmm

Michael Dell 43:13 ... versus delegating that to a series of other parties.

Tim Ferriss 43:20 Why don't more people do that? Why do people delegate it out to th- to third parties? What, what makes it difficult?

Michael Dell 43:27 Well, I think you're seeing more and more direct-to-consumer but, you know, 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, you know, going online, you see much more of that. So now it's, now it's becoming more the norm. But you think about, you know, a, a product or service today is continually improving even once you have it, right? [laughs]

Tim Ferriss 43:58 Mm-hmm.

Michael Dell 43:58 It's, 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, their actual needs? And, you know, look, I, I believe fundamentally that organizations like, 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, right? So y- you have to be in touch with those problems, and you have to have the capabilities to innovate around addressing those unmet needs. Now, customers aren't always gonna 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.

Tim Ferriss 45:18 Hmm. 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?

Michael Dell 45:40 A lot has happened in the last decade from the go private to the biggest merger acquisition in history in, in technology go- going public again, transforming the company. Again, the first book I wrote back in the '90s, I really didn't disclose very much [laughs] and I wanted to tell the kind of real authentic story. A number of friends encouraged me to, to, to write a book about everything that occurred, and it was fun to, to go back and, and tell some of the stories about the origin that, that I'd never talked about before, as well as kind of explain the real story of the, the struggle to, you know, keep the company and transform it.

Tim Ferriss 46:26 Hmm. And is, is there anything you really hope people will come away with after reading the book or a particular impact you'd like it to have on readers?

Michael Dell 46:36 You know, I, I hope people will take more risk. I mean, I, I have this belief that a lot of human potential is sort of left unrealized because people are afraid to fail, you know, seeking perfection and unwilling to, you know, e- experiment and make mistakes. And, you know, if you read the story, you'll, you'll see [laughs] that, you know, at the root cause of what is ultimately a very large, successful company were all kinds of learnings and, and mistakes that, that, that went into it. And I think, I think you have to be a little bit, you know, willing to break some rules and, you know, if you're always following instructions and doing what you're told, you're not gonna drop out of college and start a company, right? [laughs]

Tim Ferriss 47:28 [laughs] 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, A CEO's Journey from Founder to Leader. People can find, of course, Dell online, dell.com. At Twitter, @michaelsdell. You're also @michaeldell at Instagram. Facebook, Michael S. Dell. LinkedIn, MDell. 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?

Michael Dell 48:06 No, I think you got it. I mean, the, you know, the other things I talk about in the book are curiosity, and I think, you know, curiosity has been a driver for me. I was interested in, in math and electronics and computers from, from an early age, and that has led me to the path I've, I've been on. So I think being curious, learning, experimenting, failing, taking risks. There you go.

Tim Ferriss 48:36 [laughs] Yeah, I do think that the combination of the stories sort of allude to principles and, 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, uh, thank you for making the time to hop on the podcast with me.

Michael Dell 49:09 Awesome, Tim. Great to be with you. Thank you.

Tim Ferriss 49:12 And to everybody listening, we'll have links to everything in the show notes, all resources as well as links to Play Nice But Win! and everything else at tuneupblog/podcast. And until next time, thanks for tuning in.