#534: Michael Dell, Founder of Dell How to Play Nice But Win

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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 them on Twitter. At Michael Dell, Michael is Chairman and chief executive officer of dealt acknowledge. He's an innovator and Technology leader. Providing the essential infrastructure for

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to build their digital future transfer Mighty and protect their most important information. He is also the author of play nice but win a CEOs, Journey from founder to leader. Michael is an honorary member of the foundation Board of the world economic forum and is an executive committee member of the International Business Council in 1999. He and his wife, Susan Dell established the Michael and Susan Dell Foundation. You can find Del online at dell.com. You can find Michael on all social, and I'll link to those at Tim.

Blog for / podcast. But for instance, as we mentioned on Twitter, at Michael Dell, Michael, welcome to the show. So nice to see you. Great to be with you. Tim. Thanks for having me and I thought we would just dive right into the action and begin with a story to pull people into your life. And The Many Adventures that you've had. You 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

Tension, could you please elaborate and tell us the story of eating meat loaf and why it made it into the story of your life. Yeah, well, wasn't Meatloaf. The band of the musician halfway through the, the go private and I confront Carl. Icahn directly face-to-face eye-to-eye in his home.

And go over there to have dinner and I kind of suspected that he didn't have any plan for the company and that was my objective was to understand. Did he really have any cards or was he just trying to get me to, you know, raise the price a little bit. And I describe this very dramatic, you know, moment and I'm at his house having dinner and, and it's very clear to me.

That he didn't have any plans for the company and it was a fun exciting moment about halfway through the go private. Now, for people who don't have any context, who is Carl, Icahn. Let's just start with kind of defining some of the players here and then we're going to bounce around chronologically, but for those who have no idea who that is, who is Carl Icahn. What does he do? So he's a pretty famous financier, sort of corporate Raider.

Green, mailer, and general Troublemaker who kind of finds his way into transactions, where he can try to cause trouble and get people to buy him out. And, 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 never owned any of our stock and found the kind of weasel way into

Deal to try to make a little bit of money. So if we, if we freeze frame that in time, there's media coverage with headlines. For instance, from Fortune. The gamblers behind text biggest deal ever, but things didn't start there and I want to go back to Childhood and the beginnings and then we're going to jump around chronologically, but where does the title of the book come from?

So play nice. But when is something that my parents used to tell my two brothers and I, whenever we would go out in the street to play ball, you know, they would tell us play nice but win and it kind of stuck with me as a pretty good life philosophy to be fair, to be ethical to be forthright and what you're doing in your dealings with others, but also don't forget to win, right?

So some people just remember the play nice part, but there's also that that wind part which is also important, but that's one of my earliest memories is our parents telling us play nice, but win. And so, it's something is stuck with me and something we talk a lot about Adele just for people who are wondering or people who might be saying 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

The mutual acquaintances, who introduced us said to me, he really is just the nicest guy imaginable in his whole family is nice and that has been my experience. And it's always fascinated me because I imagine many people listening will immediately conjure 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 taking certain options off the table because you view them as unethical or otherwise that you would be in a way. Tying one hand behind the back when competing against these other people. How do you think about that? I think life is a long journey and your reputation and your integrity matter and I've seen time and time again, that when you do the right thing and you treat people fairly and and nicely it comes,

Back around to you, in very positive ways. It's certainly what I feel comfortable with, but it's also a lot simpler way to live your life or from from before my perspective. If we go back again to I guess your adolescence. This is from just doing homework for this conversation, which I always enjoy doing with people. I've met just because it would seem really creepy otherwise to do all this internet, sleuthing, but I have a context and a pretext for doing it. When I

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, and apartment complexes and condo communities as well as recruiting friends to research public records of new marriage licenses at the county courthouse. So the first thing I have to ask because you can't believe everything you read was that part of what happened in terms of the the secrets to the success with the

The newspaper subscriptions. Yeah. Yeah. That's very accurate. Yeah, and how did you arrive at? If you remember recruiting friends to look at the public records, I suppose. That's just not something that would immediately occur to a lot of 17 year olds. I remember exactly what happened. I got this job and I was a telephone solicitor and I worked at the Houston post and use this now-defunct. It was merged with the chronicle.

And they had a bunch of us kind of in this big open Bullpen and we were given sheets of paper that had just like random phone numbers on them. And you would call the phone numbers and try to convince people to buy a subscription to the Houston Post newspaper and my first full month. I was there. I was the top salesperson. I remember that because I got an award. I thought that was pretty cool. But what I figured out was that there were a couple

The things you could do to sell newspapers better than anybody else. Right? And one of the easiest things was you just sounded like the people you were talking to. So, you know, you just sort of picked up whatever accident they had. I won't do it any of those for you today. I think I got reasonably good at that. I also noticed that there were some trends of people because you talk to these people you're like striking up a conversation with them.

Them Trends about people that were tending to buy the newspaper. One was that they were often getting married and moving to a new house or apartment or something like that. Sometimes they were relocating to a new place. They were getting a mortgage and I figured out that in Texas, as in many states. When you want to get married. You have to get a marriage license.

And through the Freedom of Information Act. You can go to any County in Texas at. You can literally go up to the counter and say I want to see all the marriage license applications for, you know, this period to that period and on the application it says where you want the marriage license to be sent to you, gives you an actual dress, which is like the perfect address to send this offer to get two weeks free of the Houston Post.

And then, if you want to continue it, here's the deal. And so I started in Harris County, which is where Euston is centered, but then there's like 16 surrounding counties. So I hired a bunch of my buddies. We had Apple to computers back then and we go to these counties type in all the names and addresses. I did this massive Direct Mail campaign, and that's when I was 16, 17 years old or upon sounds like a lot of

That mean you have deconstructed, the system, was anyone else doing this or re you doing this by yourself, or use sort of Lone Ranger in this approach?

I was kind of a Lone Ranger, but I hired some of my high school friends to go to some of these counties because there were 16 of them and I couldn't really do it all myself. The other thing that was happening in Houston was it was kind of a Boom Town at the time and sort of like, you know in Austin now, there's like all these condo complexes and apartment complexes going up and you just go up to the person sort of running the thing and say,

You know, I've got this great offer for all your new residents. Can you please put this in the welcome kit and they say sure. So that works really well. So yeah. I was just trying to figure out how to sell a lot of newspapers subscription and it was around that time or in your, let's just say, early mid 20s, where there any particular entrepreneurial heroes or figures you looked up to.

Or tracked closely read about anything like that. I think it actually started before that when I was a kid. I mean, I saw Charles Schwab who started this Charles Schwab business, which was pretty cool. Ted Turner, Fred Smith from Federal Express, William McGowan who had created MCI and then, of course, Bill Gates, and Steve Jobs who are about 10 years older than I am.

And all of that was super interesting to me. My mom was a stockbroker, our family. We didn't talk about the football game or things like that. We talked about the economy and oil prices and which stocks, you know, we're interesting. And I was really intrigued by all that and so those entrepreneurs were definitely Inspirations. You wrote your first book in 1998.

Eight. So you've taken a 20-plus year break on the books. And I've read that at the time that you publish that first book. You didn't feel comfortable, disclosing. Perhaps as much as you feel comfortable disclosing. Now, you're comfortable sharing more and I'm curious if you would be willing to share a story or share something that you weren't comfortable talking about, then that you are comfortable talking about now.

Well, there's so many things. I mean, I was not really comfortable with vulnerability in my 30s. When I wrote the first book in the way. I am now. So one of the stories I talked about how I got arrested, probably not a story. I would have told 20 years ago, but I was sort of irresponsible young guy, you know, running around in Fast Cars and got way too many traffic tickets.

And I got one too many got pulled over, and literally, I was taking downtown at the back of a Austin Police Department. Cruiser fingerprinted and everything. Fortunately they let me go. I felt really bad about it because I always had a lot of respect for the police and any member of the public service. There's a bunch of stories in there about things that went wrong and mistakes made. And I wanted to kind of tell the wrong.

An authentic story about how the company really got going. And there were plenty of lessons along the way. I mean, we had people that were doing things that weren't supposed to be doing and I was kind of surprised by it, but maybe I shouldn't have been surprised. I'd love to dig into some of the specifics and talk about the things that haven't worked or perhaps some of the mistakes or failures that stick out.

To you, are there any particular formative experiences that fit into either of those categories that come to mind? I'll give you two that happened. Both in the late 80s, right about the time, the year after we went public and we did a pretty public face plant as it were. The first one was, we were ramping up our technical capability and sort of getting Bolder and bolder.

We're in engineering and it was around the time of the 88 Olympics. And we had this big program that we codenamed Olympics. And it had multiple microprocessors and all kinds of new inventions and turned out to be way too aggressive, and bold, and it failed. Now, I think the lesson from that was to be a lot more pragmatic and focused 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 led us to a lot of growth. One of the other big mistakes we made around the time. Now, a lot of people talk about Dell supply chain, and just-in-time inventory, and all that great stuff. Well, turns out, the root of that was a horrible mistake. We made in

Engine 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 caused our fledgling company to almost go out of business and stock to go down. It was really embarrassing, but

Painful lesson that we learned and that became the basis of an enormous muscle that we built around just in time. Inventory and supply. Chain Excellence that served us incredibly well and went on to fuel all sorts of successes for us. It makes me think there's so many examples that come to mind, like, James Cameron and the abyss where the abyss didn't do very well at the box office, but helped develop the technology that

To the newer Terminator in Terminator 2. So From the Ashes of that so-called failure. There were all of these technological innovations, that then came to bear on future projects. How do you think about failure in the sense that do you view these various initiatives, product launches etcetera, all as experiments, especially in the early days. Were you ever emotionally?

Deeply affected by some of these events or did you maintain a certain degree of stoicism through it all? No, I was super bummed about it and unhappy, but it just made me want to go at it harder. And I probably didn't internalized the lesson in the moment as much, but there's no such thing as success by itself. Failure is always an ingredient of success. And in a

When you're doing new things, it's always experiment. Try, fail. Learn, do it again. And then finally, hopefully, maybe you get some success, but failure is the key ingredient in any success. When you mentioned this, this might seem off topic, but I'm curious being more vulnerable. Now, are more comfortable with vulnerability. Now is that just a function of age or have you done certain things have certain other things changed?

That have enabled you to feel comfortable being more vulnerable. I think it's a function of Aid somewhat and just maturity. And also, I would say, you know, when I started, I got off to an early start in life and I found myself in the position where people were always asking me for things and was pretty uncomfortable because yeah, and so I kind of developed a little bit of a Teflon coating.

You distract or deflect those requests and at the same time pretty introverted, maybe deeply introverted. Right? And so, all that combined left me in the situation where I wasn't very disclosing, wouldn't really explain failures or what was going on. And I think some people looked at the origin story or the first decade or so. And we

in really explain all the difficulty that went into starting a business like this. And I wanted to talk about all that. What were the any of the toughest periods for you personally with respect to the business and the trajectory that it has had, were there any particularly dark days that come to mind specifically just want to talk about what got you through that period, what happened? And how you

Coped with it, except the certainly, with the success ingredient. You have the failure component, and I would love to explore that a bit, just to humanize entire Journey that you've been on. I would say, I'm pretty high on the determination and grit scale. And so I was always looking through to the other side, no matter how dark it was. I mean there were periods. Certainly in the early 90s, where we had grown really fast.

Fast and everything started to fall apart. We kind of went from

Half a billion to two billion in revenues in a very short period of time. A lot of people talk about you, hit the wall 2 billion. We went right from 890 million to two point 1 billion in one year. Well, everything started to fall apart. We didn't have the systems, the processes, the people Capital, everything was just not ready. And

There was a period there during that time, where it seemed like every day, every month. The news just kept getting worse and worse, and it's a problem. You have to solve but certainly, 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. Our families, the commitments that they've made and

They're counting on you to make this work. They move, they move their whole, they're all family to Austin, right? To help this company grow. And if I screw it up, it's going to be, you're not only really bad but embarrassing and a great tragedy. Certainly during the go private. There were some very dark moments. There was one point where

the board asked me not to talk to any members of the management team makes makes things hard. Yeah. 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, there were times when it was totally unclear what was going to happen. And yeah, those were some pretty dark moments. I mean, fortunately, my wife was there supporting

And had lots of friends that were encouraging me on, but what is it? Winston, Churchill, you know, if you're going through hell, keep going. Yeah, so that's what that's what we were doing. Look to tie that into the, the introvert piece. So I also play the extrovert on occasion, but M deeply. Introverted, 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 imagine the high volume of communication. And the numbers of people, you must interact with a particularly during those crunch times. What type of self-care did you have for yourself? Or what did you do to recharge?

Or how did being an introvert play into that. You can tackle that and it's a number of questions combined into one, but I'm just curious about how you factor that in if at all.

It's a recharge its sleep because and sleep. We've had some separate conversations about that. Yeah. And exercise going on a long walk in the woods. Sometimes with my wife sometimes by myself, or with a friend, but the onstage stuff, it's all an act, right? That's that's not my natural state of being, but of course, you have to do it and it's important.

To do it to be able to tell the stories of the company and describe what you're doing. Communicate the value of what we're bringing to all these people and get them motivated and inspired. Yeah, you have to do that, but it's not something I would naturally do left to my own devices. Yeah. I want to ask you two questions. I'll keep them a little simpler. The first is about to that hyper-growth that you were describing going from. I think it was 890 million to two point 1 billion.

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? On the one hand, we needed to balance our growth with also liquidity.

Aditi and profitability just because we are running out of capital and are yeah, new CFO, the joined us, help me, understand that. And we're now on the other hand, if we had gotten larger and scaled. We probably would have gone out of business anyway, so it was a difficult choice that we had to make and fortunately, we're still here to tell the story. I think to answer your question 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 the industry. Hmm. Of course, we went on to become much much larger over a hundred billion this year. But yeah, we had to kind of go for it and it's always hard to rerun the simulation. There are definitely things you would have done differently, but it's worked out pretty well.

Well, for the most part, 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 beef and some will be very familiar with this kind of stuff. But a lot of folks will have a passing familiarity. If at least the term going public and will know what an IPO is, but I suspect a very small percentage.

We'll know anything about then taking a company private and why someone would want to do that. So could you just walk us through what happened and how you thought about it?

The company had grown gotten quite large and the growth started to stall out and we knew we needed some New Horizons of growth and we started investing in new areas, like software and services and security and started acquiring new companies. And the more we did that the more the financial investors kind of didn't like

Get then they kind of just kept associating us with the original product of the company, the PC. And this was at a time when the smartphone and the tablet were really on the ascendancy and even to the point where there was kind of this narrative out there that oh, well, you know, you're really not going to need a PC anymore because you do everything on your phone or you do everything on your tablet and we kind of had the view that, well, those devices are great, but

But it's going to be an ad, not an or when it comes to these devices and when you're making all these Investments and doing all these things, but your stock price is going down. It's kind of depressing. Yeah, but at some point it goes down low enough. Where the capitalist in me. I can't get that out of me. Says wow. There's like a silver lining here. That's incredible. And that is we can

I back our stock at this really low price and we can accelerate the transformation and go faster. In fact, we're going to buy back all the stock from the public shareholders. You basically pay a premium. You pay a price that's higher than 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.

And then we as the owners of the company myself and Silverlake who joined me in the go private.

Can really go much faster on the transformation. We can make investments without having to think about the quarterly earnings shock clock. That is there, you know, when you report every single quarter and so

I thought it was a relatively straightforward thing to do turns out, you know, it's a lot harder to buy your own company back and we had the Joker showed up Carl Icahn being sort of make it much more interesting and difficult. And yeah, it started in August of 2012 and we finally completed it in October of 2013 and then we just

Need investing super aggressively in research and development hiring more sales people and it was working. We were generating tons of cash flow and we decided to quadruple down after we done the biggest take private ever in technology. We said, let's do the biggest merger acquisition ever technology. We bought

EMC and VMware and created the largest cloud it infrastructure company on the planet. And ultimately through a complex series of transactions. We had a tracking stock. We want to simplify the capital structure and we had transformed the company in a material way. And so it was kind of time to go public again in late 2018.

I have some follow-up questions. This is extremely interesting to me because I remember watching from the sidelines. I remember when this happened, but I was only getting, you know, the headlines but also getting the interpretation of commentators, right? Not the people actually on the field. So first thing, I have to ask an embarrassing. I need to ask this. But what in this context, what is a tracking stock, you mentioned to tracking stock?

When we enquired EMC and VMware combined with them, it was like sixty seven billion dollars, but we didn't have sixty seven billion dollars. We have the equity in Del. We took on substantial more debt and to compensate the shareholders. We gave them a combination of cash.

And a tracking stock which tracked the EMC owned, an 81 percent interest in VMware.

And so the tracking stock was created for portion of that, EMC ownership to compensate, the MC shareholders and tracking stocks are kind of Arcane. You don't really see them very often and the tracking stock appreciated. Well, but it's still traded at a substantial discount to the underlying VM Ware shares and a better way to do this was to align all

The interests of shareholders, which is why we ultimately combined with the tracking stock in late, 2018.

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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 are worst-case scenarios? And and how did you sort of mitigate the likelihood of ending up? In those? When you take a company, private? Basically, you're putting it up for sale and anybody can buy it. I wanted to be the person who was going to buy it.

You know, 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, right? But a lot of things could have gone. Wrong need somebody else could have stepped in and said, well, I'm willing to pay a little bit more and then I would either have to top that offer or at some point, get priced out.

And, of course, the process can cause a lot of disruption. It can be used by competitors who can create fear and uncertainty and doubt in the market about your business. Imagine the family members inside the company, you know, reading about this or hearing about it on TV and wondering, you know, what's going on with this company and during the process, a lot of the downside scenario.

Rio's played out be, we had multiple bidders. We had there were times when people were speculating about who was going to run the company and it wasn't going to be me. It was a pretty messy ugly process with respect to ultimately going public and I suppose I should just add as context. So I know a fair number of public company CEOs and more than a few just hate the shot clock as you put it there. Like hey guys, we're trying to

Make investments for long-term growth and Innovation. This is ridiculous, and it bothers them a lot. And then, you know, the CEOs of some very, very large privately held companies ultimately was the decision to go public again necessary, because shareholders needed liquidity. Is that how the decision was made? I wouldn't say it was necessary because shareholders needed liquidity. None of the shareholders have really

Access liquidity in any material way. Yeah, but it certainly allowed us to clean up the capital structure, simplify things, pay down debt faster. We just got upgrade to investment grade. By one of the rating agencies, which we kind of expected was going to happen. It's great to see it in print but I would say one of the things we did during the go private was, we reignited? The

Oprah nouriel Spirit of the company which was its origin and I actually believe we've kept that going even as we're public. And so we're very clear with our investors that our Horizon is not just the next 90 days, right? We're thinking about, you know, the medium term and the long term and we've reoriented the business and it's working. We had fifteen percent growth this last quarter and at our

Is that's that's a substantial growth rate. It's huge. Growth rate. Was there. Anyone who stands out could be more than one person who is particularly helpful that you're comfortable sharing during the take private chapter of your experience. Jamie dimon from JPMorgan. Chase was particularly helpful, and there's one story about the combination with EMC 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 asked, well, do you have the money? It's like, sixty seven billion dollars and Jamie just says, yeah, they have the money. He said it and he has stepped in and helped.

Our company many many times and super helpful thoughtful and been a great friend. I'd love to ask about Investments, but maybe not in the traditional sense. I'd love to ask you what are one or some of the most worthwhile valuable Investments you've made. That could be an investment of money time energy. Anything at all, just to give an example. I think Warren Buffett when he's asked this question.

The best investment. He talks about a public speaking course, I believe it was with the Dale Carnegie Institute or something along those lines because it multiplied 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. Well, certainly for me my best investment by far would be the thousand dollars that I invested.

In starting our company, so that one is turned out to be certainly one of my all-time best investments, but my mother may she rest in peace. She recognized when I was in about the second or third grade. I was stuttering. I had a pretty bad stuttering problem and she got me a speech coach and you know, it seemed like every day. I don't I probably wasn't every

They but it seemed like every day after school. I would go there and speech coach. Would, you know, work with me? And after about six months, I kind of stopped stuttering, huh? So it wasn't investment I made but my mother kind of knew what I needed at that particular point in my life, and that was a great thing because it could have held me back otherwise. And do you think about competition? I'm leaving that very broader. Could you tell us a story about competition either?

Will do. I'm just curious and this kind of 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 Northstar of playing nice but winning. Well, there are certain kinds of things that you just opt out of because you're not willing to play dirty. Yeah, and I'd say, you see you see some of that and in certain countries around the world, I won't name any in particular, but you know who I'm talking about. And and so we kind of avoid those things and

For me, competition is interesting and often motivating. I think, also it can be limiting.

If you're comparing yourself to competition, the competition might not be very good. All right, you should totally be setting the wrong benchmarks. Right? If you're measuring yourself against a competition. That's not really that great. And you can also learn a lot about what not to do from competition.

But I actually think it sounds quaint, you learn a lot more from your customers, then you do from competition. And we always talked about having big ears and designing the company from the customer back. And solving the unsolved problems of customers. You're not going to get those things from the competition, as much as you will from a real understanding of what the

customer is trying to do.

You have been a true Pioneer and I suppose what all the kids would call DTC these days direct-to-consumer mean you you have tested and tested and refined and refined in an end in the beginning, certainly pioneered. A lot of approaches. I would be curious to hear since that the direct consumer model is much more prevalent now than it was when you started what our

some of the common mistakes or things that people miss, when they are novices engaged or trying to engage with a direct-to-consumer business model. I think there are many, many flavors to it. I think some of the advanced moves are understanding the information advantage that you have with the direct relationship and connection with the customer and way to think about this is in the simple, breathe.

Hill 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 going to 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 prepare all sorts of things and anticipate and ultimately it's going to be Raw.

Wrong and to some degree right? And demands going to change and unexpected stuff is going to happen. Whereas if you have perfect information and the quality of your demand signal is actually perfect because you're in direct contact with that customer, you don't need any inventory to prepare for that. You can use that signal to feed your supply chain in real time. And that