Influencers with Andy Serwer: Michael Dell

In this episode of Influencers, Andy is joined by Dell Technologies Chairman & CEO, Michael Dell, as they discuss changes in the technology business, the state of the U.S. economy, and Michael's experience with Steve Jobs and Bill Gates.

Video Transcript

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ANDY SERWER: When people talk about big tech nowadays, they usually don't mention Dell, but maybe they should. That's because the decades-old PC company has adapted and thrived amid massive change, and it isn't stopping anytime soon.

MICHAEL DELL: I think all of the last 37 years are just a pregame show for what's about to come.

ANDY SERWER: On this episode of "Influencers," Chairman and CEO Michael Dell joins me to talk about his new book on the company's highs and lows, the economic risk posed by China, and how artificial intelligence will change our lives.

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Hello, everyone and welcome to "Influencers." I'm Andy Serwer. And welcome to our guest, Michael Dell, CEO of Dell Technologies, and author of the new book, "Play Nice but Win." Michael, it's great to see you.

MICHAEL DELL: Yeah great to be with you, Andy.

ANDY SERWER: So I want to talk all about your book, but first I want to ask you about the business, because Dell has really changed. You still do sell laptops, but you're a very different company now. Can you talk about what Dell does?

MICHAEL DELL: So you know, today, Dell is the leading company in cloud and IT infrastructure. And so, you know, we are number one in pretty much all flavors of how you build the infrastructure for whatever it is you want to do in the world. So if you think about blockchain, or, you know, autonomous vehicles, or AI-driven biotech, at the center of all these things, you know, at the center of you know the increasingly connected intelligent world is an enormous amount of data.

And all that data requires infrastructure and technology to manage it. And so we're the world's leading provider of all of that. And we still make PCs. So you know, all of that together, yeah, first half of this year we had $50 billion in revenues. Last quarter, we grew 15%. So business is good.

ANDY SERWER: And the breakdown between sort of those legacy hardware business and the cloud business is roughly what?

MICHAEL DELL: Well, as we think about it, we have our infrastructure solutions, which includes cloud infrastructure, and servers, and storage, and networks. And then we have our client systems, which is all the PCs and even some of the embedded edge computing. So it's a little hard to say, you know, what's legacy and what's new.

We have, as I said, number one positions in some enormous businesses that have, like, a $200-plus billion TAM, and then we're investing heavily in some new areas to build some new multibillion dollar businesses around multicloud, edge, 5G, telco, and all the compute required to deal with this explosion of data, and artificial intelligence, machine learning that's required.

ANDY SERWER: OK. We'll get back to the business a little bit more later, but I do want to talk about the book. And the title "Play Nice but Win," I mean, that's kind of your MO I guess, right? Is where that comes from?

MICHAEL DELL: Yeah, you know, as I talk about in the book, this is something that my parents told my two brothers and I, you know, before we would go out and play ball in the street. And it's one of my earliest childhood memories and it kind of stuck with me as a general life philosophy, as I watched them navigate their lives. And you know, it's been something we've talked about at Dale. And it's been a helpful life philosophy and turned out to be a nice title for the book.

ANDY SERWER: I mean, the book is part memoir, part business thriller, part management advice. What made you write it now and present it this way?

MICHAEL DELL: So, you know, I'd written an earlier book back in the '90s, but this one is much more personal. And obviously, a lot has happened in the last decade, you know, as I bought the company back, you know, in the largest go-private ever in technology, and then did the largest merger acquisition ever in technology with EMC and VMware, and then took the company public again.

A lot of people encourage me to write a book about all of that. And I really wanted to share in a real and raw way what I was feeling during all of that and how it all actually went down. And I intermix the earlier stories of the company and my childhood. So it's basically, you know, everything, you know, in my life from the beginning to present.

ANDY SERWER: You know, let's talk about those early days a little bit growing up in Houston. Your father was a doctor and a dentist, right? Is that right?

MICHAEL DELL: Orthodontist.

ANDY SERWER: Orthodontist. Right, there you go. And your mother was a stockbroker. And you said entrepreneurship was the air my family breathed. So how vital was that family life to what you and the company became?

MICHAEL DELL: You know, I think it was my upbringing and it was super helpful. You know, my parents didn't talk about what sports teams were doing or anything like that. They were talking about the Federal Reserve, and the price of oil, and what was going on in the stock market, and, you know, which companies were doing interesting, exciting things. That was what they talked about around the dinner table.

And so, you know, that's kind of what I grew up with. And I became fascinated, you know, both with technology in its earliest forms-- you know, with the electronic calculator and then, you know, the microprocessor, and the dawn of the microprocessor age with the early PCs. And also, I was fascinated by business, and business people, and particularly entrepreneurs who had sort of gone outside the normal route and done something different and amazing. And they were kind of heroes to me.

ANDY SERWER: One of the most emotional moments in the book is when you talk to your parents about dropping out of college. You already had a pretty decent business going. And I remember talking to you about this decades ago when we first got to know each other-- but back then you told them you wanted to do this, they cried, and then you cried, and you agreed to stay, but you ended up dropping out. What was it like making that leap into the unknown back then?

MICHAEL DELL: Well, you know, the interesting thing about that whole moment, and I describe this in the book, is that if my parents hadn't really forced me to stop, I don't think I would be here today, right? Because it was after I stopped that I really realized that this was something I was very passionate about.

But you know, nobody wants to sit there and watch their mother cry, right? And it was a super emotional moment. And you know, later on, I figured out that you could actually take a semester off from the University of Texas and go back later without any academic penalty. So that was one of the things I used to convince my parents that it would be OK for me to do this.

The other thing I mentioned in the book is my mom was pretty ill at the time and, you know, she probably didn't have the energy to actually argue with me about it. And you know, all of that converged to-- resulted in me starting the company in my dorm room when I was 19.

ANDY SERWER: So if aspiring entrepreneurs want to drop out of college or skip it altogether, what do you tell them? Is that a good idea?

MICHAEL DELL: You know, I don't recommend it for generic advice. And I wouldn't sort of project my story onto other people as a general proposition. I think it's a very personal decision that people have to make on their own. For me, it seemed like a really obvious thing to do.

I was super passionate about what I was doing and, you know, didn't seem like a big risk-- I felt I could go right back to college if it didn't work.

ANDY SERWER: You graduated from UT, as you said, live in Austin-- or didn't graduate, you dropped out. I'm sorry, that's part-- you went to UT, dropped out, live in Austin. We were talking about another famous University of Texas person from your generation, which is Matthew McConaughey, and you guys know each other a little bit. Did you overlap in college at the same time? And what do you guys talk about?

MICHAEL DELL: No, we didn't really-- I was only there for, like, two semesters. And you know, I wasn't nearly as cool as he is-- still am not. I don't think I'll ever be. But anyway, I got to know him later on.

And, look, I mean, he loves Austin and Texas. And so do I. And so, you know, we talk about that. We talk about our kids. We hang out. We have a good time. You know, he's quite a philosopher if you haven't read his book. And he's just a lot of fun.

ANDY SERWER: Yeah, it's a really cool book. A lot of your book, which is a really cool book, focuses on Dell going public in the late-'80s, and then growing, and then a few decades later decided to go private again. Talk first about your decision to take a public in '87, even after, as you say in the book, you received a cease and desist letter from IBM.

And of that early period for the company you write, we were simply growing too fast. That's something you almost never hear. What did you mean by that?

MICHAEL DELL: Well, so, you know, in the first eight years of the company, we grew about 80% per year. And in the six years after that, we grew 60% per year. And so we were just outgrowing every single thing that we had-- you know, people, systems, facilities, et cetera-- capital structure. The only option for us-- there were no SPACs, you know, there wasn't late stage capital, banks, not an option.

So the only way for us to finance the growth of the business, even though we were pretty capital efficient with our supply chain, was to go public. And we actually did a private placement in '87, and then '88 is when we went public.

ANDY SERWER: You write about getting to know people like Bill Gates and Steve Jobs in the 1980s as your company began to grow. What did you learn from each one of them?

MICHAEL DELL: Well, obviously, very different people. And you know, I mean, Steve had, you know, this kind of incredible idealism, which turned out to be super powerful as he pursued various projects. I got to know him better, you know, when he was at Next, and he was trying to get us to work with his Next operating system after they decided to just be a software company.

And you know, you have to admire the idealism, really, that led to all of the incredible breakthroughs later on with the iPad and the iPhone, you know, many years later. And you know, Bill, obviously, super smart, unbelievably technical, and, you know, very tenacious, and determined, and persistent as a business person.

So you know, we had a partnership with Microsoft, still do in a big way, and, you know, it was fun to see both of their trajectories. I mean, one of the things I learned from both of them was something I didn't want, which was they were both about 10 years older than I am and they weren't married.

And you know, to me, I didn't want to wake up and be 35 years old and not married. That would have been a very sad existence for me. So I wanted to get married, and did when I was 24-- fortunately. And that's worked out great.

ANDY SERWER: Interesting. That last point I'd never heard before-- that's fascinating. So let's move forward into the 2000s, because after the PC business had made Dell huge, there was concern about whether you could diversify beyond it. I think your introduction includes a conversation we had in July 2012--

MICHAEL DELL: Yes, you're in there a few times, Andy.

ANDY SERWER: Yeah, I know. Come on, man. But you know, I was skeptical about whether you were really diversifying at all. Why was that time period so important for the company, Michael?

MICHAEL DELL: So you know, you kind of have to go back a little bit to the late-2000s-- kind of 2007, 2008-- and it became clear that our business in its original form was in a way kind of fully amortized, right? You know, we needed to do some new things, we needed some new capabilities, so we started investing organically, we started acquiring other companies, building new capabilities in the data center, and cloud, and software, and security.

And you know, of course, because these were investments, they weren't necessarily immediately producing income. And so, you know, we had investors that were kind of watching this with interest and looking at it. And you know, they basically didn't like it.

And at the same time, you had this incredible growth in smartphones and tablets. And kind of the narrative at the time was, gee, you know, there's never going to be any more PCs, the PC's dead. All you need is a smartphone and a tablet. And you know, you guys are going to go out of business.

So all of that combined to make for, you know, not a great environment for our company. And at first, I was pretty sad about that, right? But ultimately, there was a silver lining in this in that, you know, the market, I think my view, mispriced the company and the opportunity. And so I took the opportunity to accelerate the transformation by taking the company private.

So we bought-- well, you, obviously, have to put it up for sale first and see if anybody else wants to pay more than you do. But you know, in partnership with Silver Lake, bought all the shares back from the public shareholders at a price that gave them some of the potential benefit of our transformation if we were successful-- there's no guarantee we'd be successful-- without taking on any of the risk. So we did that, and, you know, off we go.

ANDY SERWER: Yeah, so you went private, then you did the $67 billion takeover of EMC, $50 billion of debt-- some high stakes there. And then ultimately, you decided to go public again. So take us through that time period a little bit.

MICHAEL DELL: Sure. So after we went private, we started investing heavily and doing all the things we wanted to do. And we effectively kind of reignited the entrepreneurial risk that had started the company. And we just started hiring thousands of engineers, and thousands of salespeople, and investing aggressively. And it worked.

And you know, it was volatile. If you looked at it quarter by quarter, you'd see tremendous volatility, but it was volatile in the upward direction. And so we were just making decisions super quickly. We were paying down debt really fast. In fact, 18 months after the go-private, our net debt was basically zero, which was kind of amazing.

And so the go-private was very successful. We had a relationship with EMC and VMware that dated back to the early-2000s. And you know, we'd even talked with them about a combination back in 2009. And so Egon Durban from Silver Lake and I thought, wow, you know, if we could combine the number one in all areas of cloud and infrastructure, that would just be an amazing company and we'd be able to sell, you know, number one in everything all in one place to all these customers around the world.

The only problem was we needed, you know, $67 billion. And we were private and in a lot of debt. Anyway, so I describe in the book we figured out how to do all that. And in 2016, we did the biggest you know merger acquisition ever in tech. You know, and it was for a private company. We kind of did it-- we did it with a lot of debt, but also because we were buying a super valuable asset that we were putting on our balance sheet.

ANDY SERWER: Yeah, now you're public. And the stock's been on fire. I think it's up, what, 160% since last March.

MICHAEL DELL: That sounds about right. Yeah.

ANDY SERWER: Yeah. Not that you're keeping track or anything over there.

MICHAEL DELL: I'm glad you are.

ANDY SERWER: I am. And you recently-- you have a market cap of about $80 billion almost right now, I think. Is that right? And so is there more upside? And what does the future look like for your company right now?

MICHAEL DELL: So, yeah, enterprise value, I think, would be $110 billion or so, maybe a little more than that. We had a great analyst day-- wasn't a full day, just an analyst meeting-- people like them shorter now-- last week. And you can go to our investor relations website. We talked about our vision, our growth strategy, all the new areas we're investing in, and also capital allocation.

We announced a $5 billion share buyback and a dividend that's likely to be formalized in the first quarter of next year. All that was really well-received. I think as people look at the business and the VMware spin that we're doing, the distribution to our shareholders, all the capabilities we bought, and also now, I guess yesterday, S&P upgraded us two notches, which you don't often see. We had the same from one of the other rating agencies a few days earlier.

So yeah, everything's coming together. I think there's plenty of growth opportunities given the size of the TAM and also the new businesses that we're investing into.

ANDY SERWER: You know, there are headwinds that all businesses are facing, though, right now, Michael-- obviously COVID, supply chain, inflation. Can you talk about each one of those three issues that you guys face?

MICHAEL DELL: Sure. So let's take them in the order you said. COVID, you know, while there's been great, you know, tragedy and difficulty in the world, I also think it's amazing how much actually worked during the last 18 months. And technology played an enormous role in that.

And I think that's actually an important part of what's happened with our company and with many companies is, you know, everybody sort of figured out that you need to be more digital. And you need to be more hybrid.

I don't think you're working in your office right now right. And so all of that is to say there's been a giant acceleration in the investments in technology across pretty much all aspects of society all over the world. And so that's been an enormous tailwind for us and super helpful. And I think hybrid is here to stay.

On supply chain, you know, I think this has been a historical strength of ours. And you know, if you go back, you know, 20 or 30 years ago with the wave of outsourcing, I think some companies did this a little differently than others where they just said, OK, I'm just going to outsource everything, and I don't really know how this works, I'm just going to, like, give it all to another company and let them do it.

Well, when you get in these real supply crunches, you need to have an incredibly detailed understanding, not just of the key components, but actually of all the components and the entire supply chain. And that's something that we have had. We have, you know, 25 factories around the world. They're geographically distributed. You know, we've moved to more of a supply chain resilience approach in the last half decade or so. And we have a detailed understanding.

And so I think we've, at least we've heard from our customers, that we've done better than others relative to the supply chain challenges. And even though we're shipping more machines than we've ever shipped before, you know, the demand is higher than ever before. So the challenges are still there for everyone.

And then inflation, yeah, it's real. I mean, all the inflation you hear about in terms of component costs, shipping, et cetera, those are real costs that we're incurring and, you know, are showing up throughout our system. But you know, that's not really unique to our business.

ANDY SERWER: Yeah. In the book, you touch on current excitement over 5G and AI, though you note that their implementation must be, quote, "humane," unquote. What issue concerns you the most about the rise of AI?

MICHAEL DELL: You know, I think the reskilling, and retraining, and how you create opportunity for everyone-- I mean, if you think about this from an economic perspective, we have a lot of people that are not participating in the economy, and yet we have these shortages for skills that are huge and a lot of retraining required.

100 years ago, most people could do pretty much every job that there was, right? And you know, who can program robots, and, you know, design spaceships, and do brain surgery, come up with the algorithms and that sort of thing? Fewer and fewer people. And so I think creating more skills, because the pace of change is only going to accelerate, is something that I'm certainly concerned about, lots of people are concerned about it, and I think for good reason.

The pace of change is not going to slow down. Technology doesn't sort of have an opinion on these things. It doesn't wake up in the morning and say, OK, let's wait until everybody, you know, has caught up. You know, it just marches on.

ANDY SERWER: Yeah, it's so true. You and I spoke last June, Michael, and you said the tech industry hadn't made enough progress on diversity. How would you assess what's happened in the sector and at Dell since then or just over the past year or so and the ways forward?

MICHAEL DELL: Yeah, so, you know, we're making progress. I think many companies are. But we've set out these moonshot goals. I mean, we want to have 50% of our workforce be female, right? And you know, we've set a goal to have 25% of our workforce here in the United States be Black and Latinx, OK?

You know, I think we can get there. And I think it's great that more and more companies are voluntarily setting these goals for themselves, measuring themselves. I think there's more and more work around normative standards-- so we're all sort of counting things the same way because there's a risk that, you know, everybody sort of has a different way of counting these things.

But ESG broadly is, I think, a great thing. I mean, you know, right now, it doesn't seem our politicians can agree on much. But I think, you know, companies taking specific efforts-- you know, our moonshot goals for 2030 are just one example of those, but you can find tons of them from lots of companies. I think all of that is going to result in a lot of progress, and actually is resulting in progress. I mean, we can see it in our progress each year.

ANDY SERWER: I want to ask you about--

MICHAEL DELL: But that doesn't happen by itself, right? There's no autopilot there. You have to actually go make it happen.

ANDY SERWER: Absolutely. I want to ask you about China, which is cracking down on their big tech companies while building up advanced manufacturing at the same time. The US Senate passed a $250 billion bill in July that would invest in our tech competitiveness. What do you think-- or where do you think, excuse me, things stand between the US and China in terms of technology?

MICHAEL DELL: Well, it's kind of frosty, Andy. You know, the relationship is a little bit frosty at the moment. And we could be heading toward a bipolar world. And you know, that creates, certainly, challenges. I think it's great that the US is now starting to focus on some of these forward strategic industries.

For decades, there's been zero industrial policy. It was kind of a dirty phrase-- you know, nobody wanted to talk about industrial policy. But when you have an incredible nation like China deterministically investing in these strategic industries and the US doing absolutely nothing, and sort of getting hollowed out in areas like semiconductors, that's a real danger. And we're kind of seeing that.

And so I think it's great that the US is now focused on this. Hope it's not too late. You know, like to see the same in the EU as well, and it's about time.

ANDY SERWER: And finally, Michael, what about the future for you? You're still a young guy. I remember talking to you decades ago, you were a young guy, I can still call you a young guy.

MICHAEL DELL: I was born young, so there you go.

ANDY SERWER: You got to stay young, that's the trick. Right. Both of them. What do you see for yourself going forward, for Dell-- what's sort of a roadmap here?

MICHAEL DELL: Yeah, you know, this is incredibly fun, interesting, exciting for me. I'm learning, doing new things, we get to do things that really matter in the world. And you know, I'd be bored, probably clinically depressed if somebody told me I couldn't do this. So I'm just going to keep going, and having fun, learning.

And look, I think the last 37 years, you know, have been incredibly exciting and interesting. But you mentioned 5G-- when I think about all of these new things that are happening and this intelligent, connected future with low latency networks and enormous amounts of data and AI, I think all of the last 37 years are just a pregame show for what's about to come. So you know, I want to be a part of that and don't want to miss out on that.

ANDY SERWER: All right, and we will be watching and following your moves. Michael Dell, CEO Dell Technologies and author of the new book "Play Nice but Win," thanks for your time, Michael.

MICHAEL DELL: Thank you, Andy. Great to be with you.

ANDY SERWER: You've been watching "Influencers." I'm Andy Serwer. We'll see you next time.