By LAURA LOREK
Founder of Silicon Hills News
In 1984, Michael Dell dropped out of the University of Texas to found Dell Computers.
“At the time, it didn’t seem like that big of a risk,” Dell said. “I didn’t have anything to lose.”
He saw a really compelling opportunity to launch a company focused on the way computers were being sold and distributed.
He made a deal with his parents that he would go off and do his company for a semester and if it worked, he would keep doing it and if it didn’t, he would go back to school.
Dell spoke Thursday night at the Omni Hotel in a keynote address put on by the UT Longhorn Entrepreneurship Agency as part of its UTEWeek. Brett Hurt, co-founder of BazaarVoice and Entrepreneur in Residence at UT, interviewed him before a packed ballroom of a couple hundred people.
At the beginning of his company, after several months, Dell presented his parents with a financial statement on the company’s performance. He still has that statement.
“For the first nine months, the company had revenues of about $6 million,” Dell said. “It was profitable from day one. It had about a 15 percent operating margin.”
The company had very little expenses, Dell said. The second year, Dell grew to $33 million in revenue. For the first eight years, the company grew 80 percent a year compounded and six years after that it grew at 60 percent a year compounded, he said.
“Put all those numbers together and you get tens of billions of dollars,” Dell said.
The essence was this was the dawn of the microprocessor age, Dell said. He came up with a way to deal with customers that gave the company a competitive advantage – the direct from Dell selling model, he said.
Hurt asked Dell if students should drop out of college to found a company. Hurt said he used Dell as an example of a Longhorn student who saw an opportunity and dropped out to pursue it.
“I get angry letters from parents sometimes,” Dell said. “I have to be a little careful.”
The decision is a personal one and generally a student should know it inside, he said. They shouldn’t have to get a lot of advice, he said.
“If I had gone and asked for advice, people probably would have said you’re nuts, it’ll never work, don’t drop out of school” Dell said. “But I wasn’t motivated by what other people thought.”
Hurt asked Dell what are some of the big ways entrepreneurship has changed since Dell launched his company.
Now the infrastructure and resources like startup labs and incubators make it a lot easier for entrepreneurs to launch a company, Dell said.
“The great thing we have in this country is we have a culture that accepts and embraces risk,” Dell said.
Job creation in the economy come from new and emerging businesses, Dell said.
The U.S. culture treats failure in a way that causes people to want to continue pursuing ventures, Dell said. That culture of risk taking is a huge competitive advantage for the U.S., he said.
Hurt asked Dell what advice he would give his 17-year-old self if he could go back in time. Dell said he would have learned more about management and building teams.
Dell took one class at UT focused on business: macroeconomics. He learned to buy low and sell high. He was a biology major. And he was only in school for a year.
“A lot of it was learning by making mistakes and experimenting,” Dell said.
When an entrepreneur does something that has never been done a naïve perspective or a different perspective is often where breakthroughs come from, Dell said. If you know too much, it’s not helpful, he said.
“I think there are things you can learn from experience but when you are doing something that has never been done before it’s more response time, thinking on your feet, agility that have a higher premium than necessarily experience,” Dell said.
In the world today, the rate of change is accelerating in all industries because of technology, Dell said. That’s creating new opportunities, he said. This is where people with new perspectives, they tend to be younger, bring new ideas, he said.
Hurt asked Dell why he took the company private last year. Dell completed a $25 billion buyout to take the company private last October.
“We were a public company for 25 years,” Dell said. “The stock appreciated 13,500 percent during that time.”
About six or seven years ago, Dell started changing its business from products to solutions, software and services, he said.
It began investing in different areas to provide more solutions to its customers, Dell said. The company made a number of acquisitions.
Dell wanted to focus on more long term planning, he said.
“Our decision making is simplified greatly,” Dell said. “It’s kind of like it was when we started the company…It allows us to dedicate our energy to our customers.”
Dell refers to itself as “the world’s largest startup.”
Since going private, Dell is incubating new businesses and crowdsourcing ideas, Dell said. It’s working with customers in new ways, he said. It launched a venture fund and it has all kinds of resources for entrepreneurs, he said. Cloud, mobile, social and cyber security are all key areas of focus for the company, Dell said.
Another trend Dell is excited about is in data applications. A huge opportunity exists in data analytics, particularly in industries like healthcare, Dell said. Dell has seven billion images in its medical archive, he said. What’s interesting is when Dell layers predictive analytics on top of that archive and can provide information to doctors around the world, he said.
Hurt asked Dell about the role the city has played in Dell’s success. Dell said Austin has been a wonderful place to grow his company. He has hired a lot of people out of the University of Texas. Today, Austin is still great, he said. UT is one of the main things that attracts people to move here, he said.
“There really hasn’t been a better time to be alive in the world,” Dell said. “This is a fantastic place. It’s hard to imagine a better place to be.”
Hurt said there’s quite a bit of pessimism out there about entrepreneurship.
“There’s always whiners and complainers, but screw them,” Dell said.
Dell has done a lot to make Austin a better place for all of its citizens. Last year, the Michael and Susan Dell Foundation donated $60 million to create the Dell Medical School at the University of Texas at Austin. Dell joked that it was the closest he would come to becoming a doctor. He went to UT to study biology with the intention of pursuing a medical degree.
During a question and answer session with the audience, Dell recounted his first job as a dishwasher in a Chinese restaurant at the age of 12 in Houston, his hometown. He soon got promoted to water boy and then assistant maitre d. He then got hired away by a Mexican restaurant. He later worked in a store that sold jewelry, stamps and coins and when he got his driver’s license at 16, Dell worked for the now defunct Houston Post delivering newspapers.
“I think those early job experiences are unbelievably valuable,” Dell said. They taught him a lot of lessons.
Another audience member asked Dell about mistakes he made early on.
Dell recounted how he didn’t know the company needed an Federal Communications Commission approval to sell computers. The FCC shut the company down. They had to scramble to get an FCC approval, he said.
“That was certainly a pretty major crisis at the time,” Dell said.
In the late 1980s, Dell had a problem with inventory management. The company ended up learning a lot about inventory management, he said. But it was a near fatal experience at the time, he said.
In fact, in the first three or four years, Dell could have gone out of business five or ten times, Dell said.
“Fortunately they weren’t big enough mistakes to put the company out of business,” Dell said.
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