Interview: Michael Dell
Founder & Chairman, Dell Inc.

Let's talk about how you became involved with computers, and started your own business at such a young age. We've read that you took apart the first PC that you got your hands on. Is that true?

Michael Dell: Yeah. I wanted to see how it works, so I took it apart. A good thing about the early personal computers is that they had completely kind of standardized chips, and so you could literally get a book about each chip and read what each pin did, and how signals were processed through the chip. You could design your own circuits and you could modify them, and you could literally see exactly how the thing was working. That was sort of the classroom for me. That was where I learned the basics of how these things worked. Then I kind of became fascinated with, "Well, how could you improve it?" How could you make it do more things? How could you expand it? How could you make it go faster? How could you hook it up to other computers and let your imagination run wild?

You noticed that the parts were not made by IBM.

Michael Dell: That's right.

The earliest PCs had IBM's name on the outside but there was no IBM on the inside. And what I saw was that not only did it take an enormous amount of time for the components to get from the people who made them all the way to the customer, but it was a very inefficient and expensive process. So I would read about improvements in technology in Byte magazine, but then it would take a year or more before you could actually buy it. So I was kind of a frustrated consumer, thinking, "Hey, where is all this stuff that I keep reading about?" and kind of thought, "Well gee, what if you could sell directly to the end customer and do it way more efficiently with better service, the people who really knew about the product. Now, I had no idea this thing called the Internet would come along and make it real easy for people to buy things online and connect, but absolutely felt that over time more and more people would be knowledgeable enough to buy on the phone.

But how would they know about you?

Michael Dell: Well, you advertise. Interestingly enough, the logical conclusion most people would have after hearing all that is, "Oh, you were selling to consumers and hobbyists." But actually it wasn't much of our business. Most of our business was large companies. We were kind of discovered by large companies who wanted computers to make themselves more productive, and public institutions, and that that became the origins of the growth of the business.

So having taken this computer apart and figured out a lot of stuff about how it worked, you actually developed a business of your own quite early on. Could you tell us how that came to pass in your freshman year of college?

Michael Dell: Yeah. When I was freshman at the University of Texas, I was going to school and had every intention of going to school. I was kind of playing around with this as a hobby while I was going to school. It was a really fun hobby for me because I was really interested in computers, and it provided a little extra income, so I could buy the latest stereo and whatever I wanted to buy. You know, 18-year-old, 19-year-old kids like to do stuff like that.

So you were already making some money off of it?

Michael Dell: Yeah, yeah. When I was a freshman in college, selling upgrade kits and enhancing computers. My parents got wind of this and they were really upset, because they thought that I should really only focus on going to college.

What were you studying?

Michael Dell: Biology. My father's a doctor, my brother's a doctor, lots of doctors in the family, so I was going to be a doctor. So they were, they were very, very upset with me. You know, "Michael, you've got to get your priorities straight."

Around Thanksgiving of 1983, my parents kind of made me commit that I wasn't going to do this computer business anymore. I was only going to focus on my studies. So that lasted about ten days. It was during that time that I decided that I was going to start a company. So actually, my parents telling me to stop doing it is probably what caused the company to get created. If they hadn't done that it might've just been a hobby. But what I kind of reflected on in those ten days is that I really love this, and it was enormously exciting, tremendously fun. So like any other 18-year-old who wants to do what their parents don't want them to do, you just don't tell them. So that's what I did. I kind of went about the path to start the company without really telling my parents.

Where did you keep these computers that you upgraded?

Michael Dell: Well, they were in Houston and I was in Austin. And so...

I kind of moved into a larger apartment that had really high ceilings so I could kind of stack things up and managed to conceal it from them for quite some time. And then I basically came to an arrangement with my parents. I said, "Look, I really want to go do this, and I know you don't want me to go do it, but I've checked with the University of Texas, and the way it works at UT is that you could take a semester off and you can come back." And so I said, "We'll, we'll agree to this. I'll take the semester off -- the fall of '84 semester -- and I'll go and do this. If it doesn't work out, I'll go back to school, and if it does I'll just keep doing it." And so they agreed. If they hadn't agreed, I probably would've done it anyway to be honest with you. So in May of '84, I incorporated the company and off we go.

Wasn't there a time when your parents came to visit unexpectedly while you were still having this covert business?

Michael Dell: Yeah. That would've been in November of '83.

They would kind of hear from their friends, "Oh, Michael's doing so great. His business is going really well." And they were like, "What are you talking about? He's supposed to be in college." They had a couple of kind of surprise visits. They would just kind of show up, you know, like, "Where are your books?" "Oh, they're at the library." I'd sort of have good answers for things, and they couldn't quite figure it all out. But eventually they kind of figured out, "Wait a second. There's too many computer parts around here." It was a bit hard to disguise what was going on. So that's when we had this talk.

So what happened after you incorporated? What was the next step?

Michael Dell: It started with little tiny ads in computer magazines that appealed to business people. Right at the start, about half the business was people in the Austin area, and half was the rest of the nation. Of course, that didn't last very long either. We went all over the nation really fast. We actually started -- not making computers -- but selling upgrade kits for computers.

This is way back in the beginning of the industry when personal computers didn't even have hard disk drives. So we made a business where we would buy controller chips and cables, and write some software, and buy hard disks, and we would make kits so you could upgrade your computer to have a hard disk drive. So we were making an enormous number of these kits, like hundreds and thousands of these kits. We needed computers to format the hard disk drives. So we kind of designed a really basic computer to format the hard drives. We're busy formatting hard drives, and I remember we had this customer from Martin Marietta who came to see us, and he goes, "I want to buy 150 of these hard disk drives." We were like, "Oh my god!" We don't have ties, our office is not really a place you would want to go and see at the time. So we've got to clean the place up. So I'm showing this guy around and he's going to buy these disk drive kits. He goes, "What are those computers you have?" "Oh, those are the computers to format the hard drives." "Can we buy those?" Oh, good idea! We were so busy formatting these hard drives, we never really thought about that. So about a week later there was this Austin computer fair in the downtown coliseum-type thing. By that time we were sort of the biggest seller of computer stuff in Austin, so we had the biggest booth right in the center. We made this computer in a few days, and got a case, and brought it to the show.

This was a computer that had the hard drive in it?

Michael Dell: Yeah. It was like a fully assembled computer, and we brought it to the show and we just sort of sat it there. We wrote down the specifications, and we said, "Okay, we'll sell this for $795." We had a lot of interest. So within about three or four months, the whole business basically shifted to making these computers, which sounds kind of crazy now. So then we said, "Well hey, we've got to go hire engineers, and we've got to design more computers. We've got to get, got to get more space, and we've got to get a bigger factory, and we've got to go really serious about making computers." And that's what we did.

You were offering customers good value, weren't you?

Michael Dell: In the spring of '86 we went to the Comdex trade show, which was, at the time, like the biggest trade show in the industry. We had a 12 megahertz 286 computer. At the time, the fastest computer from IBM was a six megahertz 286 computer. So ours was twice as fast. Their computer was $3,995 and ours was $1,995. So ours was twice as fast and cost half as much. We didn't have any problems selling them! There was an interesting twist though. There were two really long lines of people at our booth. There were all the people who said, "I want to run AutoCAD or dBase, and how can I get one of these things really quickly? This is fantastic!" And then there were all the press, who were kind of wondering why in the world would anyone ever need a 12 megahertz 286. You know, "We already have six megahertz, and we know eight megahertz is coming. Those are plenty fast!" Okay. You know, compared to today, of course, children's toys have faster microprocessors than the machines we were selling then.

How much capital did you start with when you incorporated?

Michael Dell: I started with a thousand dollars, almost no capital. The interesting thing about the business that we started was that -- because we were selling directly to the customer -- the customer would pay us, often, right at the time we shipped the product. So we were able to get credit lines from suppliers and we had what's known as a negative cash conversion cycle, which is a very good thing in a business like ours. We still have that today and it helps us generate significant positive free cash flow.

Could you describe what that is?

Michael Dell: When you look at the complete balance of how fast do our customers pay us, and how fast do we pay our suppliers, how much inventory do we have, the net of all that is that we actually collect money way before we pay the money out. That's a beautiful thing. In fact, it allows a company to grow very quickly, because you have sort of negative working capital. So we didn't require lots of capital. We weren't as efficient then as we are now, but we were able to grow quite rapidly without a ton of capital. Now we were growing at such enormous rates, we needed some capital, 'cause we needed some buildings, and we needed some infrastructure. So we got a little bit of capital. We got a credit line, and we eventually did a private placement, and went public in 1988 on NASDAQ and attracted some capital so we could expand around the world and continue growing.

At what point did the customers become not just businesses but consumers? Was it at that Austin fair?

Michael Dell: We had all types of customers. It's just that the industry really started as a business activity. It was for accountants and architects and doctors and lawyers and people doing word processing and things like that. There wasn't much personal computers in the home like there is now. As we grew, we started to sub-segment the opportunities, and said, "First, there's large customers and small customers." And then we said, "Well, it's a little more complicated than that. There are these public sector customers from the government and education and medicine, and they kind of have different requirements and they buy a bit differently, and that's kind of different than large companies." And then we said, "There's kind of small companies and consumers -- and those are sort of different -- and there's large companies and global companies." Global companies have a whole different set of requirements than national companies, because they want to buy in many countries around the world. We spent 20 years chasing our customers around the world. Really big companies like GE and Toyota and Boeing would say, "When are you going to be in this country?" So every year we would open a few more countries.

Does that mean you opened factories there?

Michael Dell: We had regional factories. In 1987, the company was just three years old, and we launched in the United Kingdom. It's kind of interesting. We weren't a public company, we had very little capital. Let's expand around the world!

How old were you at the time?

Michael Dell: I was 22 years old. And it seemed like a good idea. We actually had a pretty important meeting about seven or eight months earlier.

We went off for a few days with some of the really smart people in the company and a few outside advisors. And we said, "Well, what are we going to do with this company? This thing is really growing fast, but we're in a business that's pretty competitive and expanding rapidly. What do we do?" So we had three strategies that we clued in as our growth path for the future. The first one we said was, "We've got to go outside the U.S., because 96 percent of the people in the world live outside the United States, and it's going to be at least half the opportunities -- outside the United States. You can't just be a domestic company." Second thing we said was, "We really want to go after large companies, because they underwrite their purchase of technology through productivity and they can afford the best tools. That, we know, is going to be a lucrative opportunity and we really want to go after that in a big, big way." Kind of an odd thing for a little company like ours to go after, particularly with IBM and others in the field. The third thing we said was, "Differentiating our business is going to be really key, and the way to do that is on service." You've got to have better service than the competitor. So we invented this idea of on-site service for the PC, which had really never been done before. So with those three strategies we kind of marched forward, and that lasted five or six years.

Onsite service, meaning you would send someone to the customer's place of business?

Michael Dell: The way this would work is, let's say you went to ComputerLand -- there used to be such things in the United States, around every street corner -- and you bought a computer and it didn't work. Well, you'd put it back in the car and you'd go there and (say) "Fix this thing," and you'd come back a week or so later and they'd give it to you. So our idea was that you'd call us on the phone and say, "Hey, our computer is not working," and we'd come the very next day and fix it. It turns out there were all sorts of third party companies that had field service networks -- companies like Xerox, for example, who had all these technicians all over the country who were kind of waiting for copiers to fail. So they had this fixed capacity. And so we could buy up that excess capacity at way less cost than we could put it in ourselves, and instantly have way better service. Actually, Xerox is the company we used for quite some time in that.

So we used them as one of the third party field service providers.

When a customer would call us and say "Hey, something's wrong with my computer," the interesting thing is that about 85 or 90 percent of the time we could solve that problem, actually right on the phone. So we didn't have to actually send the technician. But when we did, we knew exactly what the problem was and we could very accurately fix it the very next day. We've obviously advanced it and now we have two-hour service and four-hour service, for kind of mission-critical installations. Some of our customers say, "Hey, I want to have somebody there all the time, for 24 by seven. (We) do that too. So it becomes many, many different types of service offerings. Service is really an important part of our business that continues to evolve, particularly as we create more and more complicated products. The customer isn't so much interested in all the bits and bytes and how fast is the computer and what does it do. They want to know that this installation of a critical system that they're putting inside their business is really going to work well, so they're looking for a solution. So we have to know a lot about their business, and we have to really be able to consult with them and tailor a solution that meets their needs.

How soon after you dropped out of the University of Texas was it clear that the business was going to be a success?

Michael Dell: The first couple of years, the business grew tremendously, but it was also a business where it could've gone away at any second, because there were so many things that were fragile and unpredictable and we were doing all sorts of new things. By the time we went public in 1988 and had some capital, it was still a rocket ship, but you could sort of say, "Okay, it looks like you got something here."

Did your parents live to see your success?

Michael Dell: Oh yeah! They're still with us and they're very happy. They're pleased with the way everything's worked out.

I bet they're glad you took that semester off after all.

Michael Dell: Yes.

Tell us about your childhood. Were you a tinkerer? Were you always playing with gadgets?

Michael Dell: I liked to take things apart. I was always taking apart telephones, radios, televisions, sort of anything electronic I could get my hands on. I liked to kind of see how it worked and sometimes I'd put them back together too. But I was mostly interested in understanding how things worked.

Where did you grow up?

Michael Dell: I grew up in Houston, Texas. My father was a doctor, and my mother was a stockbroker and financial consultant. I have a an old brother and a younger brother, so I was the middle child.

When I was in the seventh grade, I was in an advanced math class. And in my math teacher's classroom at the junior high school I went to, they got the first teletype terminal at the school. And this was of course before personal computers, and basically you could like write a program and send it off to a big mainframe -- the answer would come back. And I became kind of, you know, fascinated with this idea of a computing machine. I thought that was pretty cool, so I would sort of program this teletype terminal and sort of learned all I could about computers.

What kind of student were you?

Michael Dell: I was an okay student. In math and science I was a better student. If I was interested in the subject I'd do a little better, but I wasn't particularly a high-achieving student.

Did you like to read?

Michael Dell: I liked to read. I was particularly interested in science, either real science or science fiction. Those kind of things fascinated me. My parents were always talking about the economy and the stock market, and the oil crisis back in the '70s. I found those things pretty interesting too, so I would read about business and investing and playing around with the stock market. I thought that was pretty interesting too.

Do you remember any particular books -- science books or science fiction -- that you liked?

Michael Dell: I can't say I had any that particularly struck me, you know. I definitely remember reading Scientific American when that would come. I'd be really interested to see what was going on, the latest frontiers of science.

Is it true that you began to speculate in the stock market at age 13?

Michael Dell: My mother was a financial consultant, so she was immersed in the world of stocks and bonds, and I kind of became interested in currencies and interest rates and what was going on with commodity prices. Kind of an odd thing for a 13-year-old to be doing, but I found it interesting and would sort of read reports and started playing around and investing in things and just found that whole idea fascinating.

Do you mean you were literally investing with real money?

Michael Dell: Yes.

Your mom was fine with that?

Michael Dell: Yeah, she was. She was totally fine with that. I had a couple of interesting jobs. I didn't actually have any need for income as a child, but I felt compelled to earn an income to fund my hobbies. So I was 12 when I got my first job. I was a dishwasher in a Chinese restaurant and got promoted to be the water boy. And then I was assistant maître d'. So I was moving up pretty quickly in the Chinese restaurant business. And then I got recruited away to a Mexican restaurant. I was still pretty young -- 12 or 13 years old. And then I got a kind of interesting job. I was working at a stamp and coin store. And one of my jobs was -- when people would come and they wanted to sell their rings or silver -- I would assess the metal and calculate what it was really worth and then try to negotiate with them, to buy it at a good price.

How old were you?

Michael Dell: I was like 14 years old. So that was a lot of fun. And then, when I was 16, I started to be able to drive. Of course that really expands the number of things you can do, because previously your only method of transportation is a bicycle or getting your parents to take you or something like that. So it kind of limited the available job opportunities.

When I was 16, I got this job working for a newspaper in Houston, and my job was to sell subscriptions to the paper on the telephone. And I realized two things when I was doing this. I realized that people that were buying the newspaper generally had two things in common. Either they were moving to a new residence or they were getting married. And it turns out that you could go find information about both of those things in enormous quantities. So in the state that I lived in -- in Texas -- when you want to get a marriage license you have to file with the state and it's public information, particularly the address that you want the license sent to once it's issued. So I hired all of my friends and went to every county in the surrounding 16 counties in Houston, captured the addresses of all the people that applied for marriage licenses and sent them a direct mail offer to offer them the newspaper for a free trial and then a subscription, and ended up making a fair sum of money for a teenager.

How much?

Michael Dell: I made about $18,000 in one year. My government economics teacher was particularly upset with me because we had this assignment in class to fill out our tax return, and so I filled out my tax return and turned it in. She said, "Well this is obviously wrong."

She thought you were making this up?

Michael Dell: Yeah, I said "No. I did the assignment. This is my tax return." And she said, "Well this can't be right. You made more money than I did!" She was kind of upset with me.

Who can blame her?

Michael Dell: But I was having a good time. I was having fun. It was kind of like a big, big game for me.

It sounds like you had skills as a salesman very early on.

Michael Dell: Yeah. I think that's a fair statement.

Where do you think that came from?

Michael Dell: I wouldn't necessarily think of myself purely as a salesperson, but I think it was looking at problems from a different perspective, and listening very carefully to what the real problem was, and approaching it from a completely different angle and not being afraid to have a completely new thought to address a problem.

You took a very scientific approach to selling the newspapers. You just went out and figured out where they would be, the people that would buy newspapers.

Michael Dell: Yeah. It was data-driven. And actually, we applied some of those things into the Dell business. One of the other things that I found was that you could actually get lists of people that applied for mortgages, and that was another fantastic source of leads of people who wanted to buy the newspapers.

Because they were moving?

Michael Dell: They were moving to a new residence and they're like, "Oh, I got a new house. I'm nesting. Okay. The newspaper, that sounds like a good idea."

These days you might have a tougher time selling those newspapers.

Michael Dell: I wouldn't want to be selling newspapers right now. It was a fun business for a summer job when you're 16 years old.

You mentioned that you applied some of those data concepts to Dell. In what way?

Michael Dell: In Dell we created a business that was, at least from its origin, about directly connecting with the customer. And so it was direct marketing, taken to a whole new level, where whether it was on the phone, or through the mail, or -- obviously -- through the Internet. We have at Dell right now about two billion conversations a year with customers. And those conversations occur in just a myriad of ways, from Dell.com obviously, to face-to-face meetings, to phone, e-mail, all sorts of conferences. All of that connection with our customers informs everything we do, in terms of new products, new services and how we evolve the business. And so this theme of listening has really been important for us.

Figuring out where the need might be.

Michael Dell: Yeah. Understanding the requirement.

We sort of have a very interesting place in the world. We're kind of in between all these technology ingredients that are evolving at an enormous pace, almost independent of need. They're really based on scientific principles and physical laws and how those can be extended and driven. So you have all these ingredients like microprocessors and software and memory and hard disk drives and rotating media, optical storage and networking and all these things. And then you have all of these billions of people out there who are trying to get something done, trying to be productive. They're trying to entertain themselves. They're trying to provide education, or medicine, or run a small business, or run a really big business or fire department or whatever -- hospital -- or whatever it might be. So we kind of see our job as, "How do we understand all those requirements? Take all these ingredients, and really make this as simple as possible, and allow the technology to be used by the most number of people in the world."

What was your first encounter with a personal computer?

Michael Dell: My first encounter with a personal computer was riding my bike home from school. There was a RadioShack in between my junior high school and my house. You know, at one time RadioShack was the leading personal computer company in the world. They had an incredibly simple PC, so I would kind of hang out at the store and wish that one day I could actually buy one of those.

Did you anticipate that this would become something everybody had to have in their home, in their work?

Michael Dell: I can't really say that I did. I knew that it was going to be a big deal, but I didn't know how big a deal. Certainly, I think, my concept of the macro-economic impact of productivity enhancement driven by computers -- I don't think anybody really captured or understood all that was about to happen in the next 25 years. But it certainly seemed like a great idea, and it was very fun for me.

I was, again, fascinated by this idea of a machine that could do computations. And being interested in math and sort of seeing how this machine could very rapidly do calculations that -- I could do them, but I wasn't nearly as fast as the computer. And then the idea of -- well okay, so you've got your brain, which has all sorts of power and capability; then you've got this computer, which has all sorts of power and capability -- kind of different though. And how do you combine those to the greatest possible effect? Now our industry is really still working on that. I mean, if you think about the interface between the computer and the person, it's still evolving tremendously, from simple screens and keyboards to the mice and voice, touch and all sorts of things that are evolving in how the man and the machine relate. There's still a lot to be done there. People that create things, it takes them an enormous amount of time, often, to leverage the power of computing all the way through to their creations. Well what if we could shrink that tremendously and automate a number of tasks that are just repeated? So there's still a lot of progress left in our industry.

The rapidity with which this became part of everyday life is astonishing to anyone who grew up in the analog age.

Michael Dell: I was right in the middle of it and it just seemed like a natural progression. When you step back and think, "Wow, look at how fast it evolved!" and you look at how much has changed, it's pretty dramatic. But it all seemed like a logical progression. In our business we had eight years where we grew 80 percent per year. And then we had six years after that where we grew 60 percent per year. The compounded affect of that gets you up to tens of billions of dollars rather quickly. So we were really busy just meeting the demands and the opportunities that were in front of us.

What advice would you give a young person who is interested in being an entrepreneur? What do you think are the qualities that are most important?

Michael Dell: I think you have to be able to experiment and make mistakes. I find the question a bit perplexing, in a sense that if you really don't know what it means to be an entrepreneur, maybe you aren't one. So I think there's a bit of self-initiative and self-starter that is an incredibly important part of entrepreneurship. I mean, no one can tell you how to do it. You have to sort of have an instinctual feeling, or an idea about something. And you've got to be passionate about it. I think people that look for great ideas to make money aren't nearly as successful as those who say, "Okay, what do I really love to do? What am I excited about? What do I know something about? What's kind of interesting and compelling?"

You have to follow your heart in a way.

Michael Dell: Yeah.

If you look at our story, at any point in the process you could've gone to conventional experts. In fact, I remember -- I won't name the person, 'cause he's still an extremely well-known author of famous business books, teaches at a very prominent university -- I showed up at a conference when the company was three or four years old, and he was sort of critiquing our business. And he said, "Oh, this will never work." And it was a common experience. When we launched our business in the United Kingdom, we had about 22 journalists show up. And it was sort of funny, because about three or four weeks before we launched, we started actually selling. And the thing was just going like crazy. It was just growing so, so fast, which is a good thing, because when we had the launch, about 21 of the 22 journalists said, "Oh, this is a horrible idea. Never work in the U.K. It's a completely American idea. Don't even think about coming here. You should just pack your bags and go home." Lucky for me we'd already started. "Hey guys, love to entertain some more questions but I got to go back to the office, 'cause we're busy taking orders and making computers."

The U.K. grew faster than the U.S. The U.K. just took off at super rate. We're number one there as well.

Even a business as spectacularly successful as yours can have a few ups and downs. Could you tell us some of the problem you had in the early '90s? Around 1993?

Michael Dell: We had problems in 1993 that I think were multifaceted. One big challenge was that the company had grown so fast. We had grown from -- in 1988 -- maybe 150 million to -- by 1993 -- almost two billion in revenues. And the infrastructure and the systems and processes were not really keeping up. In fact, in one year we grew from less than nine hundred million to over two billion. People say when you hit a billion you hit the wall. We just jumped right over it and went right to two billion. But it was a real mess. We sort of had to stop and re-evaluate things.

Was it ever difficult to keep up with demand?

Michael Dell: Oh yeah, for sure.

We had real challenges in how fast can you build factories and how fast can you hire people and put up new buildings. Hyper-growth sounds really fun and exciting, but, I learned the hard way, there is such a thing as growing too fast, where the wheels sort of come off and you have to take a time out and say, "Wait a second here, let's prioritize." I was absolutely to blame. We were going and doing so many things at one time, 'cause we were really excited. We were like, "Okay, we're going to go in this business, we're going to go in that business, we're going to go to this country and this new product and this new service... " It was just too much of a good thing. We had to really sort of hone it back.

Speaking of setbacks, what happened with the Olympic project?

Michael Dell: The Olympic was a project that we created. We had a really bright technical team and they came up with a new computer architecture which was sort of unbelievable in terms of what it would accomplish. It crossed all sorts of new boundaries for us into the server opportunity, into the workstation opportunity. It turned out that it was technically too much of a challenge for our team to digest. Even if we could digest it, our customers weren't really ready for it. So we learned a valuable lesson. It's not just technology for technology's sake, but relevant technology and what really matters to customers and what inventions are really valuable, versus just let's go create a whole bunch of new things.

What was the issue with the Sony batteries catching on fire? When did that happen?

Michael Dell: That was actually fairly recently. That was not too long ago. We had a notebook computer. You know, computer batteries -- or batteries themselves -- are basically devices that store energy, and they're supposed to release the energy very, very slowly. It's a complex chemical device. If the process of building the batteries is in any way flawed, the battery can release the energy much more rapidly than it's supposed to, and you don't want to be around when that happens. So we had some batteries -- a very small number, like a handful of batteries -- and it made kind of a global news story. So we went into action, with electron microscopes, tearing these things apart and looking at them.

A handful of batteries caught fire. Is that what you're saying?

Michael Dell: Yes.

We did a complete, full investigation and found that one of our suppliers, Sony, had made some batteries that had the possibility of this defect. Quite a small likelihood, but still it was there. So we made the decision to recall all of those batteries. Now the interesting thing, if you go back and look at when we made that decision, the popular wisdom was that it was an issue that was unique to Dell, and Dell was the only company in the world that had this problem, and it must've been because Dell did something wrong in the way it designed its computers. Several weeks later, another computer company announced a similar recall for the same Sony batteries. And then several weeks after that, another company. Eventually all of the companies that used the Sony batteries announced recalls. We were very proactive in doing it, and I think our teams did a fantastic job in sort of doing the right thing, when you know you could have had all sorts of arguments about, "Well, it's a really small percentage..." or those kinds of things. But we actually knew the problem was there. And you know, even though there were debates about, "Okay. Is it going to be six batteries that fail, or is it going to be ten batteries that fail?" Doesn't really matter. One battery failing is one too many.

You have to face reality, I guess.

Michael Dell: Absolutely. My experience is that when you find a problem, you fix it as fast as you can find it and just move on. Whatever the consequences of fixing it are, it you just deal with it and keep going. No one's going to fault you for fixing a problem. Now if you keep making the same mistake over and over again, that's not acceptable. I'd always rather be the first one to fix a problem, and have others follow us, than to wait and kind of see what other people do.

You stepped down as CEO a few years ago and then stepped up again. Can you tell us about that?

Michael Dell: Yeah. I was the CEO of the company for 20 years and decided to give somebody else a shot at being CEO. Then, after about two-and-a-half years, the board asked me to come back into the CEO role.

What happened during the two-and-a-half years that they were not thrilled with?

Michael Dell: I think a number of things changed in the industry, and it was time for a clear, decisive set of decisions to set the company on a different path.

Were you getting more competition?

Michael Dell: There were a lot of things going on. There was this enormous growth in emerging countries going on. The consumer business, for the whole industry, was growing super fast. There was huge growth in the enterprise area with servers and storage. Small-to-medium businesses were growing very rapidly around the world. There was a big shift toward mobility, so we needed to have a decisive approach to regain competitiveness and put the company back on a growth path.

During your years away from the CEO's desk you became heavily involved in philanthropy. Do you have any mixed feelings about being CEO again?

Michael Dell: I did that job for 20 years, and I've done it now for another year-and-a-half or so, and I'm having a good time. I'm very happy doing that. I'm still involved in philanthropy. My wife and I set up a foundation about ten years ago, and we've got a great team that's involved in that. My wife is pretty involved in it as well, you know. Some very exciting opportunities.

Could you tell us about your wonderful gift to your alma mater?

Michael Dell: I think Austin has a special place in our hearts because it's where we live and it's our hometown. Our foundation does things all over the world, but we have done quite a few things in Austin. We're very involved in Children's Hospital there, and gave a pretty large grant to the University of Texas to build a pediatric research institute -- which is sort of a precursor for a medical school, which is a much needed resource in Austin that a number of us are hopeful will come -- and also to build a new computer science building at the University of Texas at Austin, and another facility focused on pediatric health and addressing childhood obesity and really trying to get kids more active and deal with the preventative aspects of medicine, as opposed to the other side.

One of our interviews this week was with Dr. Elias Zerhouni, the Director of the National Institutes of Health. He says that's the direction medicine has to go.

Michael Dell: It's a shift left. In our industry we're always looking for the root cause. If you fix problems at the very end, it is exponentially expensive. It's true with healthcare or any other kind of system. The system we have in this country applies enormous expense at the very end, and has very little responsibility and measurement and accountability at the beginning.

What other philanthropic projects are you involved in outside of Austin?

Michael Dell: We've got an office in India. We're getting pretty active in Africa. We're really focused on disadvantaged urban youth. There are lots of opportunities all over this country, and all over the world, whether it's in education or healthcare. We've taken a kind of measurement-and-data-driven approach. I think there are a number of new philanthropists that have come into focusing on using data and analytics in a much more intensive way. We've adopted a number of the business practices, the way we would think about projects at Dell, with return on investment. Our objective is not just to provide a bunch of grants, but really to understand problems and make sure that we get results, and that those are sustainable improvements, so we're not just providing a support system, but rather we're fundamentally changing the outcomes. So that after four or five or six years, our goal is that we don't have to do that anymore, we can go do something else, 'cause we've fixed that problem. Those are the kind of challenges that we take on.

If you were to tell a young person what makes your work so exciting or rewarding, what would you say to them?

Michael Dell: I would say it's working with incredibly smart people in an industry where it's right at the center of change, and you get to see so many changes are going on in all the industries around the world, and see how countries and societies are evolving, embracing this technology. I'm still getting my education, and get it every day when I travel around and meet with customers, meet with our teams. The industry, I think, is still very much in the early days in terms of how technology affects all parts of society.

There's wonderful irony in your career. You didn't become a doctor, like your father and brother, but you just built a pediatric health research center. Well congratulations on your wonderful success, and thank you for the great interview.

Michael Dell: Sure. Thank you very much.