O ne afternoon in 1977, as his parents two brothers fished in the Gulf of Mexico, 12-year-old Michael Dell sat on the beach, painstakingly putting together a trotline, a maze of ropes to which several fish hooks could be attached. “You’re wasting your time,” the rest of the family called to Michael, as they pulled in fish. “Grab a pole and join in the fun.”
However, Michael kept right on working. It was dinnertime when he finally was finished, and everyone else was ready to call it a day. Still, the youngster cast the trotline far into the water, anchoring it to a stick that he plunged deep in the sand.
Over dinner his family teased young Michael about coming away empty-handed. But, afterward Michael reeled in his trotline, and on the many hooks were more fish than the others had caught all together!
Michael Dell has always been fond of saying, “If you think you have a good idea, try it!” And today, 1994, at 29, he has discovered the power of another good idea that has helped him rise in just a few years from teen to tycoon. He has become the fourth-largest manufacturer of personal computers in America and the youngest man ever to head a “Fortune 500" corporation.
Growing up) in Houston, Michael and his two brothers were imbued by their parents, Alexander and Lorraine—he an orthodontist, she a stock broker—with the desire to learn and the drive to work hard. Even so, stories about the middle boy began to be told early.
Like the time a saleswoman came asking to speak to “Mr. Michael Dell” about his getting a high-school equivalency diploma. Moments later, eight-year-old Michael was explaining that he thought it might be a good idea to get high school out of the way. A few years later Michael had another good idea, to trade stamps by advertis-ing in stamp magazines. With the $2,000 profit he made, he bought his first person -al computer. Then he took it apart to figure out how it worked.
In high school Michael had a job selling subscriptions to the Houston Post. Newly-weds, he figured, were the best prospects, so he hired friends to copy the names and addresses of recent recipients of marriage licenses. ‘These he entered into his computer, then sent a personalized letter offering each couple a free two-week subscription. This time Dell made $18,000 and bought a BMW. The car salesman was flabbergasted when the 17-year-old paid cash. The next year Dcll enrolled at the University of Texas in Austin. Like most freshmen, he needed to earn spending money. just about everyone on campus was talking about personal computers. At the time, a anyone who didn’t have a PC wanted one, hut dealers were selling them at a hefty markup. People wanted low-cost machines custom-made to their needs, these were not readily available Why should dealers get such a big mark~up for so little added value? Dell wondered. Why not sell from the manufacturer directly to the end user?
Dell knew that IBM required its dealers to take a monthly quota of PCs, in most cases more than they could sell. He also knew that holding excess inventory was costly. So he bought dealers’ surplus stock at cost. Back in his dorm room, he added features to improve performance. The souped-up models found eager buyers. Seeing the hungry market, Dell placed local advertisements offering his customized computers at 15 % off retail price. Soon he was selling to businesses, doctors’ offices and law firms. The trunk of his car was his store; his room took on the appearance of a small factory.
During Thanksgiving break, Dell’s parents told him they were concerned about his grades. “If you want to start a business, do it after you get your degree,” his father pleaded. Dell agreed, but back in Austin he felt the opportunity of a lifetime was passing him by. “I couldn’t bear to miss this chance,” he says. After one month he started selling computers again—with a real vengeance.
The quarters he shared with two roommates looked like a combat zone—boxes piled high, computer boards and tools scattered around. One day his roommates heaped all his equipment into a pile, preventing Dell from entering his room. It was time to come to grips with the magnitude of what he had created. The business was now grossing more than $50,000 a month. Over spring recess, Dell confessed to his parents that he was still in the computer business. They wanted to know how classes were going. “I have to quit school,” he replied. “I want to start my own company. “What exactly is it that you want to do?” asked his father. “Compete with IBM,” he answered simply.
Compete with IBM? Now his parents were really worried. But no matter what they said, Dell stuck fast. So they made a deal: over summer vacation he would try to launch a computer company. If he didn’t succeed , come September it would be back to school.
Returning to Austin, Dell risked all his savings and incorporated DELL COMPUT-ER CORPORATION on May 3, 1984. He was 19.
Under a deadline, his pace was frantic. He rented a one-room office on a month- to-month lease and hired his first employee, a 28-year-old manager to handle finance and administration. For advertising, he grabbed an empty pizza box and on the back sketched the first ad for Dell Computer. A friend copied it onto paper and took it to the newspaper. Dell still specialized in direct marketing of stripped-down IBM PCs to which he added custom features. As orders came in, Dell rushed around gathering up the right parts to assemble each order.
First-month sales topped $180,000 the second, $265,000. I)ell barely even noticed when the new school year arrived. Within a year, he was selling 1000 PCs a month. To keep pace, Dell moved to larger quarters and hired more staff. Then customers phoned orders to an 800 number, and then the staff assembled the units. Parts were ordered only as needed, keeping inventory and overhead low. UPS trucks picked up daily that day’s production for delivery. It was very efficient—and very profitable.
Just when it seemed the sky was the limit, and sales had topped $3 million, the manager that Dell had hired quit. But, as Dell always told himself “Every time you have a crisis, something good comes out of it.” From necessity, he learned about accounting basics—experience that I. would prove invaluable in the years ahead. “It’s a lot easier to learn something if it’s important to you,” he says.
Unlike other manufacturers, Dell gave his customers money-back guarantees. He also realized that when a computer is down, the customer wants it back up and working right away. So Dell guaranteed next-day on-site service for his products, and introduced a 24-hour-a-day toll-free line for customers to talk directly with computer technicians. Ninety percent of computer technical problems, according to Dell, can be solved over the phone.
Constant telephone contact with customers kept the company close to the market. Customers let Dell Computer know directly what they liked or didn’t like about a particular model. “My competitors were developing products and then telling customers what they should want, instead (if finding out what the market really wanted and then developing products,” Dell says.
By the day Michael Dell would have graduated from college, his company was selling $70 million worth of computers a year. Dell quit dealing in souped-up versions of other companies’ products, and started designing, assembling and marketing his own. Today Dell Computer has wholly owned subsidiaries in 16 countries, including Japan. The company has revenues of over $2 billion, employs some 5500 persons, and Dell’s personal fortune is between $250 million and $300 million. To encourage even greater productivity, Dell Computer gives its employees awards for ideas worth trying, even if they don’t pan out. “Our success has forced the giants to become more competitive,” Dell says. “That’s good for the consumer
Dell, his wife and their two—year—old daughter lead a pretty normal life. His charity is generous hut quiet. Recently the couple announced the donation of a parcel of land for a civic center to Austin’s Jewish community. Dell also regularly lectures I on entrepreneurship to MBA students at the University of Texas Graduate School of Business in Austin. What concerns Michael Dell is that our country is losing its competitive edge. “There’s too much of an entitlement attitude nowa— days,” he says. “ ‘I deserve this’ needs to he replaced with ‘I earned this.’
He credits his own success to the fact that Alexander and Lorraine Dell expected their three sons to learn and work hard—and draws a lesson. “The reason our schools are failing isn’t because classroom sizes are too big. I can show you schools in I Thailand where kids study in unbeIievably crowded classrooms—and yet they’re learning much more than our students. Why? Because they want to learn. Because they want to work hard. Because their parents and their teachers expect that of them.”
Back when his firm was two people in one room, Dcll told his friends his dream was to become the world’s largest personal computer maker. He was unrealistic, they said. “Why would anyone want to be second or third or tenth?” he replied. His message to us all: why not at least try to realize your dream, what deep down you would truly love to achieve?
READER’S DIGEST Magazine
March 1994 , (pgs. 115-119)
Fred J. Eckert, former Congressman and U.S. Ambassador
Author/photographer - Books on Fiji & Tonga
Church of the Science of God
La Jolla, California 92038-3131
© Church of the Science of GOD, 1993