One afternoon in 1977, as his parents and 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 serveral fish hooks could be attached. “You’re wasting your time,” the rest of family called to Michael, as they pulled in fish. “Grab a pole and join in the fun.”
Michael kept working. It was dinner time when he fished, and everyone else was ready to called 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 afterwards Michael reeled in his trotline, and on the hook were more fish than the others had caught all together!
Michael Dell has always been found of saying, “If you think you have a good idea, try it!” And today, at 29 ( he is today 55 years old), 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 Fortune 500 corporation.
Growing up in Houston, Texas, Michael and his two brothers were imbued by their parents, Alexander and Lorraine – he an orthodontist, she a stockbroker – 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 advertising in stamp magazines. With the $2000 he made, he bought his first-personal computer. Then he took it apart to figure out how it worked.
In high school Michael had a job selling newspaper subscriptions. newlyweds, 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.
The time Dell made $18,000 and bought an expensive BMW car. The car salesman was flabbergasted When the 17 year old Paid cash.
The next year Dell enrolled at the University of Texas. Like most first year students, he needed to earn spending money. Just about everyone on campus was talking about personal computers. At the time, anyone who didn’t have a PC wanted one, but dealers were selling them at a hefty mark-up. People wanted low cost machines custom made to their needs, and 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 dormitory room, he added features to improve performance. The improved models found eager buyers. Seeing the hungry market, Dell placed local advertisements offering his customized computers at 15 percent off retail price. Soon he was selling to businesses, doctor’s offices and law firms. The trunk of his car was his store; his room took on the appearance of a small factory.
During a holiday 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 college 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 vengeance.
The quarter he shared with two roommates was in chaos 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.
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 college,” 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.
Now his parents were really worried. But no matter what they said, Dell insisted. So they made a deal; over summer vacation he would try to launch a computer company. If he didn’t succeed, it would be back to university.
Dell risked all his savings and incorporated Dell Computer Corp 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 box and on the back sketched the first advertisement 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 $1,80,000; the second, $2,65,000. Dell barely noticed when the new college year arrived.
Within a year, he was selling 1000 PCs a month. To keep pace, Dell moved to larger quarters and hired more staff. Customers phoned orders, and then the staff assembled the units. Parts were ordered only as needed, keeping inventory and overheads low. 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 accounting basics experience that would prove invaluable in the years ahead.
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 in working right away. So Dell guaranteed next day on site service for his products, and introduced a 24 hour a day phone service for customers to talk directly with computer technicians. Ninety percent of computer technical problems, accounting 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 of 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 his improved 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 and India. 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 work out. “Our success has forced the giants to become more competitive,” Dell says. “That’s good for the consumer.”
Dell, his wife and their daughter lead a pretty normal life. His charity is generous but quiet. He also regularly lectures on entrepreneurship to MBA students at the University of Texas.
Back when his firm was two people in one room, Dell 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?