Dell: one of the top names in the computer revolution.
Thirty years ago Michael Dell revolutionized the entire business model behind computers
and to this day his company remains one of the biggest computer makers in the world.
In this video we’ll see how Michael Dell started a world-changing business from his
dorm room, and how that made him one of the richest men alive.
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As befitting of the man who would revolutionize the computer business, Michael Dell spent
his childhood experimenting with the early computer.
He would tinker around with his Apple II, but more importantly he’d also get a sense
for business very early on.
As the story goes, Michael had a summer job in high school selling subscriptions to the
Houston Post.
Instead of making random cold calls, he tracked down newlyweds and families that just moved
into the neighborhood; the people most likely to look for a newspaper subscription.
He ended up making eighteen thousand dollars that summer, all by targeting his buyers directly.
Now, although his parents wanted him to be a doctor, Michael wasn’t ready to give up
his interest in computers.
While enrolled in pre-med in 1983, Michael spent his free time repairing and upgrading
PCs, which he sold as an informal business from his dorm room.
The nineteen year old’s hobby quickly proved profitable, and Michael dropped out of university
to pursue his startup.
In January 1984, Michael registered his company as PC’s Limited and began selling computers
from his condo.
A young entrepreneur, Michael was faced with a question: How do I compete with established
competitors, who not only have name recognition, but also a network of retailers to push product?
At the time, customers went to retailers to purchase their personal computers.
The staff at a Best Buy or a Radioshack would help shoppers find the right computer—and
in return for their services, these middlemen would raise prices by 10, 20, or even 30 percent.
So, Michael figured: why not cut the middleman out completely and sell directly to consumers?
Although it would be harder to attract buyers initially, PCs Limited would be selling at
a discount compared to its established competitors.
Michael went all in on his approach, which became known as the “direct model of selling”.
He advertised directly to knowledgeable consumers in computer magazines.
This experienced consumer base could pick options to have their PCs custom assembled,
a service that could not be provided by mass-production giants like IBM.
And so, with the use of Chinese component suppliers and assembly plants, Michael Dell’s
PCs Limited began manufacturing and selling personal computers.
In its first year of operation, PCs Limited sold more than $6 million dollars worth of
computers, which proved the potential of his new business model.
Michael’s company rode the computer boom through the late 80s, growing rapidly as word
spread of its direct-selling and lower prices.
In 1987, the 22-year old CEO changed the company’s name from PCs Limited to Dell Computer and
just a year later its sales hit $160 million.
Michael’s vision extended beyond just direct consumer sales, of course, and now he finally
had the resources to expand his clientele.
One of the most frequent criticisms Michael had to face was that his model could not be
applied to businesses and big clients, who were exactly the sort of customers any growing
company would want.
Michael, however, was ready to prove the critics wrong: he attracted corporate clients by not
only assembling built-to-order PCs, but by also preloading them with all the software
they would need.
If you were, for example, an oil company filling in new office space, Dell Computers would
not only build your PCs for you with appropriate hardware, it would also load the systems with
software to track sales of your gas stations across the country.
Dell was finally making PCs for everyone, but what truly kickstarted its global ascent
was the advent of the Internet.
When Dell launched its direct-sale website in July 1996 it gained access to innumerable
customers.
For the first time, people could purchase PCs online, instead of having to call up the
company or sending faxes.
Within two months of its website’s launch, Dell was averaging internet sales above 2
million dollars a day.
By 1998, that figure had gone up to 5 million dollars and Dell has remained in the top 3
of computer manufacturers ever since.
Michael Dell is still the CEO to this day, even despite all the shenanigans around taking
the company private and then going public again, which are honestly complicated enough
to warrant a video of their own.
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Anyway, thank you for watching.
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We’re gonna see each other again next Friday, and until then: stay smart.