Entrepreneurs

How Michael Dell turned $1,000 into billions, starting from his college dorm room

Michael Dell
David A. Grogan | CNBC
Michael Dell

Michael Dell's $21 billion net worth lands him among the 50 richest people in the world according to Bloomberg, in line with Elon Musk.

That wealth has afforded Dell, 53, the luxury of calling several properties home, like a record-setting $100.47 million Manhattan penthouse, a $40 million home at the Four Seasons in Boston and a residence on the Kona Coast of Hawaii with 7 bedrooms and 12 bathrooms.

But when the founder and CEO of Dell Technologies began his personal computing empire as a 19-year-old, it was from a much less glamorous residence: a dorm room.

"[I] started the company with $1,000 a week before I was taking my final exams as a freshman," Dell tells CNBC's Jon Fortt on his podcast, "Fortt Knox."

"Maybe that wasn't such a good idea, but when you're 19 years old, you haven't developed all the skills you need in terms of judgement and rational thinking," he adds.

Dell had always been interested in math and technology as a kid, but began to develop a substantial interest in computers in college at the University of Texas in Austin. As a hobby and side-hustle, he started pedaling computers he customized on campus with disk drives and extra memory.

"I was in this mode of buying computers and souping them up with more capability and then re-selling them," he says on NPR's "How I Built This." "It was just sort of a fun thing to do and a way to make some money."

In this Friday, Feb. 26, 1999, file photo, Michael Dell, foreground, sits in the dorm room at the University of Texas in Austin, Texas, where he launched his enterprise as a college freshman.
Harry Cabluck | AP
In this Friday, Feb. 26, 1999, file photo, Michael Dell, foreground, sits in the dorm room at the University of Texas in Austin, Texas, where he launched his enterprise as a college freshman.

Then, he realized how big the business could be.

"I start exploring this whole computer thing further, and one of the things I noticed about the computer business was that it was very inefficient," Dell explains. "It took a really long time for the technology to get from the people that made it to the people that were buying it, and it was actually rather expensive and slow."

In his dorm, Dell says he was making from $50,000 to $80,000 a month by speeding that process up.

The business even soon caught the attention of a then 25-year-old Mark Cuban, now also a billionaire. At the time, Cuban was building his own business with computers, MicroSolutions, in Dallas.

"I remember driving down to pick up some hard drives that I was going to put into my customers' PCs," Cuban writes on his blog referring to a trip to Dell's Austin business, then called PC's Limited.

"They had just moved from the owner's dorm room into a little office/warehouse space," he continues. "I was so impressed by this young kid [Dell] (I was a wise old 25 at the time), that I actually wrote a letter thanking him for the great job he was doing, and … I'm embarrassed to say now, I told him that if he kept up what he was doing, he was destined for far bigger and better things."

It seems Cuban was right: Dell Computer went public in 1988 with an $85 million market capitalization just four years after launching, and Dell himself later became the youngest CEO with a Fortune 500 company in 1992. The business went private in 2013.

For ambitious college students today, Dell says there are numerous opportunities available to create the next technology giant.

"We're in an incredibly exciting time in terms of artificial intelligence, deep learning, machine learning, unsupervised learning, the fifth generation cellular network, the digital transformation, the internet of things," and the list goes on, he tells Fortt. The possibilities are "tremendous."

"If you think the last 30 years have been exciting in technology, I think the next 30 years will make it look like child's play," he explains.

But in order to succeed, you'll need genuine curiosity.

"I think you have to do stuff that you are actually, incredibly passionate and excited about — and you know something about," Dell says. "The 'oppor-tuneurs' don't do as well as the entrepreneurs."

That means jumping on hot buzzwords isn't enough to create success. "I think you have to really believe in what you're doing," he explains.

For Dell, the best businesses start with something like this: "It excites me, it interests me, and I've got an idea."

Don't miss: Mark Cuban says studying philosophy may soon be worth more than computer science—here's why

Like this story? Like CNBC Make It on Facebook!