Dell's Capital Expertise - Commoncog

A couple of weeks ago I removed the paywall on the Business Expertise Series, and redesigned the site to organise Commoncog’s articles according to Lia DiBello’s triad model of business expertise. One thing that I discovered during that redesign was that ‘Capital’ was the most under-covered leg of the triad in Commoncog’s publication history — I simply haven’t written that much to the capital side of things.


This is a companion discussion topic for the original entry at https://commoncog.com/dells-capital-expertise

This reminds me of an insight a friend shared at some point, which is that rich people don’t think in terms of debt but in terms of cash flow. Middle class people think debt is bad, so they try to minimize debt (I was raised this way). Rich people think of debt as just another way to raise capital.

I was about to sell some stock recently to pay for a home renovation. Another friend stopped me by saying “Rich people don’t sell assets, they take out loans”. Once I checked out the terms of a security-backed loan, it was a no-brainer; even setting aside the tax implications of selling stock, the loan was worth it if I believed the stock would grow faster than essentially the US treasury rate. Time value of money matters!

It’s a whole different way of looking at the world that I haven’t quite fully absorbed, even though I see the math makes sense. And the Dell examples are the same mindset, just orders of magnitude larger.

P.S. Leverage is an issue. If you take out debt, and you bet wrong, you can be wiped out. So it’s making sure you have a way to quickly unwind if needed and/or access to capital to cover shortfalls

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