Satya Nadella, CEO of Microsoft

1. 0:00 – 0:05

   Intro

   1. THTara Hill0:00

      [upbeat music] [audience applauds]

2. 0:05 – 2:55

   Growing up in Hyderabad: lessons from a driven father and a happiness-focused mother

   1. SNSatya Nadella0:05

      Thank you. [audience applauds]

   2. THTara Hill0:13

      Satya, we are so excited to have you today, as you can see. Um, you've said that Microsoft's mission is not to be cool-

   3. SNSatya Nadella0:20

      [laughs]

   4. THTara Hill0:21

      ... it's to make others cool. But Bob Dylan is playing across campus today, and you sold out faster than him, so-

   5. SPSpeaker0:27

      [laughs]

   6. THTara Hill0:28

      ... we certainly think Microsoft is cool. [audience applauds] Really, though, we are so grateful to you for making the time to be with us, and we have a lot to cover. But I thought we could start with your childhood in India. You've said that your father never met a test he didn't ace.

   7. SNSatya Nadella0:45

      [laughs]

   8. THTara Hill0:46

      While your mother was the opposite of a tiger mom. I love that contrast, and I'm curious how their different life philosophies shaped you.

   9. SNSatya Nadella0:54

      First of all, thank you so much, Tara, for having me here. It's great to be, uh, at the GSB, and, um, um, you know, Bob Dylan was my idol, so-

   10. THTara Hill1:02

       [laughs]

   11. SNSatya Nadella1:02

       ... times must be changing. Um, the, uh... You know, it's, it's, it's interesting, um, uh, in fact, I, I just, uh, my father passed away just last month, and I've been reflecting, uh, quite a bit on, uh, uh, what my, uh, both my parents have meant to me, um. And, uh, my father was a Marxist economist and a civil servant. Um, and, uh, he had a, you know, a definitive point of view on, uh, what, uh, uh, life was all about and, and the struggle of life, and, uh, he, he's right. I mean, he, the, uh, you know, the guy always used to look at my marks, I mean, my, uh, scorecards, and, and used to be amazed that somebody could be that bad. [laughs]

   12. SPSpeaker1:47

       [laughs]

   13. SNSatya Nadella1:47

       And, uh, and, uh, uh, but luckily enough, I think in some sense he gave me, in spite of all of that, a lot of confidence because to him, he felt like, "Look, it's a marathon. Uh, you'll catch up. This is not that hard." Uh, and my mother was exactly the opposite, of course. All, the only question she would ever ask me is, "Are you happy?" And I would say, "What the heck does that mean? Like, you know, when you're reading my scorecard, I don't know whether I should be happy or not." Uh, but again, the two of them, I think, when I look back, growing up in Hyderabad in India in the late '70s, early '80s, uh, interestingly enough, there are three or four of us who now suddenly have been- become CEOs [laughs] from the same high school in this, you know, uh, at that time, what was a off-the-grid place. Um, I think it was that ability to think, uh, that ability to pursue your own passions, um, and have, you know, enough confidence, uh, as well as some humility, uh, as sort of when I look back, have been, you know, perhaps the biggest drivers of what sort of turned out to be a reasonable, you know, set of things.

3. 2:55 – 5:29

   Cricket and leadership: protecting confidence while making performance calls

   1. THTara Hill2:55

      Absolutely. Yeah. It's, it's really clear how much your parents influenced you. And another foundational influence for you was sports. Now, my fellow international classmates and I, we're mystified daily by American sports references, so we're very happy to talk about cricket.

   2. SNSatya Nadella3:10

      Yeah.

   3. THTara Hill3:10

      You love cricket, and you dreamt of playing professionally.

   4. SNSatya Nadella3:14

      [laughs]

   5. THTara Hill3:15

      What lessons did you take from the pitch?

   6. SNSatya Nadella3:17

      Well, I mean, um, [laughs] you know, all of us who are South Asian are obsessed with that sport. And, um, you know, it's sort of, uh... I- in fact, that's right. I mean, that, that was what I was pretty much all bound up in all through my, uh, high school into college. Um, and you know, when I look back, you know, I think all sport teaches you a lot. Uh, and especially at least, I feel team sport, uh, I think has a huge impact on how you think about, uh, leadership. Uh, I'll never forget this one particular, uh, incident that I've, I think, subsequently written about. Uh, there was this guy who was, uh, my school captain, uh, who went on to do pretty well, uh, in, in the context of Indian cricket. Uh, I was bowling trash that day, uh, and he took over from me, got a wicket, which is a breakthrough, uh, but then he gave me the ball back, and then I went on to have perhaps the best bowling spell I've ever had in my life. Um, and I always reflected as to why did he do that. And then, uh, in fact, much later on in life, I went back and asked him even. Uh, and so at least the way I surmise, it was a leadership decision he made of saying, "Look, I recognize that this guy's im-" He had recognized the importance of not breaking my confidence. Uh, and I said, "Look, well, that's a pretty enlightened decision for a high school leader, you know, ca- captain of a cricket team to make." Uh, and a lot of leadership lessons is that, right? Which is you've got to make hard calls on, say, performance. But also, you've got to be able to sort of understand that you need your team, and it's not like everybody's gonna have a good day all the time. And that subtle distinction, uh, i- and that judgment, right, which is one of the things that I feel which is the most understated part of leadership is judgment.

   7. THTara Hill5:09

      Mm.

   8. SNSatya Nadella5:10

      Uh, and it's so important, and that judgment comes by you exercising this muscle around passing judgment, uh, and learning from it, and I thought that's one of the lessons I learned.

   9. THTara Hill5:21

      He was building your confidence in a way-

   10. SNSatya Nadella5:22

       That's right

   11. THTara Hill5:22

       ... by making you-

   12. SNSatya Nadella5:23

       That's right.

   13. THTara Hill5:24

       Uh, so you didn't end up playing professional cricket, sadly. [laughs]

   14. SNSatya Nadella5:27

       Yeah, uh, uh, here I am. [laughs]

   15. SPSpeaker5:28

       [laughs]

4. 5:29 – 7:49

   Parenthood, disability, and learning empathy by seeing through another’s eyes

   1. THTara Hill5:29

      And, uh, [laughs] but you did make your way to the US, and soon after, you started your own family. And in reading your book, something that really moved me was how much you talk about your family and the role they've played bringing empathy into your life. Could you share with us how being a parent has shaped you?

   2. SNSatya Nadella5:46

      Yeah. I mean, it's a, it's a very big, uh, part in, uh, part of, uh, what has perhaps shaped, um- ... uh, my worldview, uh, and for both my wife and me. Both my wife and I grew up together, we went to the same schools, um, and we were the only children of our parents. So the, when, uh, we were both late, in our late 20s when our first son was about to be born, we were very excited. The household was all about, you know, um, my wife's an architect, and so she was practicing at that time. And so my only concern was, "Oh, when will Anu go back to school, or when I go back to, uh, work, and how are we gonna think about the baby's, uh, daycare and what have you?" Uh, and lo and behold, uh, one night, um, uh, you know, there was some complications and, uh, our son Zane was born. Uh, because of, uh, some complications, he, uh, he now s- has, uh, cerebral palsy. He's, uh, uh, he got, has, has quadriplegia, and, uh, is locked in. And I would say for the first, maybe as many as five years, I struggled with it. Um, primarily because I felt that all these plans that I had for what our life was going to be like, um, had taken a real turn. And, uh, and then I watched Anu go up and down 520 in Seattle, taking him to every therapy possible, speech, occupational. Uh, and then I was just watching it and still mourning, uh, my own sort of whatever, uh, issues. But then it dawned on me, uh, that nothing actually happened to me. Uh, something had happened to my son, and that I needed to as a father step up and do my duty.

   3. THTara Hill7:28

      Mm.

   4. SNSatya Nadella7:28

      In other words, it is the harsh but real lesson around being able to see the world through the eyes of my son. Right? That's what empathy's all about. Um, and, and I think that's what it is. I mean, it's, it's innate in us all as humans. Uh, I think empathy is something that we're all very capable of.

   5. THTara Hill7:49

      Mm.

5. 7:49 – 9:49

   Empathy at work: the Microsoft interview moment and why empathy drives innovation

   1. SNSatya Nadella7:49

      Uh, life teaches us that. Uh, and in small ways and in, in, in tough ways. Like I remember even the f- the last interview by the last interviewer when I was interviewing at Microsoft, was also a m- life-changing moment for me. Uh, so I went through this interview. It is all code on screen at that time, and you know. And so this guy sort of says, "Hey, here's a question for you. You're at the crossroads, a baby falls and is crying. What'll you do?" And I say, "Wow, this is some search algorithm I didn't learn."

   2. THTara Hill8:22

      [laughs]

   3. SNSatya Nadella8:23

      "Uh, it must be some variant of some traveling salesman problem or something." And I sort of really thought about it for a few minutes, and then I said, "I'll go to the phone booth and call 911." This is pre-smartphone. Um, and, uh, so he gets up, he escorts me out, and he says, "You know what? You need to develop some empathy. Because when a baby falls, you pick them up and hug them first before you call." Uh, and I thought, "That's it, I'm n- definitely not gonna get this job." Um.

   4. THTara Hill8:53

      [laughs]

   5. SPSpeaker8:54

      [laughs]

   6. SNSatya Nadella8:55

      And, and, and lo and behold, I did get the job, but nevertheless, I mean, I, I really think that that's so core. And some people say, "Well, like, what, what does that have to do with sort of business?" Or, "What does it have to do with, uh, work?" And I believe it has everything to do with work, you know? I believe, if you sort of say innovation is all about meeting unmet, unarticulated needs of customers, where does that source of your ability to get in touch with that unmet and articulated need gonna come from? It's gonna come from your ability to, in some sense, be able to listen between the lines, uh, to be able to extrapolate. Uh, and that's, to me, deep sense of empathy, right? So people talk about design thinking. I think design thinking is empathy.

   7. THTara Hill9:37

      Mm-hmm.

   8. SNSatya Nadella9:38

      Uh, and so therefore I do believe that, you know, life teaches you empathy and, you know, empathy is the source to success in any innovative, uh, agenda you have.

6. 9:49 – 10:43

   Making empathy possible: starting with respect as a prerequisite

   1. THTara Hill9:49

      It's inspiring to hear you say that you think empathy is innate when it, we're living in a world where sometimes it feels like empathy is on the decline. So I think, um, your point around empathy is, is really well taken.

   2. SNSatya Nadella9:59

      It's a great question, because in fact, you know, it is such a big word. Uh, and it is hard.

   3. THTara Hill10:04

      Mm.

   4. SNSatya Nadella10:05

      Uh, in fact, even recently at Microsoft, we realized, uh, that it's important for us to even understand what are the necessary conditions to even develop empathy.

   5. THTara Hill10:14

      Mm-hmm.

   6. SNSatya Nadella10:15

      So one of the words we have devel- you know, we have put into our sort of parlance is respect.

   7. THTara Hill10:20

      Mm-hmm.

   8. SNSatya Nadella10:21

      For example, if you don't start with, from a place of having some respect for the other person's views, where they come from, their complete history, uh, it's very hard to develop empathy. So therefore, I think you're absolutely right to say, you know, before you think about some of these higher level things, you have to sort of even question what are the b- you know, basics that we need to get right.

7. 10:43 – 13:02

   The high-stakes cloud assignment: Ballmer’s expectations and a formative tour of duty

   1. THTara Hill10:43

      Absolutely. And that's become so core to your leadership at Microsoft. So if we turn now to Microsoft, before you were CEO, you took this job leading Microsoft's first real cloud business. And Steve Ballmer apparently told you, "This might be your last job at Microsoft, because if you fail, there's no parachute."

   2. SNSatya Nadella11:00

      [laughs]

   3. THTara Hill11:00

      That feels like a lot of pressure. Why did you make that jump?

   4. SNSatya Nadella11:04

      [laughs] You know, um, you know, Steve, who went to school here, um, had many-

   5. SPSpeaker11:10

      [laughs]

   6. SNSatya Nadella11:12

      He just went for one year, from what I understand. [laughs]

   7. THTara Hill11:15

      [laughs]

   8. SNSatya Nadella11:16

      Oh, this is the funniest thing, I should tell, say this. I mean, s- I guess the other guy who went to school here was Mukesh Ambani. So I believe one day, uh, S- uh, Steve Ballmer was introducing Mukesh in Bombay, um, and, uh, he joked that both of us dropped out of GSB, except that Mukesh had never told anybody that he had dropped out of GSB. [laughs] So there was a, a real scandal. [laughs]

   9. THTara Hill11:37

      [laughs]

   10. SPSpeaker11:38

       [laughs]

   11. SNSatya Nadella11:39

       And, uh, so Steve, uh, you know, wanted us to really take this new business area, which was our online business. Um, in fact, uh, Susan, who's here, [laughs] and I worked on it, uh, for a long time as well. And he felt that, look, this is a place where we needed to make progress. And, uh, Steve had this very, um- ... clear sense of what it means to succeed, and his point was, "You're gonna go learn a lot, uh, and, uh, of course, I'll fire you if you don't do a good job with it." Uh, and it was sort of a way for him to perhaps communicate both why he as the CEO cared, uh, about this business, uh, and at the same time his expectations.

   12. THTara Hill12:24

       Mm.

   13. SNSatya Nadella12:24

       Uh, but I must say, that particular tour of duty has been the most influential in how, uh, I've sort of thought about whether it's distributed computing at its core, whether it's the economic models, uh, that are going to be emergent. Uh, and that has been very, very helpful.

   14. THTara Hill12:43

       Mm.

   15. SNSatya Nadella12:43

       Doing different things inside the company-

   16. THTara Hill12:46

       Mm

   17. SNSatya Nadella12:46

       ... uh, has helped me grow to run the company eventually. So you know, I actually appreciate Steve both giving me that opportunity, and more importantly, giving me the message [laughs] uh, that, look, at the end of the day, it's performance that matters.

8. 13:02 – 14:16

   Ambition and career focus: doing your best work in the job you have

   1. THTara Hill13:02

      Did you know at the time that that decision was putting you on a path to one day becoming the CEO?

   2. SNSatya Nadella13:06

      No, no way. [laughs]

   3. THTara Hill13:08

      [laughs]

   4. SNSatya Nadella13:08

      You know, most people ask me this, uh, which is like, "Hey, did you have a, a, a sense that you'll become CEO?" Uh, no. [laughs] Uh, you know, I... First, first of all, none of us grew up even, uh, to us, es- especially having grown up at Microsoft, I don't think I even thought of a Microsoft where Bill and Steve were not actively in, uh, engaged. I mean, it was just not even in the, uh, realm of possibility. Uh, the thing, though, I would say, especially, you know, business school graduates are an ambitious lot, and you're all sort of saying, "When am I gonna be my CEO, a CEO?" My only advice there would be, uh, al- you know, it's, like, don't wait for your next job to do your best work.

   5. THTara Hill13:47

      Mm.

   6. SNSatya Nadella13:47

      Uh, that I think is the crux of it, which is if you think about every job you get, uh, as the most important job and as the thing that is perhaps your last job, uh, but you gave it your all, and of course, you know, from there a lot of things will happen. And that's at least how I... It was not like the job that I had before becoming CEO I somehow thought, uh, was just a stop on the way to something else. I actually thought that that was a fantastic job until, you know, I got the next job.

9. 14:16 – 17:05

   Rebuilding Microsoft’s direction: explicit purpose and culture for a non-founder CEO

   1. THTara Hill14:16

      And that next job was ultimately to become the CEO of Microsoft, and when you took that job, you faced some high expectations. Microsoft is struggling. You're following, as you mentioned, Bill Gates, Steve Ballmer, and many people thought that the CEO should come from outside. So what did you draw on in that moment?

   2. SNSatya Nadella14:38

      Yeah, I mean, look, I'm a consummate insider. I've grown up at Microsoft now 28 years. Um, and, um, I also recognize, to your point, uh, that I was taking over from Steve and Bill, and Steve, even though was not a founder for, he had founder status in the company. Uh, Bill and Steve built the company. Bill and Paul founded the company. And, uh, the one thing that perhaps I was more grounded having worked with them, uh, is as a non-founder CEO, I needed to make explicit-

   3. THTara Hill15:15

      Mm

   4. SNSatya Nadella15:15

      ... some of the things that I think founder CEOs can take for granted, because founder CEOs can carry just because of who they are and what they mean to the organization a lot, and telegraph that very broadly and have followership. Whereas I describe myself as a mere mortal CEO, I felt I needed, uh, that sense of purpose to be deeply rekindled as something that I, you know, reinforced, and culture. Both sort of these two pillars of sense of purpose and culture needed to become much more explicit. Uh, for example, when I joined, uh, Microsoft in '92, we used to talk about our mission as putting a PC in every home and every desk. Uh, it was pretty inspiring, right? I mean, you could even do an Excel spreadsheet, P times Q. It was easy to compute. Um, and, and except by the late '90s, we had more or less achieved that, at least in the developed world. And since then, we had this struggle of what's next. Uh, and I felt like I needed to sort of go back, in fact, to the very origin of the company, right? I mean, Microsoft got started, uh, when we built, or Paul and Bill built, uh, the basic interpreter for the Altair. Um, and I believe that everything that needs to be known about Microsoft in 2019 can be traced back to our origin-

   5. THTara Hill16:35

      Mm

   6. SNSatya Nadella16:35

      ... uh, which is we build technology so that others can build more technology, right? I felt like we were doing things out of envy and others. We needed to get back to what we, our core identity is, right? Especially in 2019, where every company is a software company around the world, uh, we can just basically be a software platform and tools provider and have a good business. And so I felt, let's be proud of who we are. Of course, we've got to express it differently, uh, and, and then, you know, really reinforce that. That's why we talk about

10. 17:05 – 18:48

    From “know-it-alls” to “learn-it-alls”: growth mindset as a cultural operating system

    1. SNSatya Nadella17:05

       our mission around empowering people in organizations. The other piece, though, is we had to work on our culture. Uh, you know, I distinctly remember, I guess it was '98 when we first, uh, became, uh, the largest market cap company in the world, uh, and many of us, you know, were lucky enough to participate on that wave of growth. Uh, but I remember that day when we walked around, you could see in the ca- you know, on campus, people thought, "Wow, we must be God's gifts to mankind." Uh, right? [laughs] "We're so smart. We're so good. Look at us." And, and except that was not the case. I mean, the case was, uh, you know, it's a temporal thing, and it only matters, what matters is your ability to learn, grow, be grounded in the realities and, you know, and our customers and what have you. And so that's why I wanted, uh, a culture that stood for that learning organization. And in fact, my wife had introduced me to a book by a, a, a Stanford professor, Carol Dweck, um, uh, which I'd read, Mindset, many years before I became CEO. You know, it was a huge influence in our household, uh, as it, uh, relates to our own children's education. But quite frankly, it was a great education for me, because when I read that book, I realized that, that, that notion- Of growth mindset applies to individuals like me, it applies to companies like Microsoft. So we took that meme of growth mindset and said, "Look, let's not be know-it-alls, let's be learn-it-alls." And has been a very helpful, uh, part of, I would say, our journey around this, uh, what is a cultural meme that we can even make first class that we can have a real dialogue on.

11. 18:48 – 20:36

    The hardest part of culture change: confronting your own fixed mindset and the gap between espoused vs lived culture

    1. THTara Hill18:48

       Absolutely. And y- you talk a lot about this cultural shift. Um, in, in looking back at that over the last five years, what was the most difficult part to change? Because you've, you instilled growth mindset, you did all of these things, but what were, what were the hardest roadblocks?

    2. SNSatya Nadella19:02

       Look, I mean, I think it's always, uh, it's a challenge. [laughs] It's one thing to say growth mindset, because sometimes people would come to me and say it at Microsoft, "Uh, Satya, we found the 10 people who don't have a growth mindset."

    3. THTara Hill19:12

       [laughs]

    4. SPSpeaker19:12

       [laughs]

    5. SNSatya Nadella19:12

       Uh, you know, the, the point about that, it's not about going looking for 10 people.

    6. THTara Hill19:17

       Yeah.

    7. SNSatya Nadella19:17

       Uh, it's about me being comfortable with confronting the, my own fixed mindset each day, and that's the hard part of it. When you say you're a learning organization, and you say, "Yep, we've learnt that here are the 10 people who have not learnt," uh, then that's a problem. Uh, and, and I think that that's the, the, the reality of it, right? How do you bring about long-term change? I mean, I'll say one other thing. One of the reasons why I feel, um, at least we have some momentum, uh, I'm very, very careful not to sort of paint this as some destination we will reach or have reached for sure. Uh, it's going to be something that every day we're gonna have to confront our fixed mindset. We're always gonna be imperfect.

    8. THTara Hill19:59

       Mm-hmm.

    9. SNSatya Nadella19:59

       There is gonna be a gap between what is our espoused sort of culture-

    10. THTara Hill20:05

        Mm-hmm

    11. SNSatya Nadella20:05

        ... uh, and what is the lived experience. The question is, are we working to bridge that gap? Uh, and it's very uncomfortable, especially in business where everything is graded by, you know, how close to perfection are you. To say let's be imperfect and celebrate imperfection is just a hard thing, and that's why, uh, leadership at the top setting the tone, walking the walk, uh, I think is the hard part. Um, but you know, anyway, that's the, the, the real, I would say, challenge of being able to implement change at scale.

12. 20:36 – 25:17

    Turning values into behavior: inclusion, customer obsession, and ‘one company’ execution

    1. THTara Hill20:36

       Absolutely. And, you know, you want to set this culture of a growth mindset, where people can take risks and make mistakes and learn from them, and you want to walk the, walk the walk. Um, when have you had to lead by example on this front?

    2. SNSatya Nadella20:50

       Well, I mean, every day I would say. But I would... You know, i- in some sense, the, the decision one makes, um, in... Like, for me, the ability to sort of... Take even, take diversity and inclusion. Uh, the, w- the, the, saying the words, saying we're gonna make progress, uh, is one thing. But, and then to recognize that progress has to be something that really has to come from one's own first change in behavior, right? Um, and take the everyday experience of the senior leadership team meeting itself. Uh, it's an interesting thing. Every time I question myself on everything that we talk about as what we espouse that is more broadly applicable across the company, how much of it is represented in the behaviors, starting with me, of our own senior leadership team?

    3. THTara Hill21:50

       Mm-hmm.

    4. SNSatya Nadella21:51

       We have some very, very, uh, amazing women who are part of our leadership team. Uh, are they participating, um, like anybody else? And in fact, am I allowing for them to be able to really make sure that we're listening to them, they are able to feel like they're driving the company? And, and starting with that type of sensibility, which by the way is not constant, but at least are we pushing, is sort of the way I think I, you know, I remind myself of how important to your point about it sort of putting, uh, it... Everyday practice. Uh, we have three things that are the cultural, uh, I would say, pillars for us, right? One is diversity and inclusion. The other one is customer obsession.

    5. THTara Hill22:34

       Mm.

    6. SNSatya Nadella22:34

       And then the other one is to bring the company together as one company as opposed to f- you know, you know, fragmented set of P&Ls.

    7. THTara Hill22:42

       Mm.

    8. SNSatya Nadella22:42

       All three of these are just super hard. Uh, easy to say, uh, but require everyday practice, starting with me.

    9. THTara Hill22:49

       Absolutely. And I think diversity and inclusion is an interesting one, because it's a topic that can invoke a lot of defensiveness. So to apply a growth mindset to that area is particularly powerful.

    10. SNSatya Nadella23:00

        Yeah. A, and you know, for example, the thing that we have recognized is you have to pull... I mean, you have to do a lot of things here. For example, we even changed the compensation of our senior leaders, starting, uh, even mine, uh, to ensure that we take this as a huge priority. You could say, "Well, you know, is the compensation change the real thing of..." You know, I'm not saying it's the only thing that needs to change, but it's an important thing. Uh, I myself had probably perhaps not recognized that, uh, measuring things, having a real metric around it, uh, and then compensating is actually n- is a good sort of start on a lot of fronts. And so, uh, but the thing that we have come to realize is every intern class that joins Microsoft every year is more diverse than the previous one.

    11. THTara Hill23:46

        Mm.

    12. SNSatya Nadella23:47

        But then they look around and say, "Well, where's that diversity, um, you know, in the company?" And so that means the real currency of a culture is inclusiveness. Uh, and that, I think, is, uh, the core job of what leaders do and what is the everyday experience, uh, of, uh, you know, what happens at Microsoft. Interestingly enough, I've also come to recognize that that first level manager has probably the most influence, uh, on what happens. And so I, I, I distinctly remember as a lead at Microsoft with five people working for me- Who all were thinking, "Why is this guy leading us?" Right? I mean, it's always the case, because the first level job is the hardest job because, uh, there are five people who are also grad- you know, just recent graduates who are sort of looking at you and saying, uh, "I can do what you do." Uh, and then you have a boss who's asking you to do many things. And so it's sort of real pressure cooker in the sense you sort of really have to, um, you know, do a lot. But that's when your attitude, your nurturing of that five people who are working for you around inclusiveness will matter a lot. So one of the things that we're doubling down is are we truly supporting managers, um, you know, at all levels to be able to sort of, in fact, support, uh, their team so that they can bring the best out of them, and then f- have them feel included, uh, as part of, uh, the company.

13. 25:17 – 28:05

    Winning the cloud transition: removing constraints and taking on risk during secular shifts

    1. THTara Hill25:17

       Right. So we've talked a lot about culture. Let's shift and talk a bit about strategy, and particularly the cloud. Because today we sort of take the cloud for granted, but when you took over, it was still far from a sure thing, and you made this bold bet cementing Microsoft's strategy in the cloud. How did you rally others around that vision when many were convinced it wouldn't work?

    2. SNSatya Nadella25:39

       I mean, y- you know, our, our, our challenge with, um, the cloud was we had a very, very successful business in what was the client server era. And, uh, sort of you look at any P&L that says, "Oh, here is a new business. By the way, it's got gross margins that are sort of one-fourth of this gross margins of the current business. Oh, and it'll be good."

    3. THTara Hill26:01

       [laughs]

    4. SNSatya Nadella26:02

       Uh, it's hard, uh, to sort of, uh, look at those kind of transitions because all rationality says that, you know, you should avoid it as much as possible. Uh, and e- except in, in tech in particular, and many other businesses, these transitions are secular. They're inevitable. And, uh, so the question is, um, you know, how do you make that transition? And that's where I must say Steve, when he was a CEO, was the one who gave me permission.

    5. THTara Hill26:31

       Mm.

    6. SNSatya Nadella26:31

       Um, and, uh, the decision he made was, "Look, we wanna go after this." Uh, and one of the things that I've realized as leaders, and many of you in your careers are gonna make these kinds of decisions, you ... And we are all about solving these over-constraint problem, right? I mean, classic over-constraint problem is where you have a huge profit margin, uh, and now you gotta go build a new business that sort of, sort of s- replaces this business, and by the way, you should have the same gross profit margin. And guess what? In ... It's not possible. So someone somewhere has to remove some constraint. Who does it? Leaders do it. So he removed the constraint called gross margin. He said, "Go win this market." Uh, and that's what was then made it possible for us to do all those things that have now g- uh, have gotten us to the other side. Uh, but to me, I've learned a lot from that. So in fact, if anything, I feel like as a leader, sometimes, you know, you get to speak from both sides of the mouth, right? Which is, oh, I need growth and I need profit. Uh, in many cases, your job as leaders is to in fact unconstrain, take on the risk. Uh, in fact, in the first, uh, multiple years, uh, Amy Hood, who's my CFO, and myself, we said, "Look, let, let us take on the risk." Uh, and then actually met- metric a lot of our leaders more on customer satisfaction usage, uh, versus, uh, profit, revenue even. Uh, and I think that that's sort of the type of decision-making one needs in order to make these harsh transitions.

14. 28:05 – 31:54

    Purpose and culture vs strategy: what most enables renewal and impact at scale

    1. THTara Hill28:05

       And when you look back and you, you look at all that you've done on culture and strategy and making this bold bet, are you able to tell which one moved the needle more for Microsoft's renewal?

    2. SNSatya Nadella28:16

       I fundamentally believe that, uh, you know, strategies or markets will always be coming and going. There'll be lots of changes. Um, I'm a fundamental believer in that sense of purpose and culture as the two, two pillars that are necessary in order to get a lot of other things right. Of course, if you don't get your strategy right or your ability to sort of ride a particular wave of innovation, uh, and especially in tech, you ... It's pretty harsh, uh, right? I mean, uh, it's very hard to recover.

    3. THTara Hill28:55

       Mm.

    4. SNSatya Nadella28:55

       But that said, though, the question is what is it that will give you the best probability of even catching those? Uh, and to me, that sense of purpose, which I think is a reflection of what you're innately good at as an organization, right? It's competitive advantage, uh, except it's codified, uh, in that identity, and culture is what that allows you to express that identity with new opportunity.

    5. THTara Hill29:20

       Mm. I think many of us in this room want to use our careers to create impact at scale, and you have committed almost 30 years to Microsoft, which seems unfathomable [laughs] to many of us. How do you think about-

    6. SNSatya Nadella29:34

       It flies by. [laughs]

    7. THTara Hill29:36

       [laughs] How do you think about entrepreneurship and this idea for those among us who maybe want to work in large organizations to create change in the world? What advice would you have?

    8. SNSatya Nadella29:47

       Yeah. I mean, now look, I mean, I think that, you know, all organizations, small or large, all have, uh, amazing opportunities. But I'll make the case, uh, for a large organization, and especially an organization like Microsoft. I mean, think about it. If you wanna have impact at scale, um... In fact, I, you know, one of the reasons, you know, there are two things. When I'm trying to recruit at a college, I'm always telling people, like, "Hey, look, if you wanna be cool, go join somebody else, but if you wanna make others cool, join Microsoft." [laughs] And I say that because I believe that, you know, which other organization will be able to have, in 190-plus countries, the impact on small business productivity, public sector efficiency, multinationals in any part of the world and their competitiveness globally, health outcomes, education outcomes? This is scale at f- At, you know, enormous rate. [laughs] And so therefore, uh, if you want, join a company like this, but then you have to have the following, um, I would say sensibility. Guess what? You gotta work with others. Ha. In other words, uh, that's, I think, a key important skill. Like, what does it mean? I mean, you do a lot of that. Many of you have got a lot of work experience even before coming to business school. Uh, but nev- uh, fundamentally, to do anything useful and big and at scale, it's all about teams. Teams inside or teams outside, uh, that's what it takes. Um, and the second thing, uh, that you also need is to realize that, you know, m- a lot of people talk about the matrix and the complexity of large organizations. That's, again, the case. I mean, even for small companies, you just have a different type of matrix. You'll have a VC, you'll have a board, you'll have customers. Uh, so it's, you're never going to escape working with people. Uh, you're never going to escape bringing multiple constituents together. Uh, and I think that you should pick whether whatever size of organization, recognize that scale only comes because you've been able to bring many constituents together.

    9. THTara Hill31:47

       Mm. You say that we can never escape working with people, which brings me to my next section on AI.

    10. SNSatya Nadella31:53

        [laughs]

15. 31:54 – 54:15

    AI, ethics, and responsibility: accessibility benefits, safety, regulation, and democratic institutions

    1. THTara Hill31:54

       Um, you are a big [laughs]

    2. SPSpeaker31:56

       [laughs]

    3. THTara Hill31:57

       ... proponent of AI, and you believe that AI will be good for humankind, and you argue that in an AI future, human traits like empathy and creativity will be more important than ever. And yet, in some ways, technology has made us less connected. So how do you see AI augmenting humanity rather than detracting from it?

    4. SNSatya Nadella32:18

       Look, first of all, I'm, I'm, I'm excited. I'm going to spend some time, uh, with your own, uh, work around this human-centered AI and, uh, the work you're doing there. I think it's so important. Uh, h- here's how I come at it. Um, first, before we get into s- get into some of the unintended consequences of AI, uh, one of the areas that I am, uh, deeply involved in is accessibility, right? I mean, think about what AI has done, uh, to people who need the most help, right? Um, uh, say if you have ALS, now with Eye Gaze, uh, you can type and communicate. Uh, if you have, uh, visual imp- you know, uh, impairment of any sorts, you can interpret the world by using the latest in computer vision. Uh, if you have dyslexia, using some machine reading and comprehension techniques, you can start, you know, teaching a middle school kid, uh, how to read, uh, because reading then leads to their participation in our economy. So I would first say some of AI and C- AI capabilities are helping more of us participate fully in our societies and in our economies. That doesn't mean we shouldn't be clear-eyed about the consequences of AI, right? The first one is, what are the ethics of AI? Uh, we as, uh, in fact, creators of these platforms and tools have to, even before we even get to sort of the big topic of ethics, improve the state-of-the-art of the software engineering around AI so that things like bias and so on are, uh, are being dealt with. You know, there's this fantastic line I love of, of Rilke's, which is he talks about how f- the future enters in you and transforms itself in you before it becomes real.

    5. THTara Hill34:03

       Mm-hmm.

    6. SNSatya Nadella34:03

       So we are creating AI. It's humans who are creating AI. So we get to shape, uh, you know, what the craft of creation of AI looks like, uh, how we design systems where the human is in loop. We get to decide that as a society even, uh, what we are comfortable with and not comfortable with. So I don't wanna abdicate all of that, uh, you know, and feel like this is just gonna happen outside of our control. Uh, so that's at least how I think about it. And also on the employment side, um, I, I do believe that, for example, I mean, you know, this, um, is it zero-sum? I don't think that is the case. I think that there will be more jobs. The question is, how do we really use, in fact, all of the s- uh, sort of levers we have, uh, economic and social, to skill people for the jobs that are going to be there? And many of those skills might be different types of skills than the ones that are valued today. Uh, for example, there's no reason why our society can't have wage support for teachers-

    7. THTara Hill35:07

       Mm

    8. SNSatya Nadella35:07

       ... um, in, in a different way, in a world where there's a lot of abundance, uh, of AI doing a lot of other things for us. Uh, or artists or what have you. So therefore, I think we will come up with mechanisms. Um, and, um, you know, I hope that, uh, we have, uh, you know, I... And in fact, more than hope, I feel that we shouldn't abdicate, uh, our responsibility to control our own future, uh, that I think we all wanna live in.

    9. THTara Hill35:32

       Mm. And given Microsoft's vision to democratize AI, you know, there are concerns about what might happen if those tools get into the wrong hands, and you've just mentioned not to abdicate that sort of responsibility. So how do you think about who to partner with in light of those concerns?

    10. SNSatya Nadella35:49

        Right. I mean, there, there's multiple things. So one is, what is it that we ourselves will, uh, do to, in some sense, uh, have some core principles that define what we do and then who we work with? Uh, you know, take facial recognition that's quickly becoming, uh, the topic which I think is going to even have regulatory frameworks around it. In the State of Washington, we participated even in creation of that, uh, regulation. Uh, so I think that first, before we, w- you know, even the regulation is in place, we have guidelines on what we think is the right use, because the maturity of the models really make it pos- you know, only sensible to use it in certain use c- use cases and not in others. And being clear about it, uh, and then ensuring, uh, that that's what we do, uh, and then working knowing that there will be... Like, there's food safety, there should be AI safety. I mean, there will be regulation. Uh, and, uh, we should be okay with it. In fact, if anything, our practices and our data of what's good, what's not, what's the state of technology should inform that regulation.

    11. THTara Hill36:51

        Mm. So you bring up the topic of regulation, and today it seems that relationships between regulators and many large tech companies are fraught. Uh, in its early days, Microsoft may have fought its own battles, but today Microsoft is leading with openness. And so what's your advice for the aspiring tech leaders here on balancing that pressure to grow as a company with your responsibility to society?

    12. SNSatya Nadella37:16

        That's an interesting question. [laughs] Um, here's, here's what I've at least, uh, learned. In fact, Brad Smith, who's another colleague of mine who recently wrote a book, uh, called Tools and Weapons, uh, he reflects, because he was very much part... He worked with Bill, he worked with Steve, and now he works with me. Um, very much part of our own struggle. I would say the one thing that we, at least I took away, um, from that time is when there is, uh, I would say a lot of criticism of whatever it is that you're doing-

    13. THTara Hill37:49

        Mm

    14. SNSatya Nadella37:49

        ... uh, I think that it's, it's, it's appropriate for us to look in the mirror and perhaps learn, uh, about what it is that we're being criticized about. Uh, and perhaps there are changes that we need to actually bring about. Uh, so I would say scrutiny of large organizations is absolutely something that is, uh, going to only happen, and I think large organizations should welcome it. Uh, and, and we all can learn, uh, uh, from it. And the core though, especially in technology business, we collectively as an industry have to just mature and mature at a very fast rate. Because the impact of digital technology in our lives and in our society is so deep now, uh, that for us to assume that we're just gonna have unfettered access, uh, to all parts, uh, without thinking about the unintended consequences of this technology are long gone. And so therefore, for us as an industry, for us as a company-

    15. THTara Hill38:54

        Mm

    16. SNSatya Nadella38:54

        ... to both recognize the opportunity of these technologies and the responsibilities, whether it's in security, whether it's in privacy, whether it's in AI and ethics, I think is going to be central. Uh, and it's n- And these are not gonna be terms of competition even. I think this is where the industry at, at scale has to get a lot better. Uh, and I, I think that that moment is, is upon us, and I do see positive change. Um, uh, but it is definitely a time for self-reflection, uh, and change.

    17. THTara Hill39:28

        So I want to circle back to your own leadership style and values. And what strikes me is that you seem to combine this sense of self and ability to stay true to your leadership style, you even have a story of Steve Ba- Ballmer telling you it's too late to be different.

    18. SNSatya Nadella39:43

        [laughs]

    19. THTara Hill39:44

        With, on the other hand, this real belief in a growth mindset. And I think for many of us at the GSB, there's this question of how do you stay true to your own style, while still knowing when and how to grow in the right direction? And so how do you think about those two things?

    20. SNSatya Nadella40:01

        That's, I mean... Yeah, I mean, I think the ability to understand [laughs] yourself is, is actually, it's a lifetime's journey, right? Uh, it's a journey of your lifetime to really unpack who you are and what you're good at, what makes you tick, what are your passions, uh, is something that... Uh, what makes you happy, the question that my mother asked me all the time. And in fact, the more, the older I get, the clearer I am, uh, in, in understanding even what she was asking. Um, and then to be able to understand others. That's also another journey of a lifetime, right? Which is you sort of feel like you understand what others are saying, um, you understand where they're coming from. Um, I think that's really what is going to perhaps help you with both be true to yourself, your identity, uh, what makes you tick, what makes you happy, while knowing that ultimately, I think a lot of that satisfaction you get is because of your ability to empathize, the ability... It, it could be your family, it could be your workplace. That's the other thing that I've come to realize is we can be transactional at work. I'll tell you, there was this gentleman, another, uh, GSB grad whom I worked [laughs] for, Doug Burgum, uh, who's actually the governor of North Dakota nowadays. Uh, but there was this, uh, time, uh, you know, in my mid-30s, he said something to me which just had a profound impact. He said, "Look, uh, you're gonna work, um, uh, you know, at Microsoft more time, uh, than you are gonna even spend with your kids." And I said, "Oh, wow, that's pretty, you know, that sounds pretty, uh, harsh." [laughs] And, and yet it is true. And w- his main point was, "You better think about work having deeper meaning than being transactional." Uh, and, uh, and as I've thought about that, the only way it's not gonna be transactional is when you relate to people you work with. Uh, and, uh, you know, that's what you'll remember. The projects you worked on, the technologies will all be passe in time, but the people, what you did, how you behaved, what was, uh, your, you know... I, I take great pride in these people whom I've mentored who would... or go on to do great things. That's the relationship that I think you seek out-

    21. THTara Hill42:39

        Mm

    22. SNSatya Nadella42:39

        ... uh, while being tr- true to yourself and what makes you happy.

    23. THTara Hill42:44

        And you mentioned humility earlier and how important it is to you. And you have this quote, uh, that says, "When everyone is celebrating you is when you should be most scared." And I think it's safe to say that people are celebrating Microsoft's renewal. So how do you keep yourself and your teams grounded among this success?

    24. SNSatya Nadella43:02

        That's a great, that's a great, that's a great question. You know, there's this, uh, book I recently read by, uh, David Brooks, uh, called The Second Mountain. Uh, it's an interesting book because he talks about it mostly in the context of us, um ... you know, there's that first mountain, which is what perhaps many of you as graduates of GSB are going to be on, and you're gonna seek, uh, excellence and success in the professional career. Um, and then, um, you're eventually going to get to that second mountain, and then you're going to sort of, uh, in his words, uh, relate to the world and community and what have you. And I feel that that's really what's there for Microsoft. The way, you know, having gotten to whatever high market cap in '98, uh, now for us, it's more not our market cap, but what is our market cap leading to? Uh, to your point, it's ... if you celebrate our success, but real- g- uh, but fundamentally realize, if you sort of go back to our mission and our business model, right? It's not even a sense of mission and purpose that's somehow abstracted away from what's core driving our business model. We need to see success all around us. That's it. And so if we celebrate that small business, uh, in Kenya or that large multinational in Sweden, uh, or that public sector company in Indonesia or in Vietnam, that's what's going to help us, uh, be grounded and be successful. And so that invoking of that everyday sense of purpose is what I think is gonna help us the most.

    25. THTara Hill44:48

        Thank you, Satya, and I think on that note, we will turn it over to some questions from the audience.

    26. SNSatya Nadella44:55

        Okay.

    27. SPSpeaker44:55

        This thing on? Hi, my name is, uh, Tara Karedpir, and I'm a first-year MBA student. And I'm asking this question in conjunction with my classmate, Jeff Kruger, who unfortunately couldn't be here, but we're both interested. Um, you've mentioned that at Microsoft you have made a principled decision that you're not going to withhold technologies from institutions that have been elected in democracies to protect the freedoms we enjoy. This position, as you probably know, stands in contrast to a number of your peer tech companies here in the Valley. Can you elaborate on your decision framework as CEO to have Microsoft pursue US Department of Defense contracts like the JEDI cloud project at DOD?

    28. SNSatya Nadella45:33

        Yeah, I mean, first of all, you know, one of the things that, uh, we're engaged in is, um, with deep respect for all opinions that people may have on things that we, um, should be concerned about. Uh, but on this one, we've been very clear from day one on the statement you read out, which is I feel that, uh, I have great belief in our democratic institutions and our democratic process, and one of my big fears is that, uh, somehow CEOs or corporations, uh, try and substitute for what I think in the long run is the most important thing for us, which is our democracy to work as designed. Um, and in this case, uh, if we don't like what our government does, we have this one great opportunity, which is we get to change. We get to vote. Uh, we get to even take principled stance against our government if we do think that that is something that, uh, we wanna fight for. In fact, Microsoft, whether it's in the, uh, previous administration or this administration, we've had cases. Uh, you know, it was the warrant case, uh, around privacy, something that we were able to go fight and then ultimately, uh, b- through the CLOUD Act, bring about change, which was a bipartisan, uh, legislation which I feel is a good step in the direction, uh, of having privacy enshrined in a legislative sort of pr- set of processes. So that's how I look at it. Um, I don't see, uh, how withholding technology from, uh, as I said, the institutions that we have elected, uh, that are subject to civilian control ultimately, uh, to protect the freedoms we enjoy is going to help. Uh, that doesn't mean we shouldn't have ethical principles, we shouldn't ad- advocate for ethical principles, and in fact, these institutions that we are talking about have perhaps a more of a history around these ethical principles as well. And so for us to rely on that and reinforce that I think would be important.

    29. SPSpeaker47:39

        Hi, Satya. Uh, hi, uh, I'm Prashant. I'm from Hyderabad, uh, and a second year MBA student.

    30. SNSatya Nadella47:46

        Good city.

Episode duration: 54:15