“I think we’ve all learned.”
As part of the NewCo Shift Dialogs, I had a chance to interview Brad Smith of Microsoft. You can watch the video here, but because we had to cut it down for time, many fascinating portions of the conversation did not make it into the video. Below is the full transcript, with light editing for clarity.
As president you don’t have product responsibility, but you have a lot of corporate responsibility. It seems to me that you’re responsible for the kind of company that Microsoft is going to be, what it wants to be in the world. You have to understand input from the outside, listen to the needs of the inside, and bring the two together.
Brad Smith: You’ve just captured in a nutshell a lot of what I do, although we do need to translate all of that into our work across our product space. Obviously a tech company that can’t translate into its products the essence of what it’s trying to accomplish is not going to accomplish very much. So there is this product element.
But this was really a shift. In my research into your new role, the word “multi-stakeholder” came up a lot. What does that mean?
What it really reflects is that in the world today, a company has to think about the broad array of stakeholders it needs to serve. Twenty or 30 years ago, people thought of a corporate stakeholder as basically a set of shareholders, but today we now recognize that our stakeholders include our customers. In some ways it starts with our customers, but it also includes governments and regulators. It includes civil society, all of the groups that frankly have a stake in issues that we are addressing, whether we want to or not.
This is a pretty big difference from 20 years ago. Microsoft was the dominant company in technology. The company didn’t spend a lot of time thinking about: What are our relationships with the government? What are our relationships with international governments? That seems like a pretty significant shift in two decades — now there’s a president of the company who is responsible for that external dialogue.
Yeah. Actually when people studied technology companies, they would say that one of the mistakes Microsoft made in the 1990s, is as a company we were too late to recognize the importance of relationships with people in government. Fast-forward to today, we obviously recognize that.
We have all of these stakeholders on a global basis. This isn’t something one can only do in one country.
It’s interesting to note that Microsoft’s mission for quite a long time, which was almost an unattainable one it seemed, at least to those of us that remember it, was “a computer in every home and on every desk,” or something along those lines. That seemed crazy at the time. Of course that happened. Recently, Microsoft has declared a new mission. Can you tell me what it is and what it means to the company?
I actually think that Microsoft, perhaps more so than at any time in the last 15 or so years, is more mission-driven than we have ever been. The mission statement is succinct and it is to empower every person, and organization on the planet to achieve more. It fundamentally has three pieces. First, as a company, we are very focused on both individuals and organizations, consumers and enterprises, that set us apart from some companies in the tech sector. Second, is this phrase every person and organization on the planet…Satya very much wanted to put a stake in the ground and say, “Look, we’re here to serve everybody in the diversity of the world that in fact, is part of our customer base.” Third, we are fundamentally about empowering other people, so they can achieve more. There are days when we describe ourselves as tool creators. We strive to create the kinds of tools that other people can put to work and genuinely do more in their lives, either as individuals or consumers or as enterprises.
How has the mission actually informed decisions that are taken at the company? Can you give an example of a decision that you took, which is like, “Well, you know, we can’t do that because that’s not on mission, that’s not helping people realize their potential. That’s just maybe helping a shareholder get richer.”
There are times when the mission translates very directly into decision-making and other times when it translate in an important but indirect way. It very much informs the need to think globally. Other times, what we find is that it serves us best to start with the mission and translate this into a set of principles that we’re going to apply in a discrete area, whether it’s environmental sustainability or privacy or security. Then what we find is with those principles we’re able to keep making more and more concrete and specific decisions.
One of the areas where you define principles is your recent lawsuit with the US government. Can you tell us what you sued the government for and why?
We specifically brought a lawsuit challenging the government’s gag or secrecy or nondisclosure orders that often accompany warrants. Warrants seeking email, for example. When we really studied the warrants that we are receiving from the US government, we found that a very high percentage of them not only had these nondisclosure orders, but they (also) had orders that were very long or had no end date. We found that these really conflicted with the principles that we said we would stand up for on behalf of our customers. Especially, a principle around transparency — one of the four principles we articulated. We concluded that people are not in a position to know — in a way that we think would be appropriate — when the government is accessing their email. We understand that secrecy in fact is appropriate in some circumstances, but we ended up concluding that this had become too widespread, and this kind of secrecy had become too routine.
What are the other principles? You’d mentioned transparency.
In the area of trust, we defined four principles. It says, “We have a responsibility to keep our customer’s content secure, that their content belongs to them not us and hence we have an obligation to keep it private, that we have a responsibility to manage their content in accordance with the law, so that you as a user don’t have to worry about this, and finally, we have a duty to be transparent as transparent as we can, in accordance with the law.”
You were at Microsoft in 1996. You were very involved in the antitrust suit that the Department of Justice brought against Microsoft. That was a dark time, I imagine, for many of you at Microsoft. What does it feel like to be on the other side of the table, suing the Department of Justice?
It’s obviously very different. One never brings a lawsuit against any government without thinking it through very carefully. This is actually the fourth lawsuit we brought in the last three years around these privacy and security issues. There’s one thing that runs in common, at least in my own personal experience. When you’re in litigation with somebody, it’s very important to maintain a professional relationship to have an open dialogue. Never let that communication line evaporate. That’s true whether you’re being sued or whether you are suing. Our relationship with any government is quite multifaceted and frankly when you’re litigating, it’s even more important to be doing a good job of having conversations, because the reality is most lawsuits end in a settlement. Our antitrust case ended in a settlement. We’ll see where this goes.
The Snowden revelations of a few years ago clearly spooked a lot of non-US governments to the point where in Europe for example, the Safe Harbor agreement for data between Europe and United States broke down. How have the Snowden revelations change your business?
Those revelations told the world things it didn’t know. It really undermined and in some places even shattered trust in technology. As a tech sector we’ve been spending the last three years working to rebuild that trust. It is an ongoing effort, I don’t think we can say we’re complete in this work. We’re still dealing with a lot of policy tensions across the Atlantic and new steps that we’re having to take as a company, and as an industry, to prove to people around the world that they can trust our services.
Some large tech companies say there should be one set of rules that everyone understands and knows, around the world. Ideally, it would be our set of rules, and that’s that. I think you have a bit of a different take.
It would be a wonderful world if there were one set of rules. The problem is in the last phrase, because everybody is then prone to say, “And it should be my rules.” It’s a big world. It’s a diverse world. It is unrealistic to expect any part of the world to accept a hundred percent of any other part of the world in its rules. Over the next three to five decades, we may construct a world where there is a global set of norms. Until then, we’re going to have to, in effect, construct a new legal order. You have to do it step-by-step. Step one is persuading governments that they shouldn’t try to apply their rules to everybody else around the world. Step two is starting to create, on a bilateral basis, some common rules. Step three is, once you have that model, you can begin to adapt it, and extended to other countries that you think should join in. We’re still in steps one and two, and the notion of people thinking, “Oh, we can blow past all of that, ignore it, and just everybody do what I want,” that’s just not the way the world works.
These are relatively difficult concepts of law. For example, you could have a customer in one country, his or her data could be stored in a second country, and the company, Microsoft, could be headquartered in a third country. Where should the rule of law apply? In all three cases? Are you arguing for a set of law and regulation that’s agreed to by all three countries that lives above all of them?
Ultimately, the goal is to get an international system in place that sits above all this that people are comfortable with. This is not a new issue. When the United States dealt with this in the late 1800s and early 1900s, when our economy became a national economy, the number one goal of policymakers was to ensure that consumers and individuals were protected. If you wanted to sell a product, or provide a service to consumers in New Jersey, you actually had to follow New Jersey law to meet those people’s needs. Ultimately, there was an overlay of federal regulation. The biggest challenge we’re facing is the tech sector today is, frankly, very similar. If you want to provide a service to the people of Spain, the Spanish government believes that Spanish law should protect Spanish citizens. The challenge, from a tech perspective is, there’s a lot of countries, there’s a lot of laws. This is very complex. It’s difficult work, especially for a smaller company. Yet I don’t actually think it’s terribly feasible to think that governments are going to give up on the prospect of protecting their own citizens, under their own law.
As we discussed earlier, Microsoft has a pretty clear set of principles. It has a clear mission. It was born of Western law, and a Western democratic system. What happens when you need to, or want to do work, or provide a service to a country that you might not agree with in principle?
Ultimately, one always has to ask whether one is prepared to participate in a country, understanding that means that country’s law inevitably will apply. There are certain countries where we don’t offer certain consumer services. We make those decisions, we strive to do it in a thoughtful way. Similarly, before we put a data center in any country, we do a very detailed analysis, including a human rights analysis, and we make decisions based on that. In some cases, we won’t put a data center somewhere, because just not comfortable with what that would mean.
When you’re making a decision about where to put a large server installation, obviously one factor is cost. What are the other factors?
We look at access to renewable energy. We look at whether there’s a widespread level of corruption that we think would affect our ability to operate successfully, and in accordance with the kinds of principles we’ve defined to ourselves. We look at access to bandwidth, naturally. We look at human rights. Those are five of the factors. There’s actually some others, but I think that captures a lot of them.
Already, the plant that powers Microsoft, or other large tech companies is almost equivalent to the energy consumption of a small country.
At least a small state.
Soon, one would imagine that might get to the point of a small or even medium-sized country, if the cloud keeps growing the way Microsoft hopes that it will. You’ve recently made some news about your commitment to energy sustainability. Can you tell us about that?
The large tech companies have massive data center capability today. If anything, the whole use of the word “cloud” has perhaps distracted us from the fact that these are large, physical sites. We have data centers now in over 40 countries, so we are major electrical users. We’ve articulated three principles, and we’ve translated these into concrete commitments. It really starts with transparency. We’re going to publish more information about our political use, globally, and by region, and the percentage of it that’s coming from renewable energy. And there are strong commitments we to make to the use of renewable energy. We’re already 100 percent carbon-neutral. We’re 100 percent renewable, if you include the purchase of renewable energy certificates. Today, 44 percent of our electricity going into our data centers is coming from water, hydro, or wind. We’ve said we’ll get that to 50 percent by 2018, we’ll get that to 60 percent early in the next decade. We’ll keep going from there.
What is the infrastructure obstacle to getting to 100 percent?
You just cannot get to 100 percent if the power from those sources of energy is not available. We’re having to be much more proactive and just planful. A good example is a very large data center we’re building, it’s already up and operating in southern Virginia. We partnered with the Dominion Power Company there. We’ve invested in their new solar plant. This requires that we go out and work in a more creative way, with the companies that produce energy. It also is certainly taking us more into the public policy space, because public policies can have a strong impact on whether renewable sources of energy are coming online.
Are you satisfied with the policies that are driving this, or do you feel like there’s more that could be done?
We’re at an early stage, in all honesty. There’s more work that’s going to be done, and this is true of the planet. It’s true of our own country. I think it’s true of ourselves. When I joined Microsoft 22-and-a-half years ago, I never dreamed for a moment that I would need to learn a lot about electrical energy consumption, or power creation. We have great experts inside the company, and yet we’re having to spread that expertise much more broadly than we have to date.
One of the things that I found really interesting in researching this conversation was that Microsoft has 6,000 open positions, of which almost 3,500 or more are engineers. In an era where a lot of people are complaining about the lack of high-quality jobs, here are 6,000 high-quality jobs that you can’t fill, or you’re filling probably less rapidly than you would like.
What do we need to do to make it so that our economy provides the people who could fill these jobs?
We have a significant skills mismatch right now. This is true in the United States, and in many other parts of the world. It’s clear that we’re going to need to do at least two things. First, we need to focus on skilling the younger generation, but to some degree, multiple generations, in the capabilities that are needed to fill the jobs the economy is creating. That means coding. It means computational thinking. We’re definitely out there, advocating, as are many in our industry, the need for states to put computer science in schools and the need for the federal government to provide money to train teachers to teach these courses.
Are you getting pushback? It seems like a completely no-brainer idea to incorporate computer including literacy into the farthest reaches of our K-12system. Are people saying that’s a bad idea?
The American public gets this. Polls are showing that over 90 percent of American parents want their kids to have access to these tools in school. What I find, when talking to people in Congress, I’ve met so far this year with 37 members of the Senate on this issue, is that people embrace the cause, but they have questions about what’s the right role for the federal government. There’s a debate across the country about the role of the federal government in education. We do think there’s a federal role in financing some of this, but in a way that delegates authority to the states and local school districts makes sense. You have a debate, as always, over the budget. There are a lot of competing needs for money. What we’re having to do is make the case that this is worthy of a significant federal investment. We’re asking for $250 million this year.
In the education budget, that doesn’t sound like a lot.
You’re preaching to the choir here.
Isn’t there a Gates Foundation that might be able to make a grant like that?
This requires a broad effort. It needs philanthropy. The Gates Foundation has been involved. A number of other foundations have, as well. It takes private companies. We at Microsoft, last year, pledged $75 million of educational support, funding, to help get these skills into more skills, but it does require some level of federal support, as well.
Looping back to the beginning of the conversation, many of the things that you’re responsible for now as president were already present at Microsoft, but not as highlighted. I would say one of those things might be the commitment to philanthropy. Corporate “social responsibility” has been seen as something of a bolt-on — a company spending some money to make them look good, as opposed to something that’s deeply integrated into the meaning of the company, the purpose of the company. You’re responsible for that part of Microsoft’s remit. How does that get integrated in?
You make a really important point, and it’s a point that Satya [Nadella] has made. It starts at the very top of the company. It really goes to how we connect our mission, and our core activities with these broader social aspects, including our responsibilities. Philanthropy is a great example of that. We’re really doing two things, in my mind. One is, we’ve created a part of the company that we call Microsoft Philanthropies to really do more, to be more proactive. It’s an opportunity for us to bring corporate philanthropy really into the 21st century. Second, way look at a lot of our core activities. We look at youth, and we ask ourselves, what more can we do to serve youth, especially when it comes to education, and their opportunities? We look at people with disabilities. The number one thing that most people are not aware of is the globally, and here in this country, one of every eight individuals has some kind of disability. Technology plays an enormous role in either making their lives better, or frankly making their lives worse. We are focused on that, in terms of our core business, our product development, but also our philanthropic work. How can we extend what we’re doing in our core business and filling gaps, especially in terms of gaps where the market isn’t reaching people today?
When you think about how the outside world perceives Microsoft, what annoys you?
If there’s one thing I’ve learned, being in this industry and at this company for 23 years, you should only get annoyed with yourself. Nobody ever died of humility. As an industry, we can sometimes live in our own bubble. We need to do a better job, every day, of understanding how the world as a whole, with all of its diversity, is thinking about what we’re doing today. Where the world doesn’t think we’re doing enough, we need to ask ourselves why. The first instinct to people in the industry is often to answer that question by saying, “They just don’t know us well enough. They don’t really understand us. If they knew everything we knew, they would love us.” I’m not convinced of that. Oftentimes, it means that we have some more to learn. As an industry, we’re affecting so many people, in so many different ways. If we work hard to just think about how other people are perceiving us, in all probability, it’s going to service well. I really don’t get annoyed with the criticisms. Sometimes I get frustrated that we’re not moving as fast as we’d like to address them.
That answer was the direct opposite of my experience with Microsoft in the 1990s. I covered Microsoft pretty closely when I was at Wired and The Industry Standard. Has Satya really created a new culture at Microsoft?
Satya is creating a new culture. I don’t think that one can say in two years and X months, a company of 100,000 people has been remade, and the job is done. I do think it is a much more outward-looking culture. It is a more collaborative culture, internally. It is a more mission-focused culture. It’s a more humble culture. Those of us who worked directly with Satya appreciate every day just the incredible breadth of his curiosity, graciousness of personality. Focus always a moving forward in a constructive way, and I think this integral sense of humility. As I’ve said, humility serves people well. We don’t think about that as often as we probably should. It’s a great strength if we nurture it. It’s not, I agree, what one thought of first 20 years ago, in the middle of the antitrust battle, but we’ve learned. I think we’ve all learned.
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