The Conversation: Microsoft CEO Satya Nadella on how the tech industry can win back public trust

A question of trust

In January, you wrote a LinkedIn post¹ about using technology to foster empowerment and trust. But research conducted by Pew in 2017 suggests that although more people will use tech in the next decade, they won’t necessarily trust it. How will you bridge that gap?

Nadella: A book my colleague [­Microsoft president] Brad Smith wrote is called Tools and Weapons, and I think that’s a good metaphor to keep in mind. Digital technology is perhaps the most malleable resource that we have. It can be both a tool and a weapon. So, let’s first talk about the tool and how it empowers.

There are three things we need to think about. First, is economic growth from technology equitable? You cannot have just the tech industry growing; you have to have all industries growing. The great convergence between emerging and developed markets needs to continue. 

It’s a mistake to think that what led to success will lead to new success. History will come back and bite you in the ass.

Satya Nadella

Second is trust. You can’t have unintended consequences. Privacy—you have to think about data and privacy rights as a human right. Cybersecurity—a trillion dollars or so in the economy is lost because of cyberattacks, and most of the impact is felt by small businesses and consumers. As technology providers, we are the first responders. We have to build the core infrastructure, and even the engineering processes, to ensure that there is more trust in technology.

The last piece is sustainability. You can’t talk about growth or trust without thinking about not breaking the planet.

Sure. But when consumers are seeing tech companies misuse their personal information, or learning they’ve been the victims of data breaches², how can the industry regain their trust?

We can borrow from a lot of other industries that have gone through this. Why, for example, do I trust the food I eat and food safety laws and regulations? For us, it starts by allocating talent and resources so that we are thinking about the unintended consequences of the technology we are building. 

Let’s take A.I. ethics. You are introducing a model that, say, is built on a human corpus of language—it’s going to pick up a bunch of bias based on the data it trained on. The first way to protect against that is by having a diverse team building the model³ in the first place. Let’s not abdicate control. Do we have the internal processes to ensure more diversity in our teams? We have engineering processes for doing secure code—what is the moral equivalent?

That’s the type of work we have to do. But there will be laws and regulations that society has to come up with. The combination of those two is what will help us trust in technology.

The food industry comparison is fascinating because, like tech, food is something that affects everyone. But also because it took the jolt of Upton Sinclair’s The Jungle to convince Americans that we needed food safety regulation. Does tech need something that shocks us that way to spur change? 

I hope not. We’re already living in a world where technology is everywhere. It’s becoming embedded in our lives and society and economy at such scale.

With great (economic) power comes great responsibility

How do you think Microsoft should be regulated?

We can’t wait for [regulators]—so the question is, How do we regulate ourselves? We took GDPR, for example, and said, “Let’s be compliant—but more importantly, let’s take the data rights and make it available all over the world.”⁴ Because in the United States, I’m hoping there will be more federal regulation around [data privacy] and laws that we’ll have to follow.

I’ve been thinking an awful lot about the role of the private sector in society. A modern tech company’s reach is broad and deep. For society’s ills, where do you draw the line for government responsibility versus Microsoft’s?

It’s a great question. I love the definition that Colin Mayer, who’s an Oxford economist, wrote: Companies exist to create profitable solutions to the challenges of people and planet. I do think the private enterprise as a social institution is the best mechanism we have come up with to allocate resources efficiently. But it also has to be governed such that these private enterprises are actually creating solutions, not creating problems. That, I think, is the real crux of it. 

Your core business model must be aligned with the world around you doing well. You can’t do all of this ESG [environmental, social, and governance] work on one side and break the world on the other side. That’s just not acceptable. I go to sleep at night knowing that if Microsoft does well, we have helped a small business become more productive, or a large company make its employees more competitive. That, to me, gives me license to operate, quite frankly, anywhere in the world. Without it, why would anybody want a multinational company operating in their community? 

Then you have to think about obligations you have. There are employees at Microsoft who are full-time and others who are non-full-time. The non-full-time folks didn’t have the same parental leave policy as our full-time folks, but they sit amongst us. So we said, “Hey, you know what? We’ll pay for it.” Same thing with middle- and low-income housing. We need people of all incomes. They can’t have the burden of a commute. So we used some of the balance sheet money⁵,  with permission from our shareholders. It’s not about virtue signaling. It’s about actual obligations that are in the interests of our long-term shareholders.

I’m still not sure where you draw the line between company and governmental responsibility. Let’s go back to parental leave, for example. Despite its economic might, the U.S. is one of the only countries in the developed world not to provide federal paid leave. It’s always welcome for a private company to offer great benefits, but isn’t that the kind of thing that should be national policy?

Absolutely. One piece of legislation that I admire in the U.S. is the Americans With Disabilities Act. What an amazing thing for people with disabilities—and I have personal experience⁶.  That’s what enlightened governments do for large swaths of their citizens who need services. It’s not about any one company building a wheelchair ramp; it’s about everybody being required to make it possible for people with disabilities to fully participate in our economy. 

I live as a citizen of the United States hoping that there will be decisions, regulations, or government programs like that. The democratic process is what’s going to lead to that. It’s not some arbitrary proclivity of a CEO. The thing that I feel sensitive to, as the CEO of a multinational American company, is, Before I turn all the obligations over to the government, what should we do? 

Beyond the cloud

Let’s change gears. When this magazine wrote about you in 2016, Microsoft was on the verge of a historically high stock price. It’s now three times that.⁷ Your big bet was the cloud. That paid off, but its explosive growth is starting to slow. What’s next? 

Computing is becoming embedded in a world of people, places, things. There is increasing digitization, at a broad scale, in the economy. We’re still in the early days. The tech industry is still just 5% of GDP. It’ll be 10% of GDP. But the question is, What’s the other 90% of GDP doing with all this technology? I don’t need to look around at what’s next. I need to look at what’s right in front of us. What are we doing in precision agriculture? How are medical outcomes getting better? How are e-commerce and retail becoming more personalized? How is banking becoming more inclusive?

For you, it’s about the application of technology.

Absolutely. There’s an installation phase, then a deployment phase, of these technologies. In the next 10 years, I’m looking forward to software and digital technology helping every industry, the way electricity did. We are a platform company. And one of the core rules of stable platforms is, you have to have more value above the platform than in the platform.⁸  

On this day six years ago was the announcement that you would become the third CEO of Microsoft. What’s the worst advice you’ve received?

To look in the rearview mirror and think that what led to success somehow can lead to new success. Because it doesn’t. History will come back and bite you in the ass. That’s what I think. You have to have that learning mindset going forward. It’s not deterministic. There’s no God-given right that, because you achieved something, you will achieve it again.

Past performance does not guarantee future results.

That’s right. 

Between the lines (footnotes)

(1) Big buy: In 2016, Microsoft acquired LinkedIn for $26.2 billion—its largest acquisition ever. 

(2) Security check: Microsoft, like most tech companies, has experienced data breaches, including one in January 2020. 

(3) The company’s diversity download:

Gender breakdown (globally): men (70.7%); women (29.2%)

Race/ethnicity breakdown (U.S.): white (52.1%), asian (33.3%), hispanic (6.2%), black (4.4%)
Source: Microsoft

(4) Your data, your decision: GDPR, which allows consumers more control over their data, took effect in the EU in May 2018. Microsoft has extended the same rights to its global user base.

(5) An issue that hits home: The company made a $500 million commitment in 2019 to preserve existing affordable housing, build new units, and partner with nonprofits to address the issue in the Puget Sound region where Microsoft is headquartered.

(6) Family man: Nadella has three children; his son has cerebral palsy, and one of his daughters has a learning disability.

(7) Soaring stock: Stock price as of Feb. 7, 2020: $183.89

Source: S&P Global

(8) Parsing the platform: Successful platform companies generate more value by facilitating commerce (think Google for ads, Amazon for retail) than they do by offering goods or services of their own.

A version of this article appears in the March 2020 issue of Fortune with the headline “The Conversation: Satya Nadella.”

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