Davos 2023: A conversation with Satya Nadella

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Klaus Schwab, Founder & Executive Chairman, World Economic Forum: Good afternoon, ladies and gentlemen. It's for me, a particularly great pleasure to continue what we did already in the past, to have a dialogue with Satya Nadella, who I don't have to introduce him, who probably is the most regarded and respected leader in industry as chairman and CEO of Microsoft. Should you have a question or comment, please stand up and mention your name.

But let me start with a discussion with you, Satya. And it seems when we look at the Fourth Industrial Revolution right now in technological development, when you look at the S curve, we are really at the point where we have exponential development. Just look at the announcements over the last weeks, artificial intelligence, quantum computing, and I could go on and on. Now, Satya, you are at the forefront of those technological developments in many ways. And what do you see, what major shifts will come out of this? What will be the final result of all those dynamics?

Satya Nadella, Chairman & CEO, Microsoft: Now first of all, it's fantastic to be back here and have this conversation.

And I think you described it well, which is where are we on the S-curve? And interestingly enough, I sort of think about it as there's one S-curve where we are at the tip, where it's now about deployment, diffusion, mainstreaming. In fact, one of the things I think a lot about is in a time like this where let's just say with all of the macroeconomic challenges or take even inflation, I think it's showtime for us, even in the tech industry, to really say, okay, how can software, for example, be a deflationary force so that every business can do more with less? So, there's one side of it, which is real deployment of technology so that we can use the most malleable resource we have in order to tame some of the inflationary forces. A good example to just give you one is what Unilever has done with their lights out manufacturing with digital twins. It was great during the pandemic as a way to do manufacturing remotely, but more importantly in silico, they're able to simulate and reduce energy cost, water wastage and other wastage. So therefore, that's a good example of doing more with less. So that's one side. The other side is something like artificial intelligence. If you look at it, it's at the beginning of a new S-curve. And that's the fun part of being in the tech industry where there are certain technologies that are reaching maturity that need to get deployed and show real results. And then we now have essentially emergence of a completely new set of technology, which I think is going to be revolutionary.

Klaus Schwab: You say it will be a revolution. I think we all feel it will be a revolution but there is a certain fear, particularly about artificial intelligence. People feel it dishumanises us and so on. Now what steps do we need actually to make sure that those technologies, particularly artificial intelligence, remain society oriented and human centred.

Satya Nadella [00:03:47] Yeah, I mean, I think it's a great point and I think a very important consideration, quite frankly, a design consideration. In fact, one of the things we think a lot about is how to deploy this technology to empower human beings to do more. So for example, on New Year's Day, I saw this tweet by Andrej Karpathy, who was an ex founder of the autopilot group at Tesla, who's an AI developer. And so, he sort of referenced perhaps the biggest product that made a difference in his life in the last 12 months was the GitHub co-pilot we had launched last year. So here's a software developer using tools and saying, now GitHub co-pilot is generating 80% of his code. So that doesn't mean Andrej is not writing new code and being at his creative best. It just so happens that now he has 80% leverage in doing what he's doing. He's still the pilot. He does have a co-pilot. So that's why I even like the branding of what we did there, because I think it helps put the pilot in charge and the co-pilot helping the pilot. But that's one example. I'll give you another anecdote, which for me perhaps was the most revealing of what can happen. I was in India at the beginning of January and I saw this demo class. In India, one of the things that's very exceptional that's happening is digital public goods that are getting built for identity, payment, many systems and one of the digital public goods that's getting built is for language translation. So basically they have an open source project so that anybody building any application in India can translate between any Indian language.

So a demo I saw was a rural Indian farmer trying to access some government programme, right? So he just expressed a complex thought in speech in one of the local languages that got translated and interpreted by a bot and a response came back saying, go to a portal and here is how you will access the program. He said, look, I'm not going to go to the portal. I want you to do this for me. And it completed it. And the reason why it was able to complete it was because a developer building it had taken ChatGPT and trained it over all of the Government of India documents and then scaffolded it with the speech recognition software.

So, think about what that meant, right? That basically meant that a large model, a foundational model that was developed in the West Coast of the United States a few months before, had made its way to a developer in India who then sort of added value to it to make a difference in a remote villager’s life. And I've never seen that type of diffusion.

To your point about the Industrial Revolution, Klaus. You know, I would say, we're still waiting for the Industrial Revolution to reach some large parts of the world 250 years after. The Internet maybe took 30 years, maybe the cloud and mobile took 15 years, and now I think we're talking months, which to me I think is perhaps the benefit. It doesn't mean to your core question, we shouldn't take something like AI safety as a core consideration right at the design time. And so therefore, even when we launched these APIs, which we did this week, one of the key things is the APIs have safety built into it for harmful content or the context in which they’re used. So a lot of work needs to go into it still, but we think of both the unintended consequences and the benefits, both being something that we harness.

Klaus Schwab: So you feel that ChatGPT and similar technology will become very fast about penetrating our lives, business lives, but also personal lives?

Satya Nadella: Yeah, I think about, you know, we all remember in 2007, 2008, so that is the last time I would say we had major platforms being bought by the mobile platform and the cloud platform. And you know, in the last 15 years they've gone mainstream. We’re still, I would say, you know, in the throes of its penetration, but it's significantly understood that this technology is making a real difference.

I think that the AI piece and this particular generation of AI is showing that type of, I would say, platform shift. And just to kind of give you an intuition Klaus as to what exactly happened, like why are we talking about the AI in January of 23? After all, we were talking about it last year, but this seems to me even I had not expected if you had asked me last month coming to WEF would I be talking about AI this much? But it turns out that, you know, even the ChatGPT moment has I think captured people's imagination. But we started the work with OpenAI, I would say two and a half years ago when we started building the AI supercomputer in Azure to train these large models. So, in fact, the workload of this particular form of AI requires a complete rethink, even in the system architecture of the computing infrastructure. And we did that hard work and trained these models. And when you look at GPT 3, thru 3.5 to what's coming, these are non-linear development. So, they're showing emergent capability. And I'm not saying this is the last model architecture innovation. There'll be more to come, but the fact is that these things by themselves are becoming platforms that I think truly can make a difference.

Klaus Schwab: Let's see, with the audience. So I raise the question, who of you has made already his own personal experience with GPT? It shows the sophistication of the audience. Now there's another technology which we demonstrated, and we actually do it in cooperation, in partnership with Microsoft and with Accenture, but we have 70, 80 companies in the consortium behind it, behind us. It's the Global Collaboration Village, which is probably the first Metaverse application for public good. What are your thoughts about that?

Satya Nadella: First of all, I think the vision you've had Klaus around using this new technology of metaverse and these immersive experiences to bring the world together, to both have that sense of community presence and collaboration I think is just absolutely needed, right? I mean, if I think about what is special about Davos, it's about the ability for multiple stakeholders to come convene, learn, debate, come out of it with energy on what they can do to change the world. And so to some degree, to say that if there's some new technology that can, for example, really bring this global collaboration village to life, where not only can people collaborate when they're here, but it can be an ongoing thing. I think it's fantastic.

I would encourage everyone to go see the exhibits because I feel the thing that is most for me game changing about this particular technology is that sense of presence one has, right, which is when you're even virtually interacting. I think during the pandemic, all of us obviously did a lot of video meetings and I think it has definitely got us through the pandemic and I think they are going to be very much part of our lives.

And I think of this as a very natural extension of it, because beyond video meetings, if you can have more immersive experiences where that presence, the presence can be felt, you can understand the impact of any of these hot topics that we are talking about. I think that can be pretty game changing. So, I think it's a brilliant idea. I'm glad to be partnered with you on it and I would really encourage everyone to participate.

Klaus Schwab: Let me let me just see who has participated in the demonstration. Some haven't, I think, some have still an opportunity to do so. But let me come back out to an issue which we discussed also last time. It's cybersecurity. We discuss it every year and it seems that it gets every year worse and it's undermining actually the trust into the digital system. So, what can we do? We have any chance to enhance trust into our digital infrastructure?

Satya Nadella: Yeah, I think you said it well, because in some sense, as digital technology gets much more, you know, pervasive in our sort of economy and in our life, the unfortunate consequence of it is also cybercrime and cybersecurity issues are on the rise. In fact, I think there was a great panel today, from what I understand, on some critical infrastructure. And in fact, if you look at what Microsoft has done in the case of Ukraine or Albania, these are all well recorded at this point in terms of the work we had to do to protect essentially critical infrastructure and even nation states that are under threat.

But to your point, interestingly enough, you phrased it right, which is in order for us to have trust and security, you have to have an approach which is zero trust, which is kind of the paradox. In fact, the way the security community talks about it, the best way for you to have security is to assume breach and then think about your defence, if you will. And so therefore, we have at Microsoft developed an end-to-end infrastructure, whether it's from identity to the endpoint security to application security to the infrastructure security with the zero-trust architecture.

But not only that, you know, we see trillions of signals because at the end of the day it's an intelligence game. And so, we are taking the intelligence/signals we have and using it actively. The only reason why we were able to intervene in the Ukrainian situation was because we saw the signals long before even the attacks, and therefore we were able to help evacuate essentially the Ukrainian government into the cloud. And so those are the kinds of proactive action that we have to take, I think, in order to protect. The operational security posture of every organization, every nation, every public, you know, critical infrastructure institution is going to be very, very important.

Klaus Schwab: But how do you explain that most of the companies are not yet on the level say should be and what can be done in order to increase to make it, let's say, a change of view, like everybody today probably closes the door in the evening. What can we do?

Satya Nadella: Yeah, I mean, one of the things in which we always advise is, you know, you use the cloud. So for example, one of the ways to be secure is not to be fighting this alone because at some level you want to be able to get leverage. If you go back to what I said, this is a signals game. You want to have the signal strength on your side versus being isolated. So that's one of the reasons why I think it's going to be very important for us, especially around local government, public infrastructure, to be able to modernise the infrastructure and have it run in what is environments that are really well-suited to fight the cybercriminal activity.

Klaus Schwab: It may change to a certain extent the nature of our discussion to come back to an issue which of course is very much in our minds this week here in Davos. It's the energy sustainability and energy transformation. And you are one of the pioneering companies because you want to be by 2030, not only carbon neutral but carbon negative

which means to take up the sins of the past and to correct them. Would be your advice to other companies and what can Microsoft, what kinds of technology, like your technology, to help companies to achieve, to go faster in energy costs, in energy security and energy?

Satya Nadella: So, I mean, first, I would say, you know, we are doing a lot first to make sure our house is in order because given the commitments we have made each year, we audit them and we’re making sure that we are making progress on it. And quite frankly, in the last year, for example, I think on scope one and scope two, we did a good job, reduced our emissions by 17%, but scope three increased because of the increased usage of the cloud and our gaming consoles and a lot of those. They increased by close to 20%. So, we have our work cut out. In fact, I was very, very pleased even this year early on, to see the work that we put into Xbox in order to reduce its energy footprint when at rest. So therefore, I think there's a lot of work we are doing ourselves, quite frankly. Like after all, you know, all those AI supercomputers consume a lot of energy. And so one of the key things is that everything from the data centre design to the power draw of the chassis in which these GPUs are racked, I think the cooling systems, is this sort of innovation agenda that's front and centre for us.

The second thing though, to your point, Klaus, which is one of the places where I think we can make a real difference and we are working hard and we have launched something called the Cloud for Sustainability is around carbon accounting, right? So, somebody described it to me, it's like we are trying to deploy an ERP system at the same time as the gap rules are being created. And so, you need an approach even to how one does carbon accounting that is more flexible and keeps up with all the data that's coming in. We have a software system with many partners.

We now want every small business. For example, I mean, like in Europe, I think every bank now is going to look at even the carbon footprint of companies before giving credit. And so, in order to enable that and enable the fluency of that, I think we can do a lot of work. And one other thing I would also mention going back to some of the AI pieces and even you mentioned quantum, I think the core at least my layman's understanding of even the energy transition challenges, we want to take 250 years of chemistry and compress it into 25 years. And if that is going to be possible or one of the ways that is going to be possible is with computing power and especially computational chemistry. And so, we are doing a lot of work in whether it's AI techniques or even quantum inspired algorithms even being run on classical to help with, I would say, computational chemistry and the discovery of new molecules that can perhaps accelerate this energy transition.

Klaus Schwab: I want to take you up on the word quantum, I’ll come back to the Fourth Industrial Revolution. For some people, quantum is still something in the future. For some, it's already a reality. Where do you stand?

Satya Nadella: You know, we have a research programme in terms of quantum. In fact, in the last year, there have been some real breakthroughs because we have had an approach to quantum where we are trying to not just achieve quantum supremacy, but, to be able to build a general purpose quantum computer, you need to have sufficient number of stable qubits, and so the approach we have taken is that approach where can we build a general purpose quantum computer?

And, you know, we have sort of published results on some of the breakthroughs in the last year. So, I do think it's still a ways away. It's not here today. But I think the interesting thing is the software stack that needs to be built for quantum is getting built actively. In fact, if anything, the fact that you can simulate quantum algorithms on classical is one place where we can in fact already start benefiting.

But let's face it, I mean, there's lots of things that are happening that are rapidly moving, whether it's about on the encryption side or how do you in the post-quantum world protect yourself. And so these are all fields that are actively both being researched as well as being deployed.

Klaus Schwab: If you look at economic growth in the last ten years or so, it has been very much driven by companies like yours and there was a kind of tech boom? And now lately we have seen the news about layoffs. And does it mean that the existing business model on which the tech industry was based is coming to an end and has to be replaced by a new model?

Satya Nadella: I look at it in two ways. One is the overall economic growth in the world, because at the end of the day, all of us are governed by what is happening in the world, inflation-adjusted in terms of economic growth. So because no one can sort of defy gravity and the gravity here is inflation-adjusted economic growth. And I would say all up in the world, the inflation-adjusted economic growth has been pretty weak. And one of the things that I'm optimistic is digital technology can help boost it. Things like artificial intelligence can help boost it.

That said, in the tech industry, we grow multiple times GDP. And so, the question is, during the pandemic, there was rapid acceleration. I think we are going to go through a phase today where there is going to be some amount of normalisation of that demand. Quite frankly, we in the tech industry will also have to get efficient, right? It is not about everyone else doing more with less. We will have to do more with less. So, we will have to show our own productivity gains with our own sort of technology. And then coming out of this cycle though, Klaus, I do believe that as a percentage of GDP, tech spend by definition will increase and not because it should just increase, it will increase because of its contribution to the all-out GDP growth. So that's sort of how I view what's happening in our industry, our business model challenges, but more importantly, what I think are the economic challenges in the world.

Klaus Schwab: Satya, I would go maybe even one step further and would say the next phase must comprise much more the application of those technologies in areas where it is not yet applied. And I'm not thinking only of developing countries, I'm thinking of education, I'm thinking of agriculture. If you look at just those two areas, they are very old fashioned. So, this is a large, let's say, opportunity for those technologies to penetrate much better. It's the overall economy. Would you agree?

Satya Nadella: It's a very important observation, because in some sense, what you're pointing out is also economic growth is not just economic growth. It's got to be equitable economic growth that is spread by geography, by sector, by segment. It's not about just large businesses, but it's about large and small businesses. This is about public sector institutions. And that, I think, is the crux of it, right? I think in this next phase of globalisation, even, I think when we talk about economic growth, we'll have to think about it at the core, like what's the equity of that economic growth and how is it being spread.

Klaus Schwab: Just to go even one step further, if you if you go in this direction the talent question becomes key. Now you have attracted the best talents and Silicon Valley, etcetera. Isn’t there a lack of talents, let's take agriculture, to translate some potential into reality.

Satya Nadella: You know, so first of all, let's face it. I mean, there is there's a real issue around skills, reskilling and talent. I'm very hopeful that some of these new technologies are going to be helpful in that process. What I mean by that is, you know, I gave you already that example of Andrej Karpathy and him using GitHub Co-pilot as an elite AI developer getting assistance from a co-pilot. But the same thing is true for a first line worker using, say, one of our tools, like our platform to be able to use a natural language prompt to do some workflow automation.

So, think about this. This is someone who's in the frontline who has domain expertise but doesn't have I.T. skills, he is able to now do I.T. tasks.

That's one way for us to in some sense bridge the talent gap. In fact, even the rebalancing of even software engineering talent. In fact, if you think about it, then it was actually two years ago that the number of software engineers that are being hired outside of what is considered the tech industry is higher than in the tech industry. So that means going forward we will have more of the digital skills spread much more evenly across the economy. And that's a good thing, right? Because we need that. We need them in agriculture, we need them in banking, we need them in healthcare, we need them in education.

Klaus Schwab: We spoke about the Global Collaboration Village and I mentioned we have 80 companies behind and we have a permanent exchange of ideas. And one let's say conviction came out so that the metaverse will be provide us with new capabilities, particularly in education. Would you agree?

Satya Nadella: 100%, because in some sense, if you sort of combine the two technologies that I think people are talking about, take metaverse and take AI. If you put these two things together, what does that mean? Like, it means that you can now help people learn with other people together, collaborate across space and time. And most importantly, something like a co-pilot being there to help even diagnose the conceptual mistakes the student is making right when they make it and then help them overcome that. I think this notion of collaboration and learning together is where I think we can make a real leap forward.

Klaus Schwab: I think one of the reasons why, let's say this Annual Meeting is a success. It's not only working together, but it’s the serendipity effect that if you do it in the virtual world, let's say again in the Global Collaboration Village, you can build in the serendipity with artificial intelligence into the system so you know exactly who is the best in order to help you to solve your own problem.

Satya Nadella: That's right. In fact, one of my favourite features, even in one of the products we recently built, is whenever you want to research a topic, it doesn't just tell you the answer to the topic, but it tells you the people that you should connect with and that ability to know whom to talk to, to learn more is something that is, I think, as important as learning more.

Klaus Schwab: And you can build it. Now I'm running out of time, but I would like to come back to one question, which we also touched upon last time. It is the future of work. There’s a lot of discussion about remote work and I think you and your company has been very, let's say, engaged into discussions about this issue. What is your learning from those discussions and what are your recommendations?

Satya Nadella: I think that the key observation I make is we're still learning because, you know, there's been real structural change. I don't think we can just say we'll go back to 2019, nor can we say we are going to live like is as if it is 2020, if you will. So therefore, there is real new patterns of work emerging.

The three trends that we are observing, Klaus, which I think are, to me at least, guiding, even our own set of decisions. So the first is there is what I would characterise as this productivity paranoia, right. Which is every leader thinks that somehow they're not being productive, but everybody who's working in the organization feels burnt out. So, there is that debate as to who is true and what is the truth.

And so therefore I would say more data, less dogma will be a good way to sort of end that debate. Now, in other words, at the end of the day, organizations have to be productive.

There's no question, the outcomes matter. And the question is, instead of being dogmatic about the way to achieve the outcome, we should sort of focus on the outcome and then rediscover perhaps new patterns of work, successful work. So that's one.

The second thing I would say is we are also learning that people come for other people, not because somebody set policies. So people don't come for policy, but people will come for people. And if you buy that, then I think we all have to even learn many new soft skills like convening, you know, calling a meeting versus convening an event — two different things, you know, because you convene an event, you set so much more context. You market it. You help people have a successful event. Whereas meetings, sometimes you go in unprepared. You don't worry about what the consequences of that are and what have you.

So I think we all have to learn, be much more deliberate, learn a lot of soft skills so that people to people connections are really forming because that's, I think, very important for social capital.

The last thing I would even say is it will be very important for us not to take for granted that the people who work in our organization are all connected to the company's mission or the organization’s mission. And so re-recruiting, training. In fact, one data point we observe is unless and until people feel fulfilled in their jobs in terms of new skills that they've acquired, they're not going to have loyalty to the organization. So, us really investing in their progress inside of the job and the sense of accomplishment I think are going to be important. So tools and technologies are there, but I would say new management practice and sensibility is perhaps what we will all have to develop.

Klaus Schwab: In this context you just used about loyalty. How would you describe loyalty of an employee towards Microsoft?

Satya Nadella: No, look, I think at the end of the day, I always say the most important thing is for people to sort of think of who are working at Microsoft is they should think of Microsoft as a platform to be able to connect with our mission to achieve what's core to them. I think that's the social equation. I think the loyalties only exist if Microsoft as a platform is helping them achieve what they want to achieve. It's not something that we take for granted. It's something that we have to earn as an organization by giving people a platform.

Klaus Schwab: So you have to build an attractor.

Satya Nadella: Absolutely. And also give them a reason why they think of Microsoft.

Klaus Schwab: Thank you so much. I may just close. I think we are already over time. But one short question. I met so many leaders and you may have seen in the Agenda I wrote a small article about how I define leadership, and I said leadership is a combination of soul, brain, heart, muscles and nerves. The soul standing for purpose, the brain standing for professionalism, the heart standing for passion and as the muscles for implementation capability and good nerves you need today. And I think we just have seen a leader who combines all those five dimensions. So, thank you very much.