Davos 23: Klaus Schwab in conversation with Satya Nadella, CEO of Microsoft

Klaus Schwab, Founder and Executive Chairman of the World Economic Forum is in conversation with Satya Nadella, Chairman and Chief Executive Officer of Microsoft Corp. at Davos 23.

Klaus Schwab

You are at the forefront of technological developments in many ways, what major shifts do you see as coming out of those developments?

Satya Nadella

I think of there being one S curve where we are at the tip, where it's now about deployment, diffusion and mainstream. One of the things I think a lot about, is in a time like this with all of the macroeconomic challenges like inflation, I think it's showtime for us in the tech industry. We can look at, for example, how software can be a deflationary force so that every business can do more with less.

On another S curve, on something like AI, we're at the beginning. And that's the fun part of being in the tech industry. There are certain technologies that are reaching maturity that need to get deployed and show real results and then we have the emergence of a completely new set of technology, which I think is going to be revolutionary.

Klaus Schwab

Now, what steps do we need to take to make sure those technologies, particularly artificial intelligence, remain society-oriented and human-centred?

Satya Nadella

That's a very important consideration and, quite frankly, a design consideration. One of the things we think a lot about is how to deploy this technology to empower human beings to do more. For example, on New Year's Day, I saw a tweet by Andrej Karpathy, who is a former founder of the autopilot group at Tesla and an AI developer. He referenced that perhaps the biggest product that made a difference in his life in the last 12 months was the GitHub Copilot that we launched last year. So, here's a software developer saying GitHub Copilot is generating 80% of his code. That doesn't mean that 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 but he does have a co-pilot.

That's why I like the branding of what we did there because I think it helps put the pilot in charge with the copilot helping the pilot. Let's 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. Now, in India one of the things that's very exceptional that's happening is digital public goods and one of the digital public goods that is getting built is for language translation. So, they have an open-source project that enables anybody building any application in India to translate between any Indian language. The demo I saw was a rural Indian farmer trying to access some government programme. He expressed a complex need in one of the local languages. This 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 programme. 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 that the developer building it had taken GPT [General Purpose Technology] and trained it over all of the government of India documents and then scaffolded it with the speech recognition software.

Think about what that meant That meant that a large model, a foundational model that was developed on the West Coast of the US a few months before, made its way to a developer in India, who then added value to it to make a difference to remote village life.

You know, we're still waiting for the industrial revolution to reach some large parts of the world and the internet maybe took 30 years to spread around the world, maybe the cloud and mobile took 15 years and now I think we're talking months. I think that is the benefit. That's why we need to take something like AI safety as a core consideration right at the design time. A lot of work needs to go into it still, but we think of both the unintended consequences and the benefits being something that we harness,

Klaus Schwab

So, do you feel that GPT and similar technology will quickly penetrate our personal and business lives?

Satya Nadella

In the last 15 years, the mobile platform and the cloud platform have gone mainstream, we're still in the throes of their penetration, but it's significantly understood that this technology is making a real difference. I think that this particular generation of AI is showing that type of platform shift. We started the work with open AI two and a half years ago, when we started building the AI supercomputer in Azure to train these large models. The workload for this particular form of AI requires a complete rethink, even in the system architecture of the computing infrastructure. They're showing emergent capability and I'm not saying this is the last model architecture or innovation, there will 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
Now, there is another technology which we demonstrate here at Davos and we actually do it in partnership with Microsoft and we have 7,080 companies in a consortium behind it. It's the Global Collaboration Village, probably the first Metaverse application for the public good. What are your thoughts on this?

Satya Nadella

First of all, I think the vision you had of clouds using this new Metaverse technology and these immersive experiences to bring the world together to have that sense of community presence and collaboration is absolutely needed.

If I think about what is special about Davos, it's the ability for multiple stakeholders to come, convene, learn, debate and come out of it energised about what they can do to change the world. So, if there's some new technology that can, for example, really bring this global collaboration village to life where people can collaborate and it can be an ongoing thing, I think it's fantastic.

During the pandemic all of us did a lot of video meetings and I think they're 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 copresence can be felt, you can understand the impact of any of these hot topics that we're talking about. I think that can be pretty game-changing. I think it's a brilliant idea. I'm glad to have partnered with you on it.

Klaus Schwab

Let me come now to cybersecurity. It seems that it gets worse every year and it's undermining the trust in the digital system. What can we do about this?

Satya Nadella

In some sense, as digital technology gets much more pervasive in our economy and in our lives, the unfortunate consequence is cybercrime. Cybersecurity issues are on the rise. We have to protect critical infrastructure and even nation-states that are under threat. For us to have trust and security, we have to have a Zero Trust approach, which is kind of a paradox. The security community advises assume breach and then think about your defence. So, therefore, we have at Microsoft developed an end-to-end infrastructure with Zero Trust architecture. At the end of the day, it's an intelligence game. So we take the intelligence we have and use it actively. The only reason we were able to intervene in the Ukrainian situation was because we saw the signals long before the attacks. Therefore, we were able to help evacuate the Ukrainian government into the cloud. Those are the kinds of proactive actions that we have to take.

Klaus Schwab

But why are most companies not totally secure?

Satya Nadella

One of the things we always advise is to use the cloud. 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. That's one of the reasons why I think it's going to be very important for us, especially around local government and public infrastructure, to be able to modernise the infrastructure and have it run in environments that are really well suited to fighting cybercriminal activity.

Klaus Schwab

Now, let's come back to an issue which is very much in our minds this week here in Davos, energy, sustainability and energy transformation. You are one of the pioneering companies, because you want to be not only carbon neutral but carbon negative. How can other companies achieve energy security faster?

Satya Nadella

First, we do a lot to make sure our house is in order before making the commitments we make each year. We audit them and make sure that we are making progress on them. In the last year, for example, on Scope One and Scope Two we did a good job and reduced our emissions by 17%, whereas Scope Three increased because of the increased usage of the cloud and our gaming consoles and a lot of those increased by close to 20%. So we have our work cut out.

I was very pleased to see the work that we put into the Xbox to reduce its energy footprint when at rest, so there's a lot of work we're doing ourselves.

Klaus Schwab

If we look at economic growth in the last 10 years or so, it has been very much driven by companies like yours. Now, lately we have seen the news about layoffs. Does this mean that the existing business model on which the tech industry was based is coming to an end and has it to be replaced by a new model?

Satya Nadella
I look at it in two ways. One is at the end of the day, all of us are governed by what is happening in the world in terms of economic growth. No one can defy gravity and the gravity here is inflation-adjusted economic growth and the inflation-adjusted economic growth has been pretty weak. But, one of the things that I'm optimistic about is digital technology can help boost things.

That said, in the tech industry, we grow multiple times GDP. So 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 demand. Quite frankly, we in the tech industry will also have to get efficient. It's not about everyone else doing more with less, we also have to do more with less. We will have to show our own productivity gains.

Klaus Schwab

If I were to go one step closer and say, the next phase must comprise much more application of source 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, would you agree?

Satya Nadella

Absolutely. 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 and is not about just large businesses, but it's about large and small businesses and about public sector institutions. I think in this next phase of globalisation, 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
If you go in this direction, talent acuisition becomes key. Let's take agriculture, is there a lack of talent in some of these sectors to translate that potential into reality?

Satya Nadella
There is 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. I already gave the example of Andrej Karpathy as an elite AI developer getting assistance from GitHub Copilot, but the same thing is true for a first-line worker, using, say one of our tools, such as Microsoft Power Platform, to be able to use a natural language prompt to do some workflow automation. Someone in the front line who has domain expertise, but doesn't have IT skills, is able to now do IT tasks. That's one way for us to bridge the talent gap.

Two years ago, the number of software engineers being hired outside of what is considered the tech industry became higher than in the tech industry. That means going forward, we will have more of the digital skills spread much more evenly across the economy. That's a good thing because we need them in agriculture, we need them in banking, we need them in healthcare and we need them in education.

And, if you combine the two technologies of the Metaverse and AI, it means that you can now help people learn with other people together and collaborate across space and time.

Klaus Schwab

There is a lot of discussion about remote work, what is your learning from those discussions and what are your recommendations?

Satya Nadella

I think that the key observation I'd make is we're still learning because there's been real structural change. There are new patterns of work emerging. There are three trends that we are observing, which I think are guiding our decisions. The first is what I'll characterise as this productivity paranoia, which is every leader thinks that somehow they're not being productive, but everybody who's working in the organisation feels burned out. So there is a debate as to what is the truth. I say more data and less dogma will be a good way to sort of end that debate right now. In other words, at the end of the day, organisations have to be productive. There's no question the outcomes matter. We should focus on the outcomes and then rediscover perhaps new patterns of successful work.

The second thing I'd say is we're also learning that people come for other people, not because somebody said policies. If you buy that, then I think we all have to learn many new soft skills, so that people-to-people connections really form.

The last thing I'd say is, it is 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. One data point we observed 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. That means really investing in their progress.

Klaus Schwab

How would you describe employee loyalty?

Satya Nadella

I think our employees should think of Microsoft as a platform for being able to connect with our mission to achieve what's core to them. I think that's the social equation. I think loyalty only exists if Microsoft as a platform is helping them achieve what they want to achieve. It's not something that we take for granted.

Klaus Schwab

I have met so many leaders and I recently wrote an article about how I defined leadership. I said leadership is a combination of soul, brain, heart, muscles and nerves. Soul standing for purpose. Brain standing for professionalism, heart standing for passion, muscles for implementation capability and good nerves for what you need today. I think we just have seen a leader who combines all those five dimensions. Thank you very much.

Satya Nadella

Thank you!