Hit Refresh

by Satya Nadella

  We also need to continue to promote free and fair trade. If we want to see growth and see it more broadly, opening up more markets and clearing barriers to trade for entrepreneurs is an essential step. It’s unfortunate that, in recent years, populist politicians on both the left and the right have campaigned on pledges to overturn free-trade agreements.

  Governor John Kasich of Ohio, in the midst of a bitter 2016 presidential campaign, wrote an op-ed for The Wall Street Journal arguing that a vote against trade is a vote against growth. He pointed out that the Trans-Pacific Partnership (TPP), a major trade agreement that was pending approval in Washington at the time, is about helping large and small companies find growth in Japan, Australia, Canada, Chile, and other Pacific Rim nations that want to increase trade with America. The world needs continued progress on trade liberalization. Kasich pointed out that 40 million U.S. jobs depend on trade. But our trade laws also need to be modernized. In this digital economy, the bits and bytes imported and exported are as critical to trade as the automobiles, agricultural products, and other goods we trade. We need to be able to transfer data across borders in the course of business and to do so without having to locate computing facilities in every territory, while protecting privacy, source code, and other forms of intellectual property.

  The 2016 campaigns brought new attention to the challenges and benefits of trade agreements. Despite a lot of noise, all of the candidates said that they thought trade was good, but each had differing views. Trump on the right and Sanders on the left suggested massive job loss. Clinton focused on the need for stronger enforcement. Business leaders argued that trade deals have been net job creators, though I am sympathetic with the view that those gains need to be distributed more evenly. To complaints that trade agreements are bad for the environment, supporters have pointed out that TPP is the first multilateral trade deal to include enforceable provisions for environmental protection.

  To be sure, the basic rules-based framework for economic relations between nations that were established at the end of World War II through the Bretton-Woods system provides a good, but imperfect, foundation on which to build. The framework continues to form the foundational principles for closer cooperation with like-minded countries through networks of free-trade agreements. But, trade agreements will only continue to be successful if they are seen in the broader context of economic policies for growth.

  Finally, questions are being asked about whether this next industrial revolution will be a jobless one. To help us investigate this question, MIT economist Daron Acemoglu visited our campus to report on his research into the effects of technology automation on labor. He found that new intelligent machines, particularly industrial robots, could have very consequential effects on the labor market. His estimates suggest that, on average, each additional industrial robot reduces employment by about three workers. This suggests that, without any countervailing changes, the spread of industrial robots could have very adverse consequences for jobs and wages. Nevertheless, Acemoglu argues that other powerful changes triggered by this onslaught could at least partly reverse these consequences. As machines replace labor in some tasks, firms will be incentivized to create new tasks in which humans have a comparative advantage. Acemoglu sums it up this way: “Although automation tends to reduce employment and the share of labor in national income, the creation of more complex tasks has the opposite effect.” Throughout history new classes of workers and new, more complex tasks have resulted from cutting-edge technologies. Acemoglu continues, “The creation of new complex tasks always increases wages, employment and share of labor. But when automation runs ahead of the process of creation of new, labor-intensive tasks, technological change will bring lower employment.” We need a balanced growth path. We need to invent a new social contract for this age of AI and automation that fosters the equilibrium between individual labor—one’s agency, wages, sense of purpose, and fulfillment—and the return on capital.

  One such example is Kent International, maker of Bicycle Corporation of America–branded bikes, which made news early in 2017 when it moved 140 jobs from China back to Manning, South Carolina, where the company had invested in robotics to automate many of the tasks once performed by people. What was once a low-tech, high-labor business is going through its own digital transformation and plans. CEO Arnold Kamler told me he plans to add forty jobs per year, which is considerable growth in a small town. In fact, a number of states competed to land the plant. “A lot of people have that misconception that automation decreases jobs,” a production manager on the line said. “It’s just a different type of job, a more skilled job.” Without the robots, the human jobs wouldn’t exist.

  One of the reasons I was so excited about our acquisition of LinkedIn—the talent and employment-oriented social networking service—was a shared commitment we discovered early in our negotiations. In conversations with LinkedIn’s founder, Reid Hoffman, and its CEO, Jeff Weiner, I discovered we had a common desire to use our digital platforms to spread opportunity more equitably to everyone. In fact, The New Yorker magazine has written about LinkedIn’s vision of making labor markets work better for all 3 billion members of the global workforce by making those markets more efficient and open.

  This dream of a more accessible and equitable economic playing field won’t come true automatically. In his book The Start-up of You, Hoffman writes about the forces of competition and change that brought down Detroit as an economic powerhouse: “No matter what city you live in, no matter what business or industry you work for, no matter what kind of work you do—when it comes to your career, right now, you may be heading down the same path as Detroit.” What we aspire to do through LinkedIn is to build a network of alliances to help provide the intelligence on opportunities, training resources, and collective action we all can take to create economic opportunity for individuals. In this way, we hope to ensure that other cities in the future won’t suffer the same fate as Detroit—and, in fact, just as Detroit did, other cities can shape their own successful reinventions as thriving centers of enterprise and job creation for decades to come.

  I do have a bias for which I am unapologetic. It is a bias for driving investment toward technological advancements in services like LinkedIn and Office that help people create, connect, and become more productive rather than software that is simply entertaining—memes for conspicuous consumption. Spillover effects on the economy are pretty limited for technologies that don’t foster a more equitable ratio of consumption to creation. Nonetheless, Wall Street has put a lot of value recently on these consumption technologies.

  Robert Gordon’s recent economic treatise, The Rise and Fall of American Growth, has as its central thesis that some inventions are more important than others. I agree, and I would put today’s productivity software in that category. Gordon examines American growth between 1870 and 1940, describing a century of economic revolution that freed households from an unremitting daily grind of painful manual labor, household drudgery, darkness, isolation, and early death. It was a transformation unique in human history, unrepeatable because so many of its achievements could happen only once. Looking over the great expanse of American economic history, Gordon concludes that innovation is the ultimate source of such dramatic changes: “Entrepreneurs contribute to economic growth far more than the narrow word ‘innovation’ can convey,” he writes. And education, he further notes, is innovation’s closest cousin in fueling growth.

  John Batelle, Wired’s co–founding editor, once wrote that “Business is humanity’s most resilient, iterative, and productive mechanism for creating change in the world.” He is right—and we business leaders need to take seriously our responsibilities as change leaders. I don’t say this for purposes of so-called corporate social responsibility, which is important but can also serve as little more than good PR. I say it because a better world is better for business. It’s important to be dedicated to creating great products, serving customers, and earning profits for our investors—but
it’s not sufficient. We also need to think about the impact of our actions on the world and its citizens long into the future.

  Afterword

  “Why do I exist?”

  “Why does our institution exist?”

  “What is the role of a multinational corporation in our world?

  “What is the role of a leader in digital technology, especially as the world turns to tech as such a crucial input to drive growth?”

  These questions haunt me, and they motivated me to write Hit Refresh. Finding answers set me on an intellectual and introspective journey to discover what I uniquely can contribute to society and how to rediscover the soul of Microsoft, to define our role as a global company. They guide me daily in the pursuit to bring empathy together with big ideas in order to make a real difference. Hopefully the stories and lessons along the course of my journey have produced something useful to you in your own life and work.

  I also hope these existential questions spark conversations among policymakers, business leaders, and technologists. In an often-divided world that is careening toward ever more dramatic technological, economic, demographic, and even climactic shifts—we have to redefine the role of multinational corporations and the role of leadership. Anti-globalization movements like Brexit and populist political campaigns in both America and Europe have raised important questions and concerns ranging from automation, trade, and economic opportunity, to fairness and whom to trust.

  Economist Richard Baldwin, author of The Great Convergence, writes that the origin of today’s anti-globalization sentiment in the wealthiest nations lies in the fact that their share of world income has plummeted from 70 percent in 1990 to 46 percent in just the past two decades. In other words, wealthy nations like the United States, France, Germany, and the UK have witnessed a large drop in their share of world income. The combination of low wages and information technologies that radically lowered the cost of moving ideas has meant that places like China and India have significantly gained in the share of world income while rich nations are now back to 1914 levels, igniting anti-globalization feelings in some quarters. Baldwin predicts a third wave of globalization will come when telepresence and telerobotics (like HoloLens)—really good substitutes for people crossing borders to provide services—become affordable.

  As this book was going to press, Nobel economist Angus Deaton and his wife, Anne Case, also a distinguished economist at Princeton, published a paper that found whites in the U.S. who have less than a college degree, experience cumulative disadvantages over the course of their lives that can negatively impact their mortality, health, and economic well-being. In fact, their research found that it is education more than income that explains increases in mortality and morbidity among whites in midlife. This dynamic, coupled with Baldwin’s findings, have at least in part fueled today’s anti-globalist fervor, and as a result now invite introspection on both our public education and public health priorities.

  Of course, the goal is to grow the pie for everyone. GE’s Jeff Immelt provided his answer to the role of today’s multinational in a 2016 speech to the Stern School of Business at New York University. He reflected on the role played by global companies during his thirty-year career. During that time, the rate of extreme poverty had been cut in half, and technological innovations had dramatically improved health care, reduced the cost of energy, and connected people like never before. Yet today, Immelt observed, big companies are seen as failing (along with governments) to address the world’s challenges. In response, Immelt announced that GE intends to pivot. Because greater equality is good both for business and for society, GE plans to adopt policies designed to help level the playing field globally. GE will localize—that is, it will grow local capabilities within the company’s global footprint, making space for greater local decision-making in a more comprehensive local context.

  I agree. More than half of Microsoft’s revenues are from outside the United States. We can’t do business effectively in 190 countries unless we prioritize the creation of greater local economic opportunity in each of those countries. We’ve invested more than $15 billion in constructing thirty of the world’s most sophisticated regional data centers, positioning them to support local entrepreneurship and public sector services in North America, South America, Asia, Africa, and Europe. In each of these regions, we have to operate with responsibility. Real business success, in fact capitalism generally, cannot be just the surplus that you create for your own core constituency, but also the broader surplus that is created to benefit the wider society.

  The way I look at it, multinationals can no longer be the memes they’ve become—soulless, bloodless entities that enter a nation or a region simply to take rent from the locals. The job of a multinational is more important than ever. It needs to operate everywhere in the world, contributing to local communities in positive ways—sparking growth, competitiveness, and opportunity for all. How can we help our local partners and startups grow? How can we help the public sector become more efficient? How can we help solve the most pressing issues in society, like access to education and health? Every country, naturally, thinks about its own national interest first. America first in America. India first in India. The UK first in the UK. The priority of a global company should be to operate in each of these countries with the goal of creating local opportunity in long-term, sustainable ways.

  We all must do this while staying steadfastly anchored in our timeless values. Microsoft is a company born in America. Our heritage has shaped our values. We believe in the American Dream—both in living it out as employees and helping others do the same. Our allegiance is to a set of enduring values—privacy, security, free speech, opportunity, diversity, and inclusion. We live by them, and we will stand for them when challenged in America and elsewhere.

  Multinational corporations that create technology have an even higher bar for creating economic opportunity as the next wave of technologies takes hold. The coming industrial revolution, one that builds toward ubiquitous computing and ambient intelligence and is fueled by software, will be more profound in its impact on the economy than those revolutions that came before. It’s why I developed a set of design principles that shape how we—Microsoft and others—create this next wave of technology. I encourage feedback, debate, and ultimately commitment to building out the ethics that will govern our society going forward.

  The world used to grow at 4 percent per year, but it is now growing at roughly 2 percent. So, we need new technology breakthroughs in order to have the type of growth we had in the twentieth century. Mixed reality, artificial intelligence, and quantum computing are going to be game changers, creating new economic surplus, but also disrupting the workforce, eliminating the routine jobs we take for granted today. Some argue that robots will take all our jobs, but this so-called “lump of labor” argument—the notion that there is a limited amount of work available—has always been disproved. It’s just that different types of labor will be needed. And humans will add value where machines cannot. As we encounter more and more artificial intelligence, real intelligence, real empathy, and real common sense will be scarce. The new jobs will be predicated on knowing how to work with machines, but also on these uniquely human attributes.

  In the face of these many coming shifts, there must be a new social contract that helps to achieve economic surplus and opportunity on a more equitable basis. To get there, what will the new labor movement look like? There has been talk of a Universal Basic Income. How will we re-skill and retrain workers—not just high-end knowledge workers, but also low-skill and mid-skill labor? Can the service sector and people-on-people jobs be the source of new employment for many displaced from traditional manufacturing or agricultural sectors?

  Finally, as leaders, what is our role? At the end of the day, leaders of any company are evaluated based on their ability to grow the business, to clear the way for innovations that inspire customers. As CEOs, we’re accountable for generating the best returns to shareho
lders. But I also subscribe to the notion that the bigger a company is, the more responsibility its leader has to think about the world, its citizens, and their long-term opportunities. You’re not going to have much of a stable business if you don’t think about the growing inequities around the world and do your part to help improve conditions for everyone.

  We approach this goal by focusing on multiple strategies and constituencies, leveraging our core business for positive social impact, and improving personal productivity, making sure our business is socially responsible by investing in sustainability, accessibility, privacy and security, and through philanthropy. Microsoft Philanthropies is the world’s largest corporate philanthropy with more than $1 billion in contributions across a wide variety of causes including teaching digital skills like coding and computer science, affordable access to the Internet, and humanitarian assistance. And we use our voice—under the banner of A Cloud for Global Good—to advocate for policies that advance the goal of economic opportunity for everyone. In fact, all of my proceeds from this book will go toward these causes.