Bonus Episode: Satya Nadella at Code Conference 2021

Kara Swisher: Hi, everyone. This is Pivot from New York Magazine and the Vox Media Podcast Network. I'm Kara Swisher. Today, we've got a bonus episode from our Code Conference. It's my conversation with Microsoft CEO Satya Nadella.

Kara Swisher: Thank you so much for being here.

Satya Nadella: Oh, it's my pleasure. Thank you.

Kara Swisher: Good. So we did your first interview. That is right.

Satya Nadella: Correct.

Kara Swisher: How did you think that went?

Satya Nadella: Somebody, I remember the tweet right after that interview. I forget, there was some founder, I think right after me said, "Oh, that guy is a manager," and there was a founder after him. I said, "That's interesting." That grounded me. I'm somebody who grew up in Microsoft, I was not a founder. But in some sense, I think I tried to make sure that I stayed grounded in what that meant and what I could do with it.

Kara Swisher: Well, you've done rather well. You've done rather well. Company is, you have to give credit for credit as you. It was the most valuable company in the world. It's now the second, I think, but it's in and out of that. Talk a little bit about that process for you. There's a lot of new CEOs. Ted just came in at Netflix. Andy Jassy just came in at Amazon. What's your advice to them?

Satya Nadella: I mean, if I go back to, I think, this distinction of what does it mean to be a CEO, what does it mean to be a founder CEO? It's pretty distinct, right? I think one of the things that founders have is that sort of amazing followership and they take a lot of things for granted, rightfully so, because they created something from nothing. And for any CEO, at least in my case, even though Stu technically was not a founder, he had founder status in our company. And so I felt I was the first non-founder CEO. And to be able to ground yourself on what Reid Hoffman called "refounding" is a great metaphor, which is to be able to recommit yourself to what's the mission and sense of purpose of the company, to be able to articulate that, though, in your own words, and then build the culture, the capability. And at the end of the day, you've got to get a lot of things right around strategy and the new concepts. So the best advice I ever got after becoming CEO is to be yourself versus try to fill someone else's shoes. But doing so, respecting what came before you, but at the same time, to be able to shape what comes after to be truly something you believe in, not because something has done before.

Kara Swisher: What is a mistake you can make? I'm just thinking the new CEO of Disney insulting Scarlett Johansson probably is not the best move. But what is something that you did that you, what are some of the refounding principles that you thought were critical, not to mistake, besides the strategy?

Satya Nadella: Yeah, I mean, the thing that maybe as an insider, because in fact, it's interesting, Kara, I don't really think of my Microsoft career or my even my tenure as CEO of the last seven and a half years. I think about it since 1992, right? So it's sort of one continuous film, if you will. So the mistake at least is to, you have to objectively look at yourself. And it's hard, especially as an insider, it was perhaps even harder for me. But the biggest benefit, at least, was when I criticized, I was criticizing myself when I criticized what we were doing as a company. It was not like I was critical of someone else. I was critical of all of us, including myself. And it really did give me, perhaps, the best shot at being able to then work the issues versus feel like I'm just criticizing for criticizing's sake. So the mistake I think someone can make is not to respect the place that was created. You've got to go in there and understand what made you successful in the first place. And there must be lots of patterns that you need to renew. So not throwing everything out. Like, for example, one of the things my father said to me once, which he was a civil servant, and he always had this thing about, look, when I work in an institution, I want to make sure that the institution becomes stronger and it doesn't fall apart after I leave. And that stood with me, right? So as a CEO, I think the mistake you can make is it's all about cult of personality. It's about you. And once you leave, the thing falls apart. So after all, if the previous CEO did a decent job, they gave you a platform, respect that. But then make it your own, build, and then leave it a better place for the next CEO.

Kara Swisher: I guess that begs the question, did the previous CEO do a very good job?

Satya Nadella: As far as I'm concerned, Steve Ballmer made some of the biggest bets that I was able to build on. If Steve had not taken a bet on me running what was our cloud business, if he had not taken a bet on me spending all the money I spent, we wouldn't be where we are. So I absolutely think that like all CEOs, he got a lot of things right. We all get things wrong. The one thing I learned from Steve all my years working with him, I never sort of sat with him in a meeting where he said, "Let me tell you, Satya, about all the great things I've done." He would only talk about all the mistakes he was making. It's the greatest gift that somebody can give you.

Kara Swisher: Right, but many of the things you shifted, let's talk about what you shifted because he made a lot of bets all over his life, whether it was the phone, all kinds of different things they did. Same thing Gates. You have really, talk a little bit about your strategy, because you've sort of honed Microsoft into a much simpler setup, I would say.

Satya Nadella: Yeah, I mean, it goes back a little bit to sort of rediscovering what that core identity, Kara, for me was. You see, I felt like at some point, Microsoft was doing a lot of things out of envy, not because out of things that natural things that we were meant to do, right? So that's sort of, in some sense, customers give you permission. Your brand gives you permission to do things and you should do those super well. And maybe if you do that super well, you get more permission to do other things. And so in that context, if you think about at least three layers of what we perhaps got right, first is we were able to take the big inflection points like the cloud, and redo our entire server infrastructure. In fact, it became more expansive. I used to be, grew up in our server space, and I used to think it's a big business, except we now have a bigger business than we ever built in the client server era. We rode the SaaS wave and reinvented Office 365. I mean, we were all saying, "Oh, wow, can we ever build a bigger business than the traditional office?" And Office 365 is orders of magnitude bigger than what we were doing. Well, same thing with Dynamics. We had lots of chaos in the client server era because we had grown there by acquisition. Whereas now we have a complete cloud native news business SaaS, which doesn't even have the encumbrances of the first generation SaaS guys. So it was fantastic to be able to reinvent it. Even Xbox, Xbox was part of Microsoft, but it was sort of this thing on the side. Whereas today, Xbox is much more central to Microsoft. It's built on a cloud. The social network is critical to Microsoft and it's much more expansive.

Kara Swisher: What was built out of envy? I'm just curious what you think.

Satya Nadella: You know, it's entering, to me, if I think about, it's not even like, you know, doing things even in Windows, right? Windows is a device, it is an operating system that was built for productivity and communications. Right. And to be able to reinforce that, or Windows is the, today, in fact, if you think about it, right, it's the most open platform. I mean, it's ironic that, you know, it is sort of, I think the, you know, both AOL was killed by the web or the internet. And guess what? We now have, what, five AOLs thriving. And so that's 25 years of progress for you. So, therefore, we're saying, no, let's get back to what Windows is fantastic at, at being an open platform. And leaning into that uniqueness. I'm not saying it's out of some great virtue out of us, but it's just about to have a competitive decision.

Kara Swisher: So what keeps you from not moving into those envy areas? Like, I don't see Microsoft Studios anymore, although you had done MSN. Search is not as big a focus for you all. It's there, but that was certainly a bigger focus. The phone, how do you stay out of those things without wanting to move into them?

Satya Nadella: Yeah, I mean, if I look at the new areas we've gotten into, the first thing I always think in terms of strategy is before you go into something completely new, make sure you don't miss line extensions. So the adjacencies, whether it is building out our security business, I mean, they're securing the platform and building security products. We now have an end-to-end security suite that's best in class. It's basically a new big business for Microsoft. Of course, it has the adjacency to what we've always done. Or developer SaaS, right? With GitHub and what we've done with VS Code, we are into developer productivity. You could say we were always into it, but we've now reinvented ourselves in that. Or our new automation suite called Power Platform. That's another complete line extension. Or getting into new spaces like LinkedIn. LinkedIn is a fascinating one for me because...

Kara Swisher: These are acquisitions you've made, LinkedIn, GitHub.

Satya Nadella: LinkedIn, GitHub, and Minecraft are the three large ones. They all sort of centered around building communities around something we had permission in, right? Minecraft is very different than all the other games. It's not sort of the same as Halo or what have you. My kids play Minecraft. And Minecraft just got us new permission in gaming, which we were a primary on. LinkedIn is about professionals. And after all, Office is about professionals and knowledge workers. But we didn't have 800 members is just choosing as consumers to network. So it's sort of both an adjacency and a different business model.

Kara Swisher: So how do you think of acquisitions? Because you've made several rather large ones.

Satya Nadella: So that's kind of how I think about it. The primary thing I ask myself is, will we be able to create the platform for that entity to thrive? In other words, the classic question is, are you a better owner? You're only a better owner if the mission for a LinkedIn or a GitHub or a Minecraft could be realized better with Microsoft as a platform. In fact, in all three, one of the interesting things for me is we had other people who were bidding for those assets. And all three founders chose to sell to Microsoft.

Kara Swisher: Are you surprised?

Satya Nadella: I was not surprised, but I feel like we got it right because that choice that the founder was making is to make sure that whatever it is that they built can thrive, and not just high price.

Kara Swisher: Right, so talk a little bit about that approach to buy Discord. That was one that didn't work. What extent do you see acquisitions as important versus creating original things within Microsoft? How do you balance those two?

Satya Nadella: I think fundamental bet is organic. I mean, when I look at our R&D budget today, the inorganic things that you do, which is more episodic, seeing they get the press, they get the headline number. But when I look at the year over year, R&D increases, it's most, I would say 80% or 90% of what a company does, at least at our scale, has to be about organic growth. And inorganic things are definitely going to be key.

Kara Swisher: What did you want to do with Discord? What is Discord? No. Look, I mean... Don't make me laugh, Satya.

Satya Nadella: The thing that I feel that we're in the business office, to sort of look at anything that is in the core communications, and whether it's entertainment or communications and productivity, we want to be a primary in. And we will definitely keep working on our own, and we'll keep looking at assets.

Kara Swisher: Well then I just sort of have to ask about TikTok. Tell me what happened there.

Satya Nadella: It was the strangest thing I ever sort of worked on. I learned so much, Kara, about so many things and so many people.

Kara Swisher: So, give it to us.

Satya Nadella: I mean, one of the things, first of all, you've got to remember, TikTok came to us. We didn't go to TikTok. Right. I think the way people talk about it is as if I went looking for TikTok. I mean, TikTok was caught in between a lot of issues. They were having it across two capitals, and they wanted a partner. And Yiming, whom I'd met a couple of times before, and fundamentally came to us and said, "Hey, can you be a cloud provider who can help us with these security things that we seem to be hearing about?" And that's kind of how it started. But I was pretty intrigued, I must say. It's a great property, obviously. Everybody has seen their growth and what have you. And then I guess the rest is history.

Kara Swisher: Well, tell me, I don't know what you know. What part? I mean, tell me about your discussions with Donald Trump. He's gone now for a little while, at least.

Satya Nadella: President Trump, I think, had sort of a particular point of view on what he was trying to get done there. And then I just dropped off. I mean, it was interesting. There was a period of time when I felt that the USG had some particular set of requirements and then they just disappeared.

Kara Swisher: Yeah.

Satya Nadella: And I mean, I'm not part of the USG, so you have to ask someone there.

Kara Swisher: Interesting lack of execution. That's interesting quality. But what did you want it for? Tell me what you were thinking about it.

Satya Nadella: Yeah, to me, if we had a chance to both, quite frankly, the place where even if you go to Yiming and ask him, the thing that attracted him to even talk to Microsoft was all of the stuff we had done around child safety. For example, whenever I think about the investments around social media in particular, what we are doing in content moderation and child safety is what would have given us even permission.

Kara Swisher: Right. What we were doing with Xbox. There were very few companies who could have done this, correct?

Satya Nadella: Yeah. I mean, there are a few companies who can, I think, bring a lot. I mean, there's the cloud platform. There's the security infrastructure that was very much required, because if you remember, at least at that time, what was the conversation was the complete fork off the code base, which you then, it's to have the engineers to be able to take over a code base and then to secure it on an ongoing basis. That required competence. And on top of it, you better know something about running a social media, which we know with either it's through Xbox Live or LinkedIn. And so it is an interesting product. And also the way it was engineered, quite frankly, appeals a lot more to me and Microsoft, I think. The way it's about design and AI, I like that.

Kara Swisher: So, were you surprised if Oracle showed up?

Satya Nadella: I mean, Oracle is a very competent company, and I think that the partnership, you know, I mean, at this point, it's all moot, right? I mean, I have no idea. We don't know what's happening now. I have no idea.

Kara Swisher: Have you called?

Satya Nadella: No.

Kara Swisher: Okay. All right. Would you like to acquire TikTok?

Satya Nadella: At this point, I'm happy with what I have.

Kara Swisher: Okay. All right. Okay. So I want to talk a little bit about, are you looking at anything else?

Satya Nadella: I'm happy with what I have.

Kara Swisher: All right. Okay. Well, let's talk a little bit about cybersecurity because you mentioned it. One of the things you were involved in was the JEDI project before Jeff showed up. He's suing Elon now, so don't worry about it for you. Talk a little bit about that process and then a little bit about SolarWinds and what happened there.

Satya Nadella: Yeah, I mean, on JEDI, I think at this point, the Department of Defense has decided themselves that they want to go multi-cloud. Quite frankly, we were advocates of a multi-cloud strategy across all of the federal government. And so it is what it is, and we are happy to compete for each contract. And we were proud to win it first time. We won a second time and now hopefully we'll get to execute on it going forward.

Kara Swisher: Can I just ask a question for JEDI? Was it a bad thing that they haven't moved forward more quickly on this for national security?

Satya Nadella: Absolutely, right. I mean, it's one of the things that I feel the United States in general all up, the federal government is probably a little better off than a lot of the state and local governments, because we do need to modernize our infrastructure as rapidly, because it even touches upon the cyber issue, which is what is our biggest, we were, after all, there was significant penetration of, let's call it the client-server era technology inside of our government and inside of our private sector. And so it's more incumbent on people like us or a country like ours to modernize faster. And it does require capital investment. Like the run costs. In fact, it was stunning to me. I was meeting with one of the state CIOs and the run costs of most of the CIOs still is predominantly mainframe. I mean, in 2021, when you have that, that's a problematic thing. So you need to modernize.

Kara Swisher: From Microsoft's point of view, how important are defense department contracts or government contracts?

Satya Nadella: We've been, Department of Defense has been a big customer of ours from day one. And they're important, but they're not the only customers. Look, we're not a defense contractor. We are a company that builds commercial technology that's broadly used. And we've been very, very clear that we want to make sure that the Department of Defense can use the same technology we build for commercial customers.

Kara Swisher: All right. So talk to me about cybersecurity.

Satya Nadella: Yeah, the fundamental thing I think we're hitting upon is we can talk a lot about what are the specifics of the adversary in this case, how they were able to penetrate the supply chain essentially off this one company and thereby its blast radius was very, very high.

Kara Swisher: And you came forward compared to other companies, correct?

Satya Nadella: Yeah, I mean, disclosure is another side of it, right? Which is one of the key things in cybersecurity is we now need to make sure that whoever gets impact. So in our case, basically, yes, we had an instance of SolarWinds. Interestingly enough, the way we had designed our network is that instance obviously got the update from SolarWinds, but it stayed there and it didn't propagate. And so, at the same time, we wanted to make sure that everybody understood that our production servers or nothing was affected and we disclosed on that. And the reality is a lot more people were impacted by it and very few people disclosed, but it's up to them. But the bottom line, though, is more than any disclosure or any headline around how this happened, the thing is trust. There was a great paper by, I think, Ken Thompson and his Turing Award paper, actually. It's "Trusting Trust," I think is what it's called. And it just, I think, hits the right thing, which is you ultimately, you can come in and we can talk about technology and technology and technology, ultimately you've got to trust the institutions from whom you're getting your software from, right? And how do you ensure that is where I think the role of governments and multilateral agreements and institutions is going to be the thing. So you can't solve the cyber problem by just talking about technology.

Kara Swisher: So what has to be done is it's a public private. I interviewed Marina Hatsukato talking about public-private partnerships. What is the problem in doing that? Because these have to span government. What is the challenges you face?

Satya Nadella: I think the challenges are first to try and prioritize this as a domain that requires. We had a White House summit, I think, last month, which is a great, the fact that the White House is prioritizing this is fantastic. I mean, multiple things have to happen. New standards that NIST puts in place, which is Department of Commerce around, let's say, supply chain attacks. That is something that will, I think, raise the bar for everybody. Then the national security apparatus and the intelligence agencies, right? Today, I would say information sharing across both sides, public and private, that I think needs to happen. Then there's a side to diplomacy as well, which is you do need to hold other nation states accountable when cyber attacks are being propagated by a nation state. And we also need to have some moral equivalent of a Geneva Convention here. Because in some sense, if you think about the people who suffer the most under any cyber attack, it's the small businesses and it's the individual consumers, i.e. the most vulnerable.

Kara Swisher: How did the Geneva Convention work? How would that?

Satya Nadella: It goes back to how did the Geneva Convention work? It's got a bunch of countries that are coming together within some auspices of a multilateral. We will not do this. And within some governance of some multilateral organizations that can enforce the convention.

Kara Swisher: Why would China do this?

Satya Nadella: China would do it because they have a stake in the world being safe, right? China, I think, cares as much or should care as much about cybersecurity for their own economy, because no one's going to be somehow isolated from the... And in fact, if anything, cyber doesn't have borders like the pandemic. And so of all things, this is a place where I think the world does need to cooperate in order to protect their own citizens and protect their own economy.

Kara Swisher: What is your hopes for that cooperation? I mean, today we are in that state where it's sort of a little bit of, hey, the globalization as we knew of it didn't work that well. So therefore, we should just all be about our countries first, which, by the way, is correct, because after all, every country does need to look after its national interest, its national security.

Satya Nadella: And I subscribe to that as a CEO of a multinational company. I feel I only have permission to operate in any country if we are meeting that country's national interest. Otherwise, we should get kicked out. And so having said that, I think we now need to recognize that all of what globalization did can't be thrown out. We, in fact, need multilateral institutions with some strength on big issues, whether it's climate or cyber or pandemic response. Because without it, the world's too connected, too connected in capital markets, too connected in climate, too connected in many other dimensions.

Kara Swisher: Are there national security interests? You being one of the big tech companies, I just talked to Lisa Su about that. Are there considerations of nationalist protection, I guess?

Satya Nadella: I think every country will in the United States. I think there is, for example, I'm sure Lisa touched on this. There is real concern about like, hey, what is our silicon supply chain look like? What is our dependence on other countries and perhaps what happens to our ability to continue to operate our economies and so on? And that's good. I mean, after all, you may say that in the last phase of globalization, the way the supply chains were organized may not be completely compatible with whatever are the national security considerations. So they need to be rearranged. And that will happen in time. And so I think the question, though, is does that mean we can get disconnected? That, I think, is a fallacy. You cannot disconnect yourself from the world. You can take steps to make sure they are more resilient if something happens, like whether it's the pandemic or whether it's the supply chain.

Kara Swisher: We'll be back with more from Satya Nadella after the break.

[Ad break]

Kara Swisher: Welcome back to this bonus episode of Pivot. Here's more of my conversation with Microsoft CEO Satya Nadella at this year's Code Conference. One of the things, I want to talk about two areas. One, the pandemic, you just mentioned it. How has it affected running your company in terms of the work from home? Obviously, you benefited. Teams benefited. Zoom and other companies. Tech has never been more valuable. How are you thinking about this? Your policy is hybrid, right?

Satya Nadella: Correct?

Kara Swisher: How did you think about this?

Satya Nadella: Yeah, I mean, the first thing, Kara, I would say is we, for sure, have seen tremendous amount of growth. I mean, being a software company, being a cloud company at a time when the most malleable resource that was available for people to continue to operate was digital tech. And so obviously the adoption curves went up across all sectors of the economy.

Kara Swisher: But at your valuations.

Satya Nadella: And yeah, I mean, so there were clearly beneficiaries of it. The one thing, though, interestingly enough, before we come to sort of our own policy, the interesting thing was during even the early sort of months of the pandemic in 2020, as we were going remote, we needed to really ensure that we were scaling all of our cloud for all the frontline people, whether it was in healthcare or retail or critical manufacturing. Because those are the folks who needed, in fact, I always say we are the first responders for all the first responders out there. And even today, in fact, we talk about the hybrid policies of a few tech companies or the tech sector. But in the overall labor market, it's still a very small percentage because most people are actually at work and working. So that said, to your point, right now, at least there's a real structural change, right? Some of the poll data in our own employee base, it's pretty clear. I describe it sometimes as the hybrid paradox, which is there is 70% of the people want to say they want more human connection. And 70% of people say they want more flexibility. And so therein lies the challenge. What do you do? The best thing is to sort of make sure that we build the tools that allow for that flexibility. In fact, the other thing, at least in my own opinion and the policy at Microsoft is let's not try and make too dogmatic a decision right now on "we found the future and this is the future." Let data over time, not data today, but like what are people's expectations of employees has changed. Let's accept that.

Kara Swisher: Have your employees been more productive?

Satya Nadella: In fact, all of the metrics, in fact, this is what I feel even where all the metrics will say they've been very productive. In fact, if anything, we want to make sure that things like wellness, we are really being careful because there is, you know, productivity can lead to burnout.

Kara Swisher: How are you managing that?

Satya Nadella: Therefore, the role of a manager has become more important. Interesting enough, when you get to a workplace, say one bad manager could be compensated by just the work environment and a lot of people around the person. Whereas when you're remote, you're very dependent on managerial excellence at all levels. So I do feel that our employees have been very productive. But what is productivity in the long run, right? You just can't say, "Oh, patents filed or code written or pull requests." Those are all interesting metrics. But I think that it's too early to tell whether productivity or innovation. So I want to make sure that we do take... I'll tell you one place where we were not that productive, game studios. We were very sure. It was very clear that they need to be together. It's interesting. We learned a lot about which functions need to be gathered for what. So we now have, I think, a bit deeper understanding of what people need to be together for what. And so to your earlier question, I think we then now need to make sure that we have enough flexibility. But at the same time, new norms will emerge, which bring people together in order to be.

Kara Swisher: It's your instinct for yourself.

Satya Nadella: I think I'll do what we have now stated as our policy. That's at least where I'll start, which is at least work, you know, maybe three days a week in person, two days a week, you know, remotely.

Kara Swisher: But which three days and two days?

Satya Nadella: That's going to be the one that we are going to basically allow individual team norms to emerge.

Kara Swisher: Do you think this is a big area of business for you?

Kara Swisher: You have Teams, obviously, tons of other things. Some of it worked. A lot of the teleeducation just didn't. Anyone with children knows what a disaster it was, no matter where you sat.

Satya Nadella: Yeah, I mean, the thing, if you sort of do this simple two-by-two quadrant and you say there's synchronous communications, asynchronous communications, and then there is collaboration happening where people are together and remote, you could get away in the past, perhaps by being good in, say, a couple of cells in that two-by-two or the four quadrants. You now need to be great at all four. So to your question, is this a good business for us? Because as a tools provider and a platform provider, it's a good business. But to your point, the practice, whether it's in education, whether it is in healthcare, or whether it's in retail, I think we all have to accept that we now need to be able to deliver whatever service or content in more ways than we did in the past and improve its efficacy. Education is probably the place where we have suffered the most because the core pedagogy has to evolve in order to support the different ways people learn.

Kara Swisher: Yeah, absolutely. So in seeing the opportunity, one of the things that's happened is, as we said, your company's never been more valuable. All of tech has never been more valuable. Someone, I think it's Scott who said I should ask this, how have you escaped scrutiny of regulators? Because we were scrutinized a lot. I understand that. I recall. But talk a little bit about that. Your company is one of the most powerful companies. There's two ways you can go here. One is we're not doing anything that would attract scrutiny. And the other is they're so bad that they're focused on that. Do you think, should you mush everybody together? I always say.

Satya Nadella: I think that's the issue, right? Which is what is the tech company today? Here's my thesis. And I think that it's sort of very important. Interestingly enough, the regulators, at least today, seem to, whether it's in the United States, whether it's in Europe, even China, everyone seems to recognize that there seem to be two forms of tech. This is now not even saying let's not get into financial services, let's not get into health tech, let's not. But even in what is considered core tech, I would say there is platform technologies which act as factors of production. So that is their input for someone else so that they can create new products and services. So things like cloud fit into it. Productivity suites, business application suites. A lot of Microsoft business is that, factor of production. And there is also what I'll call factors of distribution. So these are marketplaces, whether they're app stores, whether they are news feeds in social media or search, which is the biggest of them all as an organizing layer. And so all of those, and all e-commerce marketplaces. So I think finally people are coming and saying, oh, you know, this idea that, and both, by the way, have a place under the sun. After all, these marketplaces reduce transactional costs, which I think all of us can do with. And platforms are commodities, ultimately, if these markets are competitive. And the issue, though, is measuring the social impact of these basically factors of distribution are what everybody is evaluating. First of all, is there competition? I mean, one thing that I sort of look at is, hey, when was the last time sort of lots of funding went into search?

Kara Swisher: Yeah.

Satya Nadella: Other than good old Microsoft, you know, where we spend billions of dollars trying to compete.

Kara Swisher: Good old Microsoft. That's what I always say. It's like we're going to be at it because that market has to get competitive. Yeah. I mean, it's kind of like the most ridiculous thing that is the biggest market in the world is just a complete monopoly. Do they deserve antitrust scrutiny?

Satya Nadella: No, I just want. You're just saying. I'm saying the onus is quite frankly on us to compete. I mean, they've done a fantastic job. Let me just not sort of-

Kara Swisher: Should regulators come in here?

Satya Nadella: I'll let the regulators do whatever they need to do. But the bottom line is for us to sort of say, let's make these factors of distribution more competitive. Right. And if they become more competitive, then even the unintended consequence of any one thing will be less. Yes. And I think that's the simplest way. So I'm not sort of saying let's wait for regulators on any side. I think, you know, I think we should just compete in lots of these places.

Kara Swisher: What about Facebook? Are you glad you didn't get into social media?

Satya Nadella: We are in social media. We love LinkedIn.

Kara Swisher: Well, you are. Okay. LinkedIn is the only social media company anybody likes. Correct?

Satya Nadella: Snapchat. Snapchat. Look, I mean, I think in social...

Kara Swisher: What do you think is happening over there? What do you think of all the scrutiny they're getting, the criticism?

Satya Nadella: I think in the case of, you know, we kind of run, I mean, obviously we have LinkedIn. We also have Xbox Live.

Kara Swisher: You do.

Satya Nadella: So the thing, though, what at least we've learned is context matters. In other words, as a platform, in this case, of a social media network, you need to use the context of that network to enforce the standards of discourse on the network. That's sort of what the terms of use all are about. It's a hard problem. I mean, disinformation is a hard problem. There is no AI that solves for it. There's no amount of just even moderators that solve for it. But the best thing, though, is for us to recognize our responsibility and govern by using the context of the platform. What is allowed? Like on LinkedIn, we know ultimately, why is anybody on LinkedIn? To find economic opportunity. That's the context. So we want to curate everything we do, all the mechanics.

Kara Swisher: How would you run Facebook if they said you're the CEO?

Satya Nadella: I mean, I let you bring Mark in and have that conversation. He's never coming back here. It's three for three with him and me. I am not going to talk about any other CEO's problems.

Kara Swisher: All right. What about Epic and Apple and Google?

Satya Nadella: Look, first of all, let me put it this way. I think app stores are absolutely important assets, right? After all, if you think about like even on Windows, we have an app store. And if anything, when we didn't have an app store, some of the security challenges were immense. And so therefore, I think app stores are a necessary mechanism. Each platform, the way like Xbox has an app store, Windows is an app store, the economics of Xbox are very different. So I don't sit here in judgment, quite frankly, as someone who competes and cooperates with all these folks that one person's doing something right and the other person's doing something wrong. And I think they all have to sort of both listen. Everyone, including people like us, have to ultimately listen. In fact, that's probably the biggest lesson.

Kara Swisher: Nobody's complaining about the Windows app store that I...

Satya Nadella: Yeah, but I'm just saying, if I think back at 1990s, right, the biggest thing, lesson learned from Microsoft's own sort of history here is when there's a lot of people sort of complaining about something that you are doing, then there must be something that you're doing that's bothering people that you need to reflect on. And that's it. I mean, and so therefore to me, that's what I like to look at. And so in every company and every CEO probably needs to reflect on.

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Kara Swisher: Welcome back. Now back to my conversation with Satya Nadella of Microsoft. You suspended Microsoft PAC donations to politicians who oppose certification of the 2020 results. How should big tech work in this highly partisan environment?

Satya Nadella: That's a great question. I mean, I get very weary of individual CEOs, individual companies. in a democracy like ours, make decisions to sanction sort of our own political system and its constituents. It just bothers me. I mean, after all, I mean, as an immigrant to this country, one of the greatest things about the United States is its democracy, its vibrancy. And so for me to take or for our company to take stance, it seems quite frankly silly. Because after all, we're all companies are not meant to do that. Individuals do. But that said, I think we will need to have certain grounding in some values, like protecting our democracy. So when those lines are crossed, how can you be clear? that you will use your voice. And you've got to be sparing on it. You just can't be out there just trying to act as if you are somehow the replacement. So when people say business leaders are now the people who are going to somehow solve it. I mean, I don't want to live in a country where I have to depend on CEOs to govern us. Same time, IBM was at the forefront of integration. Apple was at the forefront of gay and lesbian rights. And that's fantastic. We can definitely lend our voice, lend our support, push for legislation. After all, we sued the U.S. government on many issues around privacy. And those are all instruments of our democracy that I think that we should exercise.

Kara Swisher: What happens when you get faced with the Texas abortion laws or trans issues or voting rights? Like take the Texas issue.

Satya Nadella: We are very, very clear at Microsoft that we will support the women's choice on their rights, on their, you know, any medical decisions they make. And so therefore, our insurance will cover them wherever they want to go and exercise that right. So we will make sure we do protect our, you know, our employees. That's our responsibility. And we'll be clear on that.

Kara Swisher: Do you get tired of the political partisanship? I mean, you got sucked into the TikTok thing. That was lunacy.

Satya Nadella: The partisanship, yeah, I mean, I think the way it's currently characterized, because if it's debate that allows us to truly get things done ultimately by compromising, After all, democracies do function in that form. But right now, I think, yeah, I think we can all do better. And I think we can do even as individuals, as well as organizations like a private company, on how to take any issue, just completely ignoring every nuance and making it as if it's just two decisions. It's just not going to help us. And so I'm actually, you know, at least President Biden and his approach saying, look, I want to talk this through and perhaps bring people together and compromise. I hope it sort of leads to more or less partisanship, more action and more benefits, because there are real points on both sides, except those points have to be reconciled in a way that is very, very different than at least current state of play.

Kara Swisher: All right. Speaking of, you knew this was coming, do better. The Bill Gates situation. Can you talk a little bit about the impact on Microsoft and what your role was in that?

Satya Nadella: Bill's our founder and remains our founder. He's very engaged on things that he cares about. There are certain technologies he deeply cares about. And even though he now is not on our board, he remains in close contact with the company on those issues. And the Microsoft of 2021 is a different place that I am responsible, my leadership team. The lived experience of any person in the company is our responsibility and we shape it every day. We're not perfect by any stretch. But we care deeply about all topics of our culture, and we're working it every day.

Kara Swisher: That's a lot of good words. I appreciate them. But was it right to take him off the board? Was it important?

Satya Nadella: As Bill stated and we stated, Bill left the board. It was not about the board asking him to leave. And he decided that, in fact, that he had a lot more things to do with his climate work and his philanthropy.

Kara Swisher: But did it have an effect within Microsoft?

Satya Nadella: You know, look, I mean, Bill has been, you know, he was CEO and then he was on our board, but he was not full time at Microsoft. So in some sense, Bill's transition has been many decades, I mean, maybe more than a decade in the making. So the impact on Microsoft at this point is more about the people at Microsoft and what we do for the future.

Kara Swisher: Right. I'm going to let you off the hook. I think the fact that he was left from the board, he left, is great. That was probably the right thing to do. At the same time, disclosure is also important. So it's a difficult situation. But I appreciate your answering that.

[Audience member speaks]

Audience Member: Rob, you're an old friend.

Kara Swisher: Oh, yeah.

Audience Member: Great to see you guys. Great to all be live in the same place. I had a question about ransomware. Oh, yeah. Which is something that I guess a lot of us have been thinking about. It seems to me that between better tracking of zero-day exploits, secure cloud backup for enterprises, helping with enforcement, there's a big role for Microsoft since Microsoft's platforms are generally involved in all the big cases, not unilaterally by any means. I'm curious how you're thinking about that and how important that is as almost like a mission for Microsoft's platforms to be secure.

Satya Nadella: Yeah, first of all, it's great to see you, Rob. And I 100% agree with you. I think what we were able to do with, say, botnets is what I would like us to do even with ransomware. Because starting, if you think about the botnet work, going back to that public-private, that is a place where the public-private partnership works superbly. I mean, even the judicial system and its support of takedowns on the botnet. I think the same thing needs to happen on the ransomware, including this is one place where the crypto rules should be very, very clear so that the incentives are placed in the right place. So we are definitely going to go after this. This is definitely a topic of discussion even in the White House and what they want to do. But it will require Microsoft. We are making it our mission. As you said, the best thing we can do immediately is on the backup restore. In fact, the detection, the interesting thing is, you know what set of activity anybody who is involved in ransomware does, which is first delete backup. So we need to get better at being able to sort of see that first activity and then to, you know, do the mitigating thing. So absolutely the right call and we're on it.

Kara Swisher: Right. Are you interested in the cryptocurrency markets?

Satya Nadella: You know, I'm watching it. I mean, when I say like, you know, there's multiple things there. I'm very definitely interested in the use cases of what's the distributed database underneath crypto. But we've got to get out of this POW thing in the sense that there needs to be a better than proof of work so that we don't have the energy use problem and what have you. So I think it's a great general purpose technology there that I think can have many use cases. I was recently learning about settlement of our own accounts payable across all the banks, across all the countries. I mean, God, it's sort of, it's so pretty antiquated. And so some new infrastructure for that would be fantastic. And then on the currency side, my own feeling is that nation states, and I know you had a great conversation just before me, but I think nation states are going to find it very, very hard for just some decentralized infrastructure to completely take over. So I see that that's what, I'm not an expert on crypto. And so therefore, we're watching to see what equilibrium do we reach between what is an alternative infrastructure for how the world ascribes value and how value gets transferred. And then good old nation states, they're not going to go away. See China this week.

Kara Swisher: The United States.

Satya Nadella: Right here.

Kara Swisher: And the United States, but a little slower right here.

[Audience member speaks]

Audience Member: Hi, Terry Kawaja, Luma Partners. Question about advertising. As Cara mentioned, you've had sort of fits and starts with businesses in and around advertising, from search to MSN, et cetera. That was back when advertising was more of an art. Today, it's much more science, right? You've got, it's a trillion-dollar global industry. You've got ads coming to gaming. You've got advertising being far more data, software, and cloud-related. So I guess my question is, might that change per your comment about product extensions, given the scale of that opportunity, that vertical, your approach?

Satya Nadella: Yeah, I mean, first of all, advertising as a business model is a very powerful business model, as you described it. And we definitely want, we do have, you know, like LinkedIn has a significant advertising business. and then Bing and what's happening in gaming and our newsfeed, both all of those add up. So we would probably be, I forget now, fourth largest advertising business. There's a huge distance between one, two and four. So we do have aspirations to grow that. And I think that the opportunities today of being able to take a fresh take at it, I think are there and you're going to see us take a run at it.

Kara Swisher: All right, Satya, it's an eight o'clock flight. So I'm going to have one more quick question. Sacha, you've made great leadership in many areas that you work on. Can you comment on the future role of Microsoft in healthcare in the context of leaders like Tim Cook, saying that's going to be the most important work Apple will ever do? Where do you stand at Microsoft in terms of your work in healthcare and life science?

Satya Nadella: Yeah, look, I mean, I think in general, I would say, I think the next step, you know, if we come back here at code, let's say 10 years from now or five years from now, I want to be in Hawaii with my children. We will be talking about for sure what's happening in healthcare, what's happening in energy, what's happening in financial services as if it was just tech. In our case, we're very, very excited about our Nuance acquisition, which is still pending. But for example, what Nuance has done to take the cutting edge AI work and apply it to where some of the biggest problems are, which is physician burnout. And to be able to really help them focus more on the patients, less on the administrative tasks as just one example. So yes, I ascribe to that, which is we are doing a lot today with in healthcare being a provider to all the providers, the pairs, the life sciences companies with our cloud tech. I think drug discovery will fundamentally get super accelerated with some of these large scale AI models and their ability to simulate even the biochemistry. And so therefore, I think there's tons and tons of things that we as Microsoft are investing in and looking forward to sort of seeing that.

Kara Swisher: Lots to do. Lots to do for sure. You look like you're having fun.

Satya Nadella: I am.

Kara Swisher: I figure.

Satya Nadella: And it's, you know, look, I think one of the things I think is it's such a privilege to be in this industry at a time where its impact is so, you know, visible and so broad. And I also think to the many questions you asked, it's also incumbent on all of us is to really make sure that as we scale this, the unintended consequences of scale is something that we invest the time. Not, you know, don't take care of the issues before they become scale issues.

Kara Swisher: Right. Some of them are intended. Some of them are intended. But I really enjoy interviewing someone I actually like. Anyway, Satya, thank you so much.

Satya Nadella: Thank you so much.

Kara Swisher: Okay, that's the show for today. Stay tuned for more bonus code episodes in the Pivot Feed.