The Conversation: Brad Smith, President & Vice Chair, Microsoft

TECH TRENDS

The world order is going to be increasingly dictated by technology. Tech companies will have to assume greater responsibilities. How should they gear up for this shift?

Technology is a tool for solving almost any problem. Unfortunately, it has also become a weapon or in some cases a factor that can exacerbate the world’s problems. That has profound implications for responsibilities the tech sector needs to embrace. Unfortunately, many millennia of human civilisation have demonstrated time and again that one can never rely solely on goodwill of men and women to do what’s right. That’s why we have laws, governments and regulations. So, we need a sense of responsibility, and a healthy dose of law and regulations. That’s the only recipe for ensuring that technology serves the world.

Is there one technology which you think is going to make the biggest impact on humanity?

If we look at internet access, low earth orbiting satellites are going to change the game. They will give governments the opportunity to focus more on subsidising access. We should hope that by 2030 we see a world that can take Cloud infrastructure we are building today as a foundational layer for great computational and data advances. We should also hope that we see artificial intelligence play a much more impactful role in equipping people with ability to achieve more in almost any scenario — whether it’s medical science or drug discovery or helping someone who is not literate in any language use the power of the computer to do something better. I am also very bullish on quantum computing. It’s not unrealistic to aspire towards seeing in this decade advances in quantum computing that are game-changers for environmental science, agriculture, medicine and human health.

You believe in responsible AI. What is your definition? Do you see any AI trends or use cases in coming years?

We want AI that improves human condition. We have defined principles around privacy, safety & security, inclusion, transparency and accountability. We must build a future where machines remain accountable to people and people who build machines to society. But one has to operationalise these principles. So, we have created engineering tools, a variety of steps so that AI can be reviewed before deployment. But the hardest thing about ensuring responsible AI, interestingly, is not getting this right within a company like Microsoft. What sets AI apart is that you don’t buy the service from us and use it. Instead, you license building blocks and create your own AI service. This means the knowhow to use AI responsibly needs to be developed in a single organisation and transferred to everyone else. That is a daunting challenge. There has to be a regulatory force every time you are talking about responsibility in an area that is so complex and diffused.

THE CHALLENGES

The global macro environment is facing headwinds. What are the immediate challenges for tech companies?

Tech companies face many of the challenges that other businesses face in a recession but we can tap some opportunities as well. We are seeing pressure on consumer spending, especially in, say, Western Europe and the lower end of the economic ladder in U.S. Businesses that are consumer-focused are feeling that more than, say, companies that are more enterprise-focused. The most sobering aspect of current economic climate is combination of recessionary and inflationary forces. Some inflationary forces are short-term and to a degree caused by exogenous factors such as war pushing up energy prices. Others are more long-term— basically, declining labour pool in some parts of the world such as Europe, Japan, South Korea and, to some degree, U.S.

When there’s shortage of people, there is need for more technology so that productivity can continue to rise. I would connect that with India in two ways: first, much of the technology the world will need to sustain productivity will come from people in India and, second, India’s labour pool, including engineering talent, is growing. This is a time of not only new challenges but also opportunities for some sectors/countries to play an outsized role in helping the world.

Are you seeing any cut in tech spends by your clients?

The industry has so far seen more weakness in consumer than business spending. You can see this perhaps most clearly in consumer and advertising services. No one knows what’s going to happen. Everybody has to be prepared. But when you see recession coupled with stagflation, technology is in many ways the most effective way to counter inflation. There’s probably more cause for optimism in enterprise tech than other areas.

Isn’t there a deficit of skilled talent in India and across the world, especially as tech firms gear up to meet evolving digital demands and build capabilities in Web3?

There is shortage of talent in every country. This is because technology keeps changing and becoming more ubiquitous. Now, the good news for India is that it is not only the country that’s about to become the largest in terms of population, it also has this extraordinarily high quality and large group of talented engineers.... three million being added every year. Still, there are two kinds of talent challenges for India. One is to broaden the skill base so that more people have digital skills to put technology to work. The other is to think about areas that require deep expertise. And that’s where you need to take account of changing technologies, whether it’s Web3 or augmented or virtual reality or, say, something like quantum computing or AI where we, other tech companies as well as institutions of higher learning have a role to play.

You have been a proponent of inclusive tech. There are reports that 40% of the world is still not online and the pandemic has aggravated the problem. How should tech companies meet this challenge?

The first thing we should think about is how advances in technology have redefined in some critical ways the nature of human rights. Access to internet should be regarded as a human right. Accessible technology for people with disabilities should be recognised as a human right. But what’s the role of a tech company here?

Let me start with accessibility, which has become a huge cause in a company like Microsoft. We can play many roles. We have a programme called Airband. Our goal is to bring internet access to 100 million people around the world. We can advocate for public policy, we can ensure that people not only get access to internet in terms of broadband service but also better access to less expensive devices, as well as skills needed to put all that to work.

Many big tech companies have laid off staff. There have been some layoffs at Microsoft, too. Was it business restructuring or response to the economic crisis?

At Microsoft, every July, we do a bit of a restructuring. We did it this July too, and it perhaps got more attention in the press than July in years past.

REGULATORY NOOSE

Big tech companies across the world have come under government scrutiny because of abuse of dominant position. U.S. introduced five bills last year to limit the power of big tech companies. What are your views? Also, whose regulatory environment is the toughest when you look at the countries you are in?

It is clear that we have entered an era where both technology innovation and technology regulation are advancing. One of the things I have said inside Microsoft is that 2020s will bring to technology companies what 1930s brought to banks, which went from being unregulated to being regulated. Now, one of the most successful banks in 1930s was JP Morgan and one of the most successful banks 90 years later is JP Morgan Chase. So, you can succeed if you figure out how to adapt.

Now, no industry has had to adapt to regulations like the tech sector this decade. Many fields are moving forward simultaneously — anti-trust, privacy, security, digital safety, responsible AI, telecommunications, national security, sustainability… there are a dozen different themes. And no industry has had to adapt to regulatory change globally the way tech is doing right now. So, I joke that I have to walk around with this spreadsheet in my head where rows are legal fields and columns are countries. There’s a different sheet for every product we create.

Now, when it comes to anti-trust, in several ways, many of the laws that we are seeing are bringing to many companies the need to adapt the way Microsoft did 20 years ago. It was painful, but it turned out that once we adapted, we found new ways to flourish. We see some of the laws in Congress and we say we are at peace with those. We see some of the laws in Congress and say that’s probably not such a good move, especially when you see rules that will make it hard to pursue acquisitions. But, on a whole, technology needs a dose of regulation. The one thing that I probably worry about is governments adopting so many laws so quickly in so many fields that they lose the opportunity to learn from experience or connect the dots between them, which is why the two countries I find most interesting are U.K. and India. The U.K., as it has a coordinating body for three principal regulatory agencies, for markets, telecommunications and privacy. India, for putting on hold its privacy law. That was an act of wisdom as people in the government recognise that you can’t think about privacy in a vacuum, separate from everything else. So, the government here is using the pause to pursue the opportunity, to think about how different regulatory fields should connect with each other. That will lead to wiser and better laws and regulations that will serve not just technology sector and innovation but also encourage use of technology throughout the economy.

What will be Microsoft’s metaverse strategy? What are the challenges in metaverse? Do you think we need a new set of regulations? How do you see India contributing to your metaverse strategy?

When it comes to metaverse, I don’t like use of a label suggesting it is singular, in a different place from earth. Yes, we see it in the commercial space but even there, we see retail uses, manufacturing uses, military uses. In the consumer space, the same thing is true, including in entertainment. We are creating a set of technology tools that will enable others to create applications that will involve augmented or virtual reality. India provides software talent for the world and not just itself and does it in a way that leads to creation of products that then are deployed around the world.

But India is working on a new data protection bill. You are in India. Are you talking to government about this? Has it sought your inputs?

Sometimes, we offer inputs. Sometimes, people ask and sometimes we offer before they ask. But I just shared with you what I believe.

How big is India opportunity for you? What would be your growth strategy for the market and what kind of investments have you lined up for India?

India has made five years of progress in last 24 months when it comes to digitisation. India is leapfrogging much of the world when it comes to using digital technology in governance, identity, payments and healthcare. So, in some ways, India is not only moving forward, it is also creating new models for the rest of the world. India is already the second or third largest digital economy and that’s extraordinary. For Microsoft, it means a few things. First, I am glad we doubled our Cloud capacity in last two years. We have the opportunity to serve as the digital infrastructure provider.