Hit Refresh: The Quest to Rediscover Microsoft's Soul and Imagine a Better Future for Everyone

by Satya Nadella

I like to think that the C in CEO stands for culture. The CEO is the curator of an organization’s culture. As I had told employees in Orlando, anything is possible for a company when its culture is about listening, learning, and harnessing individual passions and talents to the company’s mission. Creating that kind of culture is my chief job as CEO. And so, whether it was through public events like the launch of Windows 10 or through speeches, emails, tweets, internal posts, or monthly employee Q&A sessions, I planned to use every opportunity at my disposal to encourage our team to live this culture of dynamic learning.

For example, those tech companies born with an open-source mentality get it. One group may create code and intellectual property but it’s open and available for inspection and improvement from other groups inside and outside the company. I tell my colleagues they get to own a customer scenario, not the code.

Because I’ve made culture change at Microsoft such a high priority, people often ask how it’s going. Well, I suppose my response is very Eastern: We’re making great progress, but we should never be done. It’s not a program with a start and end date. It’s a way of being. Frankly, I am wired that way. When I learn about a shortcoming, it’s a thrilling moment. The person who points it out has given me the gift of insight. It’s about questioning ourselves each day: Where are all the places today that I had a fixed mindset? Where did I have a growth mindset?

Phil maintained a great relationship with Mojang, continuing to build trust, and one day, Phil’s team got a text that the company was for sale again. They could have gone to any of our competitors to strike a deal, but they came back to us. Phil had recently become the head of Xbox, and I was new in my role as CEO. He brought the deal to me for reconsideration. I felt we could bring the inherent strengths of Microsoft to the product while preserving the integrity and creativity of the small indie group that invented it. We pulled the trigger on a $2.5 billion acquisition. Today Minecraft is one of the bestselling games of all time on the PC, Xbox, and mobile. It has tremendous and lasting gamer engagement. Bill Gates and Steve Ballmer, who were still on the board when the deal was presented, later laughed and said they had initially scratched their heads, failing to understand the wisdom of the move. Now we all get it. That’s a growth mindset, and it highlights individual empowerment—what one person or one team can do against the odds.

Anyone who says they can accurately predict the future trajectory of tech is not to be trusted. However, a growth mindset enables you to better anticipate and react to uncertainties. Fear of the unknown can send you in a million directions, and sometimes it just dead-ends with inertia. A leader has to have an idea what to do—to innovate in the face of fear and inertia. We need to be willing to lean into uncertainty, to take risks, and to move quickly when we make mistakes, recognizing failure happens along the way to mastery. Sometimes it feels like a bird learning to fly. You flap around for a while, and then you run around. Learning to fly is not pretty but flying is.

Honestly, I left the conference inspired and energized, but I was mad at myself for blundering such an important chance to communicate my own commitment and Microsoft’s to increasing the number of women we hire at every level of our industry. I was frustrated, but I also was determined to use the incident to demonstrate what a growth mindset looks like under pressure. A few hours later I shot off an email to everyone in the company. I encouraged them to watch the video, and I was quick to point out that I had answered the question completely wrong. “Without a doubt I wholeheartedly support programs at Microsoft and in the industry that bring more women into technology and close the pay gap. I believe men and women should get equal pay for equal work. And when it comes to career advice on getting a raise when you think it’s deserved, Maria’s advice was the right advice. If you think you deserve a raise, you should just ask.”

Since my remarks at Grace Hopper, Microsoft has made the commitment to drive real change in this area—linking executive compensation to diversity progress, investing in diversity programs, and sharing data publicly about pay equity for gender, racial, and ethnic minorities. In some ways, I’m glad I messed up in such a public forum because it helped me confront an unconscious bias I didn’t know I had, and it helped me find a new sense of empathy for the great women in my life and at my company.

This episode led me to reflect on my own experience as an immigrant. Hearing racial slurs toward Indians after moving to America never stung me, I just blew them off—an easy thing to do for a man raised in the majority and with privilege in India. Even when some people in positions of power have remarked that there are too many Asian CEOs in technology, I’ve ignored their ignorance. But as I grow older, and watch a second generation of Indians—my kids and their friends—grow up as minorities in the United States, I cannot help but think about how our experiences differ. It infuriates me to think they will hear and grapple with racial slurs and ignorance.

When I joined Microsoft, there was an undercurrent among the Indian engineers and programmers. We were aware that despite our contributions, there had yet to be one of us promoted to vice president, a rank that recognizes a leader as an officer of the company. We could get to a certain level but not beyond. In fact, a senior executive, long since gone from the company, once told another Indian colleague that it was because of our accents—an idea as derogatory as it is outdated. It was the 1990s and I was surprised to hear such bias within such a leading-edge company, especially one led by and founded by such open-minded leaders. Yet, when I looked around, sure enough, there were no Indian V...

VPs despite the well-known top performance of so many Indian engineers and managers. It was not until 2000 that myself and a few other Indians were promoted to the executive ranks.

At work, the tech industry, including Microsoft, is simply not as diverse as we must become. And outside work, minorities can also feel isolated. King County in Washington state, for example, which encompasses Redmond, Bellevue, and Seattle, is 70 percent white. African Americans comprise under 7 percent and Latinos and Hispanics are nearly 10 percent. To help connect communities of people with like backgrounds and interests, there has been a long tradition inside the company of underrepresented groups organizing themselves into employee resource groups such as Blacks @ Microsoft (BAM) and Women @ Microsoft. In all there are seven major ERGs and forty more specific networks. They host online discussions, networking meetings, provide mentoring and professional development, community outreach, and connect people with a community inside and outside of work. Most importantly, they offer support.

“To be a leader in this company, your job is to find the rose petals in a field of shit.” Perhaps not my best line of poetry, but I wanted these people to stop seeing all the things that are hard and start seeing things that are great and helping others see them too. Constraints are real and will always be with us, but leaders are the champions of overcoming constraints. They make things happen. Every organization will say it differently, but for me there are three expectations—three leadership principles—for anyone leading others at Microsoft. The first is to bring clarity to those you work with. This is one of the foundational things leaders do every day, every minute. In order to bring clarity, you’ve got to synthesize the complex. Leaders take internal and external noise and synthesize a message from it, recognizing the true signal within a lot of noise. I don’t want to hear that someone is the smartest person in the room. I want to hear them take their intelligence and use it to develop deep shared understanding within teams and define a course of action.

Seeing me demo Microsoft software on an iPhone designed and built by Apple, one of our toughest, longest-standing competitors, was surprising and even refreshing. Microsoft versus Apple has been such a prominent and even contentious rivalry that people forget we’ve been building software for the Mac since 1982. Today one of my top priorities is to make sure that our billion customers, no matter which phone or platform they choose to use, have their needs met so that we continue to grow. To do that, sometimes we have to bury the hatchet with old rivals, pursue surprising new partnerships, and revive longstanding relationships. Over the years we’ve developed the maturity to become more obsessed with customer needs, thereby learning to coexist and compete.

Partnering is too often seen as a zero-sum game—whatever is gained by one participant is lost by another. I don’t see it that way. When done right, partnering grows the pie for everyone—for customers, yes, but also for each of the partners. Ultimately the consensus was that this partnership with Apple would help to ensure Office’s value was available to everyone, and Apple was committing to make its iOS really show off the great things Office can do, which would further solidify Microsoft as the top developer for Apple.

For me, partnerships—particularly with competitors—have to be about strengthening a company’s core businesses, which ultimately centers on creating additional value for the customer. For a platform company, that means doing new things with competitors that can accrue value back to one of the platforms.

In today’s era of digital transformation, every organization and every industry are potential partners. Consider the taxi and entertainment industries. Ninety percent of Uber riders wait less than ten minutes for a driver, compared with 37 percent of taxi riders. Netflix costs its viewers $0.21 per hour of entertainment compared with $1.61 per hour with the old Blockbuster video-rental model. These are some of the higher visibility examples of digital transformation, but it’s happening in every industry. We estimate the value of these transformations over the coming decade to be about $2 trillion.

My very first job at Microsoft in 1992 was all about partnering. We were building Windows NT, a 32-bit operating system. But most of the backend applications that we needed to become viable had been built for Unix-based minicomputers, not Windows. And so my task as a young Windows NT technical evangelist was to move those applications onto the PC architecture. Lacking credibility as a serious enterprise player, Microsoft had to do a lot of hard work just to be considered. We built prototypes of applications for our PC platform, and then took them to customers in manufacturing, retail, and health care to show them that their big, robust minicomputer apps really could run just as well on a PC—maybe even better. They were surprised to see their mission-critical apps work with a graphical user interface on a device they’d thought of as a toy.

Google today is a dominant company in our industry. For years we’ve competed in the marketplace while also feuding through nonstop complaints to government regulators in the United States and abroad. As CEO, I decided to turn the page on that strategy, reasoning that it was time to end our regulatory battles and focus all of our energy on competing for customers in the cloud. Sundar Pichai, Google’s CEO, is a competitor who I also count as a friend. After a series of very productive discussions and thoughtful negotiations between our two organizations, led by Brad Smith, Microsoft’s president and chief legal officer, Sundar and I surprised observers of the rivalry with a joint statement: “Our companies compete vigorously, but we want to do so on the merits of our products, not in legal proceedings.” In pushing this change of attitude, I’ve been helped by the simple fact that I am a fresh face, new blood. Losing the baggage of history makes it easier for me to break down old walls of mistrust. But will it be enough?

In the end, we still had to resolve some of our issues through the courts, but we also continued to show respect. “Microsoft values and respects our partnership,” we wrote in a statement. “Unfortunately, even partners sometimes disagree.”

Yahoo’s business model came under pressure, and lawsuits were being threatened. Yahoo wanted to breach its contract. We worked to mend the relationship not by presenting a list of demands, but by listening, empathizing with a partner’s situation and exploring ideas. In the end, we decided to forgo the requirement of exclusivity for Bing as Yahoo’s search partner. The issue was generating too much needless friction between the two parties, and we were confident that our technology and our partnership would prevail. We avoided costly litigation, and today Bing continues to handle the majority of Yahoo’s searches.

Partnerships are journeys of mutual exploration, and so we need to be open to unexpected synergies and fresh ways to collaborate. Openness begins with respect—respect for the people at the table and the experiences they bring, respect for the other company and its mission. Do we always agree? Of course not. But we always seek to listen intelligently, seeking to understand not just the words we are hearing but the underlying intentions. I try hard not to bring needless history into the room, and I don’t let the limitations of the past dictate the contours of the future.

Over the years, I’ve found that openness is the best way to get things done and to ensure all parties feel terrific about the outcome. In a world where innovation is continuous and rapid, no one has time to waste on unnecessary cycles of work and effort. Being straightforward with one another is the best way to achieve a mutually agreeable outcome in the fastest time possible.

In my experience, whether we’re talking about a gigantic acquisition like our deal to purchase the social network LinkedIn or smaller acquisitions like those of app developers Xamarin, Acompli, and MileIQ, the acquisitions that succeed generally start as partnerships born out of careful analysis of customer needs. That was the case with LinkedIn, which Microsoft acquired in 2016 for $26 billion, one of the largest such deals in history. For more than six years, Microsoft and LinkedIn worked together to enable our one billion users and their nearly half-a-billion members—the Venn diagram of our customers would overlap 100 percent with theirs—to synchronize contacts so that Office contacts were available in LinkedIn and vice versa. Microsoft made its technical specifications available so that LinkedIn could build a beautiful app for Windows and partnered on a Social Connector that enabled rich connections and collaboration across both platforms. For us to do even further integration, and create more compelling scenarios and value for our customers, we had to come together as one.

With mixed reality we are building the ultimate computing experience, one in which your field of view becomes a computing surface and the digital world and your physical world become one. The data, apps, and even the colleagues and friends you think of as being on your phone or tablet are now available anywhere you want to access them—while you’re working in your office, visiting a customer, or collaborating with colleagues in a conference room. Artificial intelligence powers every experience, augmenting human capability with insights and predictive power that would be impossible to achieve on our own. Finally, quantum computing will allow us to go beyond the bounds of Moore’s Law—the observation that the number of transistors in a computer chip doubles roughly every two years—by changing the very physics of computing as we know it today, providing the computational power to solve the world’s biggest and most complex problems. MR, AI, and quantum may be independent threads today, but they are going to come together. We’re betting on it. A technology company that misses multiple trends like these will inevitably fall behind. At the same time, of course, it’s dangerous to chase untested future technologies while neglecting the core of the current business. That’s the classic innovator’s dilemma—to risk existing success while pursuing new opportunities.

Doug Engelbart in the 1960s performed “the mother of all demos,” introducing the mouse, hypertext, and shared-screen teleconferencing. Engelbart’s Law states that the rate of human performance is exponential; that while technology will augment our capabilities, our ability to improve upon improvements is a uniquely human endeavor. He essentially founded the field of human-computer interaction. There are many other visionaries who influenced me and the industry, but around the time I joined Microsoft in 1992, two futuristic novels were being eagerly consumed by engineers all over campus. Neal Stephenson’s Snow Crash popularized the term metaverse, envisioning a collective virtual and shared space. David Gelernter wrote Mirror Worlds, foreseeing software that would revolutionize computing and transform society by replacing reality with a digital imitation. These ideas are now within sight.

Under the leadership of our chief speech scientist, Xuedong Huang, and his team, Microsoft set the accuracy record with a computer system that can transcribe the contents of a phone call more accurately than a human professional trained in transcription.

As a platform company—one that has always built foundational technologies and tools upon which others can innovate—Microsoft’s approach is to put the tools for building AI in the hands of everyone. Democratizing AI means enabling every person and every organization to dream about and create amazing AI solutions that serve their specific needs. It’s analogous to the democratization that movable type and the printing press created. It’s estimated that in the 1450s there were only about thirty thousand books in Europe—each one handcrafted by someone working in a monastery. The Gutenberg Bible was the first book produced using movable type technology, and within fifty years the number of books grew to an estimated 12 million, unleashing a renaissance in learning, science, and the arts.

If you’re a business owner or manager, imagine if you had an AI system that could literally see your entire operation, understand what’s happening, and notify you about the things you care most about. Prism Skylabs has innovated on top of our cognitive services so that computers monitor video surveillance cameras and analyze what’s happening. If you have a construction company, the system will notify you when it sees the cement truck arrive at one of your work sites. For retailers, it can keep track of inventory or help you find a manager in one of your stores. One day, in a hospital setting, it might watch the surgeon and supporting staff to warn the team, before it’s too late, if it sees a medical error.

Don’t imagine that one day a quantum computer will take the form of a new stand-alone, super-fast PC that will sit on your desk at work. Instead, a quantum computer will operate as a coprocessor, receiving its instructions and cues from a stack of classical processors. It will be a hybrid device that sits in the cloud and accelerates highly complex calculations beyond our wildest dreams. Your AI agent, acting on your behalf, might tackle a problem for which there are a billion graphs to check by using a quantum computer that can scan those billion possibilities and come back to you instantly with just a few choices.

As a computer engineer, I find it helpful to express complex ideas and concepts according to the schemas or algorithms we would use if we were writing a computer program. What are the instructions to write to produce trust? Of course, there is no mathematical equation for such a humanistic outcome. But if there were, it might look something like this: E + SV + SR = T/t Empathy + Shared values + Safety and Reliability = Trust over time

But are there differences between the American and the Indian experiences? I asked Indian constitutional scholar, Arun Thiruvengadam, this question. It turns out that, in the period just after Indian Independence from Great Britain in 1947, there was considerable resentment against the colonial government’s general misuse of criminal laws, including those that restricted free speech and those that enabled the colonial government to preventively detain Indians, often without showing any cause and on mere suspicion of antigovernment activity. So, as in the United States, the framers of India’s new constitution sought to provide guarantees against such misuse in the future, incorporating rights and provisions in their fundamental law to secure this result. However, because of complicated factors that scholars of Indian history are still unpacking, the constitutional provisions for individual liberties were not as strong or as expansive as was initially demanded. For a variety of reasons, search and seizure provisions were not seen as particularly important, and no analog to the U.S. Fourth Amendment was incorporated in the Indian bill of rights. Since then, as successive governments have continued to make use of the old colonial mechanisms, persons accused of political crimes have sought to employ arguments from U.S. Constitutional law, including the Fourth Amendment. These efforts have had mixed results.

AI must maximize efficiencies without destroying the dignity of people. It should preserve cultural commitments, empowering diversity. To ensure this outcome, we need broader, deeper, and more diverse engagement of populations in the design of these systems. The tech industry should not dictate the values and virtues of this future. Nor should they be controlled solely by the small swath of humankind living in the wealthy, politically powerful regions of North America, Western Europe, and East Asia. Peoples from every culture should have an opportunity to participate in shaping the values and purposes inherent in AI design. AI must guard against social and cultural biases, ensuring proper and representative research so that flawed heuristics do not perpetuate discrimination, either deliberately or inadvertently.

Developing the knowledge and skills needed to implement new technologies on a large scale is a difficult social problem that will take a long time to resolve. The power loom was invented in 1785 but took thirty-five years to transform the clothing industry because of shortages of trained mechanics.

Michelle Obama, seated directly in front of me in the gallery overlooking the chamber of the House of Representatives, listened intently as her husband delivered his final State of the Union address before a joint session of Congress. It was a poignant night. The political divisions on Capitol Hill that cold winter evening were deep and widening, with a historically bitter presidential race still looming. It had been twenty-eight years since I’d first arrived in the United States, and now, as CEO of Microsoft, I was the guest of the First Lady, following along with tens of millions of others around the world as President Obama somberly outlined some of the key questions his successor would have to address, no matter who he or she turned out to be. One of the president’s questions felt as though it was addressed directly to me: “How do we make technology work for us, and not against us — especially when it comes to solving urgent challenges like climate change?” I sensed—or did I imagine?—more than a few eyes searching for my reaction.

In recent decades, the world has invested hundreds of billions of dollars in technology infrastructure—PCs, cell phones, tablets, printers, robots, smart devices of many kinds, and a vast networking system to link them all. The aim has been to increase productivity and efficiency. Yet what, exactly, do we have to show for it? Nobel Prize–winning economist Robert Solow once quipped, “You can see the computer age everywhere but in the productivity statistics.” However, from the mid-1990s to 2004, the PC Revolution did help to reignite once-stagnant productivity growth. But other than this too brief window, worldwide per capita GDP growth—a proxy for economic productivity—has been disappointing, just a little over 1 percent per year.

Leaders were asking how the latest wave of technology could be used to grow jobs and economic opportunity. It’s the question I get most often from city, state, and national leaders wherever I travel. Part of my response is to urge policymakers to broaden their thinking about the role of technology in economic development. Too often they focus on trying to attract Silicon Valley companies in hopes they will open offices locally. They want Silicon Valley satellites. Instead, they should be working on plans to make the best technologies available to local entrepreneurs so that they can organically grow more jobs at home—not just in high-tech industries but in every economic sector. They need to develop economic strategies that can enhance the natural advantages their regions enjoy in particular industries by fully and quickly embracing supportive leading-edge technologies.

During the Industrial Revolution of the nineteenth century, many of the key enabling technologies were originally developed in the United Kingdom. Naturally, this gave Britain a big advantage in the race for economic supremacy. But the fate of other nations was determined in large part by their response to British technological breakthroughs. Belgium dramatically increased its industrial production to a level rivaling that of the United Kingdom by leveraging key British innovations, investing in supporting infrastructure like railroads, and creating a pro-business regulatory environment. As a result of these policies, Belgium emerged as a leader in the coal, metalworking, and textile industries. By contrast, industrial productivity in Spain significantly lagged the rest of Europe as a result of Spain’s slow adoption of outside innovations and protectionist policies that decreased its global competitiveness.

Unfortunately, in many underserved parts of the world, public and private attention is focused on attracting Silicon Valley companies rather than on growing local tech entrepreneurs. Successful entrepreneurs in developing nations often tell me they can’t even get meetings with their president or prime minister. Yet those same heads of state routinely meet with Western CEOs like me, looking for very near-term, foreign direct investment. That’s a shortsighted policy, and very frustrating for the business leaders who are trying to nurture the long-term prospects of their local and national economies. And yet I see this mindset everywhere—in the Middle East, Asia, Africa, Latin America, and even in struggling communities in G20 nations like the United States.

Internet penetration is close to 100 percent in Korea, Qatar, and Saudi Arabia, but below 2 percent in a number of sub-Saharan African nations. Unless we take specific steps to make access universal, by 2020 just 16 percent of people in the world’s poorest countries and only 53 percent of the total global population will be connected to the Internet. At this rate, universal Internet access in low-income nations won’t be achieved until 2042.

Hong Kong, located in China but ruled for generations by Great Britain, was free of antimarket Communist rule and became an economic engine, attracting and training workers. Deng Xiaoping, grasping that China needed to become more open in order to grow, created a de facto charter city in nearby Shenzhen, which could take advantage of its neighbor’s talent pool and infrastructure. Unlike the rest of China, Shenzhen’s rules would be attractive to foreign investment and international trade. He knew that Communist China would be slow to embrace these reform zones, but many entrepreneurs and workers would leap at the opportunity. Shenzhen grew from a town of thirty thousand people to a global financial center of nearly 11 million residents after it was designated as a special economic zone in 1980.

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.

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.

This is a hint for the future of work. Perma-remote, proven profitable during the pandemic, means I might be doing my job in the future from Hyderabad instead of California. (For a lower salary, of course.)

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.

On the whole, women are more educated than men, so this may also mask a gender imbalance in white mortality rates. (Which makes sense when you look at who voted for Trump.)

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.

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.