Blitzscaling with Microsoft CEO Satya Nadella and Greylock Partner Reid Hoffman

thank you very much for coming here you're a treasured part of of our network in our community and as is Satya so it was one of the things that we when we said well who should I kind of come and talk to Silicon Valley about both for what's kind of going on an interesting tech and for blitzscaling my very first choice with Satya we we work this out and was awesome this is one of those places where Satya doesn't mean an introduction you're all here because of him you know who I am I don't need an introduction so we're not gonna waste any time with that the real thing is to get to interesting content and we're gonna actually ask each other questions like part of the thing when we were talking about is like Saki was like no no I'd like to be interviewing you and I think no I'd like to be interviewing you and so we said okay we settled right and we'll both ask questions because I have the pleasure of the the first of the mic what I will actually start with is I think a question a close and dear to such as heart which is that blitzscaling kind of a pulley applies in a number of circumstances including changing the culture of a company as you take over and we'll get to like a little bit later when I'll ask some questions about Microsoft being one of the original blitzscaling companies and kind of what did that look like but let's start with a kind of cultural question because I think one of the things that I've had the delight to see in collaboration with you and the board is literally the rapidity at which the kind of the culture and the thought that the way that the growth psychology the approach to market the approach to collaboration the approach to this is how we operate changing at speed right and you know it would in some senses would be a surprise because you're a long-term Microsoft er right you would think you would like all I've been read in this other successful culture but I have to change it so sing a little bit about kind of how you how you thought about that change and then how you thought about about scaling that change quickly and powerfully through the organ oh wait I have something else to do first that's yes you're right sorry I was starting on my very first question different question Paul Allen so obviously it's a huge loss he has not only been a powerful industrialists but also a a massive contributor to Microsoft why don't you say a little bit about kind of what he meant to you and also a little bit about what he meant to my personally I mean in you know it's a it's a very sad day for us at Microsoft Paul is someone I've gotten to know a lot more in fact since becoming CEO is one of these I'd say understated human beings who did a lot who did a lot for us obviously as a company having founded it for our industry and the community in Seattle he's done so much that you know he'll be missed sorely and more than anything else I think Paul is one of these people who was always curious you know you meet him you would never think of him as well this is the guy who actually founded Microsoft he was always asking me on what's next and I always found that to be an amazing attribute of his and his curiosity and his generosity for everything that he did it will be sorely missed in fact it ties a bit to your question because you asked about our our culture you know and I was talking to a group of founders even the Greylock in the Jay gray rock portfolio companies and I sort of feel and I what I said to them about this culture thing was I consider myself as a mere mortal CEO who took over from someone who was not a founder but had found a status Steve for all intensive purposes Paul and Bill started the company and in some sense Steve and Bill scaled it and I made a conscious decision even I grew up in the company and I made this conscious decision that I'm going to make culture something explicit that I myself will talk it's interesting I found that at least in founder company our companies led by founders culture is sort of implicit a lot of it is bound up with who the founder is because they've got and obviously scaled it from nothing to what it is but especially for a CEO taking over I recognized the need for me to have much more of a conversation being an insider I could call it for what it was right in the sense I you know the good and the bad I represented it so there was no denying it it's not like I could say hey I came from the outside in an interesting way I had credibility to criticize Microsoft without it appearing as criticism that's at least how I think and the advantage of an Insider because there's always the debate about the outside who versus the inside the insider does have an advantage because you can say it in a way and do things in a way that it's not viewed as criticism if anything it's viewed as being intellectually honest and I always used to say at Microsoft we had like this amazing advantage called Bill Gates and then we had an amazing disadvantage called a bunch of people who were roaming around Microsoft thinking they were Bill Gates and that was really in the gist of writing in the late 90s I distinctly remember that the num the hubris that had set in you know the distinction between what you contributed versus the rocket ship you rode becomes sort of kind of blurred for a lot of people when success comes and especially when success comes easy and and I so that's one of the reasons why I went on the search and weirdly enough the place where I found the metaphor for at least having that culture logger you know conversation was a book I'd read my wife would introduced me to it called mindset like maybe four five years before I became CEO and Carol Dweck you know it Stanford she has the simple metaphor ed which is if you have two kids in school one of them has got a lot of innate capability but is a know-it-all the other one has less innate capability is a learner you know how the story ends the learn it all does better than the know it all and it's true for students in school it's true for CEOs and and so we we took that and really in and sometimes people will say hey this growth mindset is interesting Satya I found the ten people at Microsoft who don't have a growth mindset and that's not the point the point is not to go look around for ten people at Microsoft who don't have the culture it's the thing that I love about this growth mindset is the ability to confront fixed mindset in other words I have to be comfortable admitting that I have a fixed mindset and every day what you do is your best job of trying to confront it and so in if anything to your scale point right if you go back to the Blitz scaling thing I don't think this cultural renewal at Microsoft would have happened but for two fundamental reasons one is we did not think of it as a one-time transformation from attribute ABC to attribute XYZ it is going to be a continuous journey and in fact I'm very very careful not to celebrate some destination reached second is it was not viewed as new Dogma from a new CEO because if it was that if it didn't have that attribute of foundationally appealing to the human and asked all of us then I don't think it would have worked and so the fact that you know you don't do growth mindset or confront your fixed mindset to be a better employee at Microsoft you do it because you'll be a better parent a better partner a better colleague and a better leader and the fact that it speaks to your entirety of your life is what's probably it really helped us and what were the first couple of moves that you did to start trying to get it to spread like what was the what was was it and it was it was it a exact level was it the kind of the corporate executive level was it like what was the set of things up here's how we need to to shift course and going this continuous learning path the the biggest thing in retrospect I understand the power of this a lot more we are 130,000 people in the company and I've learned lot I learned a lot about what does it mean to be see because nobody teaches you a here's how you'll be a CEO of 130,000 person company you suddenly get plopped in and you here you are and at that scale the simplicity of what your overarching framework I mean if you look at it there's not a single meeting at Microsoft that I don't somehow managed to go to our mission and our culture and I've done it now close to five years it's boring as hell for me but I do it and I am so disciplined about it because that is my unit of scale if I the day I stopped doing it the entire motion sort of will fall apart and so to your point consistency with one of the most biggest things that you underestimate and especially if you are the one who you you keep repeating and you think god I've said this I should change it a little make it a little more novel and interesting don't and as you scale stop inventing new things that you talked about especially around your sense of purpose and mission and culture and then we had practical things we picked I would say three key air because it's an abstract thing what the heck does it mean to confront your fixed mindset me said hey look it's easy to do take customers listen to them don't go just pitch to them but get behind and if whether you're a engineer sort of looking at a log file or a salesperson both sides can in fact go deeper on one of the customers really trying to say what is behind those words take inclusion and diversity talk about that area that every day you can practice you know you go into a meeting you have a diverse group of people and you know people who are you know come from different backgrounds aren't able to get their word edgewise happens quite a bit in Microsoft and so you then you say okay how can i as a leader or as I as a participant change the culture as we speak it's the living breathing culture not the abstract one the other one we've had our challenges were yeah we had gotten organized into these beautiful business units and we would metric them to hell and we would measure everything and it was great except once there all three of you you know views right which is there were all categories that had gotten created long time ago and they were not as relevant we needed to mix up if you look at we've made a big structural change to by the way that was one of the biggest changes I did which is we had a hundred thousand person company other than LinkedIn that we operate and somewhat our gaming that we operated in a much more loosely federated way it's a functional org and it's not because I'm sort of like I love functional logs but I needed to do that and in fact Steve got us started on that in order to make sure that the company was not stuck in a or configuration there was backward looking and we could actually from Silicon all the way to our gaming experience rethink everything from the product we build to the business model and so those are all the things that we have to explicitly go do yeah well one of the things about these keep saying the same thing is kind of I look at that as establishing a frequency it's almost like let's harmonize all the same frequency and I just came from a micro version of that which is when you're on media tour you're saying the same thing you try not to to show that and actually the funniest thing I think that made me stronger at that was the masters of scale podcast because as you're saying you know as you're kind of like reading a script and you're trying to convey excitement about this even when you're reading the script how do you how do you have people share that journey with you even though you're like reading the script for the third fourth time as a way of doing it but talking about this idea of scaling go what is your perspective for a large company like ours because in some sense you think about in your book you do have the hierarchy right it starts with the family and goes all the way to the nation or the globe but if you sort of had to reflect a company like Microsoft or any one of the other large companies what does it mean though or does it blitz scale mean for a large company so I'll open with and you know some some of you have had a chance to read the book but obviously most of you have not yet with the definition of blitzscaling which is the precise one is prioritizing speed over efficiency in an environment of uncertainty and the uncertainty part is a really important part of this because actually in fact if you have certainty like you know what your customer acquisition cost is you know your exact competitive landscape your unit economics your LTV then you can still scale fast but you know how to do it in a relatively efficient way you don't actually have a lot of footfalls you you know it's a bit of a spectrum but you still have that so the uncertainty is actually I don't know what my customer acquisition cost is I don't really necessarily know what my total addressable market is I have an idea that I can get to good Union economics but I don't I don't per se know that and and then speed over efficiency is well actually in fact I still need to get to scale very fast usually driven by competition right usually kind of the uber circumstance we open the book with Windu and and and them do and Airbnb actually we're gonna do a post on them do probably this week maybe next week because it just announced it was shutting down it was kind of a it's an interesting arc for the whole for the whole kind of Arc of this and so usually driven by competition but sometimes it's potential competition or sometimes it's the economics only really work when you get to certain amount of scale so you still need to to go to scale and get that early so for example how did PayPal get to a good fraud engine it was like what we had to get to scale of data within the system and so blitzscaling was important there anyway even though you didn't actually really understood the economics because the entire economic curve would change as you understood what your actual fraud cost is and how you can manage that because the unit economics / / / charge and then the speed obviously competition capital allocation and other kinds of things the way doing that now when you get to a large company there's a couple of different ways that a large company could think about actually blitz killing now one of them the reason I opened with culture is because sometimes a mineral we're gonna we're gonna operate and change this that's also a blitzscaling phenomena you have uncertainty how well will the culture take well will we be able to do it you need to do it fast because you need to get everyone rowing in the same direction like if some people are rowing kind of this way and other people are kind of rolling this way you have disharmony it doesn't work so speed also matters and at some degree your question of efficiency as well the per doll or per human it does kind of doesn't matter we just need to get there right and so that was the reason the culture was one of the fascinating things I think you that you're on path to no destination on path to another one which will I'll ask you about in a moment is a sure which is kind of this question when you say well actually in fact this market we have to participate in we're not there yet we have to get there we have to get to a certain scale and we have to be competitively you know in the fight right given how far out AWS started when you're really pushing forward to getting there that's another I think example of a large an established company going we need to play now in order for a company to do that I think a couple things have to be true a established company a significant size one is I think you have to be able to get sufficient backing from investors right I think that you need to have a kind of i we buying into the future or what it is now it can be a challenging way of doing that select for example one of the the little examples we used last week immediately because we said well so say you had a twenty billion dollar public company and you had 17,000 employees wouldn't you think blitzscaling has passed you well this was amazon in 2006 before AWS right and so it is actually there and matter of fact and part of the reason we use this example because in media when deso started doing that the response from the street was there was literally a magazine cover that said bees owes to just mind the store right right so the response was not like oh yes that's great we're all going for it you need enough buy-in not enthusiasm necessarily but okay right this seems to be you know you good leader good shot we may disagree with you but we'll give you enough that you'll start proving it I think that's one of the other things that you lost brought to Microsoft in this which is oh we believe now that Microsoft can invest in the future and we should be enabling Microsoft to invest in the future because we believe that future will play out well so one is with the with the with come the street another one is you can't unless you're in desperate straits you know Apple when Jobs went back you know this kind of thing usually you can't blitzscale the entire business right because of the disruption so usually it's a component so even though for example you know Asher was what a group AWS was a group it wasn't we're just doing it we're just you know resetting to zero and then that means that the that team needs the right backing from the CEO needs the right know or you know the kind of buy-in as the derivative down the investor to say we understand that a dollar here will have an uncertain dollar output because part of what happens in these traditional industries is they go well this group goes look you give me a dollar I'm gonna give you a dollar eighty back right because we know it we got it we're tuning it for efficiency etcetera etcetera and then when you're given the dollar to the blitzscaling group you're like well when are your unit economics gonna work out well soon we have a spreadsheet right and and you have to have the creditor know we're gonna build into that and so I think that's some of the the kind of traditional company and so I think that you know in the kind of this this exchange of questions talk to me a little bit about how you made the your decisions and how that kind of worked through because that's kind of another of example of the key kind of blitzscaling you know kind of grooves within an established company yeah I mean a lot of what you taught this said is obviously you didn't have the that vocabulary but I always sort of say that they look long before its conventional wisdom you would have had to take that risk and you do it because of you know you describe this you need to have that courage to in some sense have the speed over efficiency with an uncertain future and it comes because of the you have of the Ark of Technology and the microeconomics that goes with it right that's where the founders everyone here has that intuition and that's what gets you to even do the startup and to us you know that's really what was the case which is we understood hey where's distributed computing going you know we know in all honesty we started late and so therefore it was more about being able to in that case be a fast follower and when you want to cart off your own area to which is super interesting the hybrid is something you should go into in fact I'll come to that because now interestingly enough here we are now reading it's kind of an interesting way but the way in the beginning when we got started with Azure is I mean we had like you know and I remember distinctly in 2011 joining the team that was our server team and we had an amazing business with amazing gross margins and they would look at this cloud thing and say god this is a nightmare and but yet it was clear as day that this this nightmare could in fact finish us all off and so we needed to just be all in and it is unclear in fact if you think about dread right the street can punish you right which is once they you know have a set of metrics that they're tracking you on you better be just on that treadmill but the thing that I learnt read was even with the street the investors and of course investors is I think Pisa says this you get the investors you deserve but even the investors you can't go and ask for permission but the only thing that they need is real conviction and real track you know progress quarter-over-quarter so one of the things I did was to ensure that we had leading indicators of success so I had to sort of basically get a set of metrics that were not you know net profit for sure there are not even gross margin but what indicators of something that we're going to be long-term gross margin or long-term net profit that the investor said ok as long as you walk the walk every quarter on this mat set of metrics I'll give you the leeway so to degree we went for scale over efficiency especially measured by any of our traditional if metrics of efficiency a got commissioned from Alton the other thing I realized was again this goes back to being mayor mortal CEO not a founder right I can't go in and say hey trust me is to walk the walk and I realized that if you can do that even public markets can be a fantastic source of you know investment and Azure now to you know interestingly enough it might be three years ago at our developer conferences when I first started talking about the edge because I always knew distributed computing is it's not gonna be like the back to the mainframe I mean we said distributed computing will be distributed forever the question was what is the edge gonna look like and right now I feel we have you know if you think about what we are doing with Azure sphere which is basically a silicon design or an operating system in a cloud service for a microcontroller to have a compute node to Azure stack to Azure is one distributed computing plane for doing sort of the new workloads this is not a hybrid for the old world this is really the hybrid for the new AI first workloads because compute gravitates to where data is being generated and that's what's driving a lot of our growth I mean I look at even and a traditional company like Chevron or Shell it's amazing the amount of compute power we're putting at the edge in their rigs which is just part of the edge of fabric is a great sort of it's you know a way of the view going forward and exactly one of the other things that we didn't have a chance to talk about so this is this is this is me asking this question I did tell Sachi had asked him before I got this page but me not having heard the answer which is you know part of the part of the reason we had bill write the foreword to blitzscaling it was we thought of Microsoft is like one of the actual early original blitzscaling companies where it got this super compelling and powerful business model and then went to global scale what was it like kind of being part of that company and then saying okay now we have to reset because I actually think most blitzscaling companies actually get to a point at some point where they need to reset because you need to start focusing on wrong we're gonna focus on efficiency you know too many of these kind of multi thread experiments and so there has to be kind of ID now we're gonna have much more of efficiency what was that like both being in it as you kind of grew through the ranks and then as they're kind of thinking about how is it that we reset our our ability to earn our market rather than take it for granted yeah I mean I joined the company in 92 and we you know the mission of the company at that time was put a PC in every home in every desk you know talk about a concrete mission which even had the math formula right in there and and then so fight by even the end of the decade I would say at least in the developed world we had scale to achieve that but I think one of the things that I've come to realize you know and it was amazing like for example when I joined the company there was there was no enterprise business and the joke was that we'll never be an enterprise company and and here we are whatever 25 years later we're now the cordon called the enterprise company but it takes that long to build it out and but we had the inherent belief that whether it was our technology choices that we were making with it was an operating system with the intel architecture was going to go into the data center was phaidor complete I mean in 92 you could just look at it and say it's going to happen it may you know we all overestimated you know how quickly it'll happen but it happened eventually you know maybe five ten years after we originally thought it was but it was sort of it was locked in the scale was locked in the the thing that I would say though have learnt is the biggest challenge comes at some point anything that hi has hyperscale will eventually taper off and when it tapers off your ability to invent the next thing if it was just a technical shift you have much higher percentage chance of doing that just because you will have a big R&D budget you would have spend you recover your base but if it's a business model shift which is fundamentally destroying the margin that you sort of celebrated all these days then it's a hard one so for us for example the the mobile thing was just difficult because it really changed in two weights it became Hardware gross margin for Apple and it became Services on the back end for Google you know and here we were with an OEM based business model and that transition was the hardest for us which is we needed to reinvent our business model and that's where I would say we faltered and whereas in the cloud we didn't we sort of decided that we were not going to be beholden to the old business model we were not only going to change how we build products but we were also going to change the business model on the products makes total sense I can ask you another question although I'm conscious that I'm hogging the questions no yeah I flip it out the one thing that when I was reading your book I was thinking look look look at the number of challenges that we face as a society in fact interestingly enough when when you think about that speed versus efficiency I run into this nowadays around communities you know I've gone back and studied a lot about the Xbox Live community and one of the reasons why that community has integrity around a lot of things is because I think we made some very good conscious decisions in retrospect thank God we did that to grow it with moderation really turned on in a big way early on so I think about you know there are a lot of unintended consequences of scale especially at a societal level and it's not just tech it can be as you know a program by the cell you know the federal government how do you think we should think about scale versus efficiency when there are unintended consequences sometimes of scale so so one of the things we added in and actually there's an essay which I'll come at the bottom which will come back the question which has actually been learning a bunch from you and Brad Smith about how a tech company can think about their was their position of responsibility within society and there's what I realized after wrote this chapter on responsible blitzscaling was that there's another article that I should do so I'll come and talk to you guys about that will may do a little bit of it here too but the basic thought was the challenge that these litte scaling companies have and I'll get the society part of it is when you're small it's fast and everything Matt like it's just fast as you can go like the thing that I learned for my first week as in the operational job at PayPal was every decision was made with the timeframe of you do not let up from a full depress of the acceleration pedal right the amount of time you had to make the decision was well you know you go in full force and make the decision by the time you get there which may mean right now and and so you have this problem this challenge because you have to move fast a competition getting to scale you say well where does responsibility factor in where does this thinking about what your social impact is what your risk factors especially as you get to scale and one of the things that is a kind of goal in the in the in in writing the blitzscaling book was also not just to reflect what the Silicon Valley playbook is but also try to to help shape it in some paces and one of the things we realized was if what you did is you plotted said look as I know this i get my organization larger as i know that i get to more multithreaded I can actually start investing in what my responsibilities are because I can start thinking okay now we're bigger we're doing more things and we're still really running to compete but we should have somebody some part of the group thinking about our responsibilities and what are what are what our impacts could be and the three areas that we said every blitzscaling combination think about one is well do you have serious impact on individual customers right in this a little bit like the Thera knows si of saying look you like you blood tests serious impact right no you can't like fake it until you make it as an entrepreneur when it's blood tests right no not bad right it was thick second is do you have a real impact maybe it's not as as mortal or as kind of threatening but it's like serious impact and it's a large number of people so if you kind of look at the integration across it you say well actually in fact we're affecting a whole bunch of people and so we should figure out before it happens we should figure out what the possible antidotes are and motheryou nothing can be perfect but but like for example if if people were coming in and saying you know like oh look you've been hacked and you've lost this data and said look we've had this whole effort going and we've had it going for years and we've been really trying to invest in it then it's like okay you still up but you didn't up quite as bad right like it's kind of as an issue so so this one is another area and then the third one is systemic impact can you take the system down can you make payment stop working and you make you know that coming and in that area you should also say what are the areas where as we get to large was we begin to get to the fact that we're no longer kind of the pirate ship but we're actually the Navy in which everything runs where the infrastructure what are the responsibilities for being infrastructure and you should start thinking about it as you get to multi-threaded like as you begin to get to what we call the village stage which is hundreds of employees you might say well we got somebody a person or two whose job that is and who's doing it and then more as you go up and that was part of the part of the thought we had only doing this book is that not only is it to share to other places outside of Silicon Valley what we've learned from here and how to spread that but also helped shape Silicon Valley and one of the things that I as I was because we pushed our publisher a lot and I was literally putting in changes until like four months ago and the publisher was like you're not allowed to do that among woods the constraint the constraint is well it has to have the same number of words on every page okay we could still make those changes right and so and part of it was trying to get this stuff in and as I was doing that I realized that a bunch of the stuff like you know Brad's digital canoe Geneva Convention and other things were since you guys have been there early and I've been interfacing with look what the right kind of like how do you communicate how do you help set an agenda how do you go and say look actually in fact the whole like we're critical mission critical infrastructure don't regulate us trust us it's stupid that's not the dialogue that's gonna work with society practically saying well here here's the kind of things we should think about as a good regulatory framework would have been what would be the lessons that you'd say from a Microsoft perch saying to the up-and-coming blitzscaling companies look here is some of the things you guys should be thinking about it's a great in terms of contributing I mean I've been thinking a lot about it even in this context of scale the overarching thing that I would say I've come to realize is day one while you're building that product or service that obviously needs all the scale you'd be better served to construct even in its core business model and in the unit of scale a way to deal with the unintended consequence so the more you have thought through what are the unintended consequences that you will be unleashed when you are at scale they want I mean and I say that with all the respect to all of the things that are can't be forecast at all right so the uncertainty is real but there are things that you could sort of say Wow and that's what goes back to something like the X Box like because the decision those guys made at that time was to see a moderation is going to be important we want a safe community and so in some sense this sacrificed a lot of efficiency it is not like all this AI driven community they just literally put a lot of humans and said we're going to day one have a lot of more moderation which is human driven which is super inefficient but knowing because the unintended consequence of having a community that was not safe would be problematic that's the way we are increasingly thinking about our stuff because and some what some of it comes with our territory right we bought a recent company called flipgrid which is used in education for giving students and voice and it's scaling you know you know in a very big way and the point is we know now we've got to take all the lessons learnt it has to be gdpr comply there are all of these things the transactional costs of tech are not going down they're gonna only go up if there's one secular thing that's gonna change for all of us is that you know doing business worldwide is just going to be more expensive so that means there is an incentive for us in fact there's a competitive advantage for everyone in the room here to actually out think your competition on dealing with unintended consequences so that's kind of how I think about it and know in the terms of competition no longer are did you scale do you scale safely will be the only thing that may matter and so that's at least how I'm thinking understand and also I think part of what I've seen you guys do which you know probably sit down and interview Brad and you maybe a few other folks has been this look there's a way to propose a lightweight set of kind of regulatory frameworks that enhance trust still create the maneuverability for innovation and aren't trying to just do what people classically think of companies and like the digital Geneva Conventions perfectly it's not trying to disbalance the fate of the field in favor of one company and that's a very good point trying to just say let's make it good for all of us and that probably is one thing I would say is when I compare Silicon Valley and the maturity of I'll call it the players and Silicon Valley versus other industries we have still some ways to go because where we think of as our terms of competition versus what is the thing at stake for the industry we're just so lopsided we don't get that hey if we don't in fact self-regulate we will be regulated for example one of the considerations take all of the say I on the facial-recognition issue the reality is when we look at it the maturity you remember the Gartner guys and others would always have these maturity models that's kind of how enterprise adoption would go but we don't in scale we don't apply that right we just take some model that's just half-baked and say it's ready for scale you know damn the unintended consequences this is blitzscaling by the way that's right yes but the problem with that when you all its if you did it and said oh it is an unknown that's a that's blitzscaling yes ha this is it's completely known but when you know it you should yes not you're scaling it yes that's sort of to me the challenge sometimes we run into especially for a large company to do that that's unforgivable so the point is for us to be able to sort of that's where the Geneva Convention comes in if you think about you know it's fun it's amazing cyber we know it economically impacts basically citizens and consumers world over and small businesses because large businesses can spend the money tech companies are more competent in dealing with their own network Welner abilities and what-have-you so therefore that is where that Geneva Convention came in and I think a lot more cooperation industrial and initiatives I think would be important and regulation is inevitable you might as well engage on the policy to make sure that the regulation is smart yes has the right shape and is adaptive over time because people say oh it's everything that are changed yet fine start very light like the Chinese model from what I can observe is they definitely seem to be it's not like in China when there's a lot of talk and ok foo is written a recent book it's not as if China is open season in terms of data they are building their own set of regulations that is more along your lines which is in some sense the state policy there seems to also understand blitzscaling their policy yes well this is the thing I was just about to also go to which is their most the time when you get within a social context you said okay not companies but society what should when should society be thinking up what's gaming and they and they and the challenge is one of the great goods you want general in society is predictability and reliability and so generally speaking you want to only move into areas of uncertainty when it's really important it's being driven by some factor and you know the most obvious visceral one is war as I go ok we used to have to do all this because it's it's desperate but you know for example big transitions which can be the okay will actually in fact we have all of this kind of industry transformation and we have all these issues around you know kind of middle-class jobs or opioid academics or so forth and that's when you might start saying well actually in fact the speed at dealing with this problem because it's a systemic problem we just need to understand that we're gonna take inefficient shots on goal right and and and part of it and this isn't one of the things that I actually only really just started having this particular thought as I was answering questions on the media tour last week which is part of that I think also needs to learn one of the things that we didn't cover quite as much in the book is experimentalism right so like part of when you can think of an inefficiency you say well we take 10 shots like we're gonna try this one we're gonna try this one we're gonna try this one try this one and we will look at all of them they say okay this part of this is working this is working okay let's let's triple down on those and move the other ones out and government's usually pretty bad at doing that so we need to figure out how to how to do that now part of for example you the Chinese actually I think do this in in some good ways which is I've been thinking about how would be what would be the u.s. examples of the Chinese special economic zones like what would you do is you say well we need to run some experiments on how this stuff's gonna work well could we say look there are certain areas that are in somewhat economic disrepair we just need to be juicing them whether it's Detroit New Orleans and say okay let's try to get this back let's make this a special economic zone and let's work in the following ways and what I'd realize is an essay that I had written and published three or four years ago which was around special economic zone saying look what you should do is you should allow unlimited immigration immigration here with you know safety checks and everything else with jobs if you're investing in this community if you're getting the economy of this city region going back to going as a as a way of doing it you could do it through for example a payroll tax so you have to say we're paying us rates it's competitive us rates and we're paying we're actually even paying more in order to do this and I think those are things that we need to start thinking about how do we add to the societal corpus right and I think that Chinese the Singapore model I think those offer some of the tools set that maybe we could figure out our version and apply them and maybe the right first one is like special economic zone that's a person test let me yes we want to thank you in your book I know you sort of explore case studies out of both Silicon Valley and China what would you characterize is the core difference in the blitzscaling attributes between Silicon Valley and China so China has some advantages that it's deploying very well so one is raw scale of employees so for example when $0.10 said okay here comes mobile and we have this QQ that we're making all this money on from the SMS fees and so forth so classic like business model kind of disruption possibility they literally started multiple groups in multiple cities and said all of you have the mandate and you're competing with each other right this is kind of strange from an American corporate perspective which is well I got these three different groups and they're all competing with each other so which whichever it's like a you know battle royale survivor game well whichever if you make it out right of this mud pit oh by the way Microsoft when I joined in 92 we had that yeah we had os/2 Windows NT and Windows in fact the first meeting I went to was Steve Ballmer its OS to our stores to the next month he said it's Windows Windows Windows and it's sort of it there's blitzscaling Oh interesting okay that's another conversation to have os/2 some people probably still remember what that was and and so one part of it is that is the pure talent amount of talent so the number of groups competing etc another one which actually learned from got a real up and close and personal with LinkedIn China because in in the woods who know ways we were navigating China which is still averages you know which is this Chinese only project a product called Chi 2 because it was one of the ways that we thought we would also show that we're investing in China that were actually experimenting with things that were local to the market in addition the global linkedin network as a ways of kind of running a dual process and so I was sitting down with the team and they showed me a set of wireframes about what they were gonna build and they said we're gonna have this done in eight weeks and I was like you know I've done this investing game a little bit I was like no there's no chance you go to this in eight weeks like I've seen so many companies here in Silicon Valley it's a look at Valley moves faster I'm like no no you don't have to over promise so just tell me we know we're gonna be done in eight weeks is that look but we're really helpful for the key team if you come back in a month and you visit us so that we can ask you questions in morale and so forth I said okay fine I'll change my calendar around I'll be back in a month and I got back in a month and what the team had done is they've taken all the product team all the engineering team and all the design team and they had checked them into a hotel two weeks on bill would say used to watch the number plates of the people yes when they came in and when they left yes his scale that's exactly it was his version of what lei Jun calls 996 9:00 a.m. to 9:00 p.m. 6 days a week you're discoverable at your desk that was when Johnny was thirty thousand people right to give you a sense of how it operates oh that doesn't believe that you could go in to the house and check in no no it's it's discoverable that your dad yes right and and by the way Chow Chow is as doing that as well now but it's 10:10 it's 10:00 a.m. to 10:00 p.m. six days a week right and whatever 40,000 people or whatever number of people they have and so and so anyway so it's the LinkedIn example I went back at four weeks and because he didn't tell me he was gonna do it this way because I might have believed him I was literally like oh my god you're halfway there well yeah you're gonna be there in eight weeks and it was because of this intensity of literally when they were at the hotel it was breaks 30-minute breaks for meals you know 15-minute breaks for like a little walk a smoke etc etc and then work right you know and and and for sleep and this was a you know the the the LinkedIn JV in China not all not only just the kind of rather so that's another thing that the that the the China folks do and then the other thing that they're actually doing which we kind of Silicon Valley I know what he just said read you basically said we're lazy yes yes well compared to the Chinese yes right and and part of that I think culturally that most of the folks who are around are aged a little older remember the Cultural Revolution and remember the starvation that came from it so that's literally the definition of hunger right they're like this is our golden ticket we're going for it and and and that's important to realize and so when you part of the whole point of writing blitzscaling is we don't advocate that you ask so European other companies didn't necessarily do the European model that it's possible at the village stage maybe certainly the tribes certainly the family stage but it's not as you get to city and a nation which which it is there and so there's a stack of those things now what they what they are further behind on the curve of is we've been refining management we've been refining how do you manage efficiently how do you do these things including in blip scale so it's kind of that compare and contrast and they and the lesson usually in blitzscaling is play to your strengths right like yes lightly try to correct your weaknesses but don't try to like if you say great this is where you're strong we're gonna play the game on your terms bad now the last thing I'd say is part of the thing that in case anyone I don't think anyone here would have this illusion well the Chinese copy acceptors that are oh they're inventing all over the place right this is this this is a I get this question from Washington all the times like well they're just copying are things like no no no like I pay attention and one of the things that that that is actually the whole digital goods market the business model of digital goods is coming up that's that's a Chinese like that came out of the out of the WeChat the Y 'seeing environment and that's coming back and that's something that we're starting to learn as interesting business model because which are the business models that scale are actually it's it's a fundamental part of the Penn the blitzscaling is hanging these ones work these ones don't work as well now just so that people realize it's not just the tech thing I'm gonna actually go to another kind of blitz killing thing which is there's a company that some of you may be familiar with called Zara and Zara is fast fashion it's a fashion manufacturing and it's not manufacturing in China for low-cost its manufacturing in Spain but what they did is they said let's close the loop let's make it really fast we will use our stores and our salespeople as as immediate Intel and that Intel will go back to the designers and go back to the the the robotics there is some robotics in the factories but not only robotics and there to produce and ship new clothes to the storage such that it's a two-week turnaround right that's a way that you say look we now need to work in a world of data in a world of learning and a world of a faster clock and faster acceleration its action as the way of doing that so so it's totally doable across across the spectrum the industries and so now it may be good that we do it more within our pure tech companies because you know we have maybe margins we have a better understanding attack with better understanding of how do you build products on data how to use data in competitive Intel but just as software is transforming the world it's essentially going right the whole area and so that's part of the example that we use in the book as it's not just that's know that's a great one that's a great one I mean I mean I think that that's the one of the fun things for me is to see you know today pretty much every company out there is becoming a digital company one of the foundational challenges is as much culture it's as much understanding the physics of digital network effects changing in some sense all these other industries and you sort of run into this which is structurally sometimes companies are organized for a very different factor of production but now you have a new factor of production and you need to reorient and and right there lies it's not as much in fact they're willing to change the business model they're willing to change their product but it's that structural change that allows them to get to those network effects that's sort of the real either accelerator or impediment and since we have a bunch of geeks here I'm gonna ask what is hopefully a quick geeky question just for fun and then we're gonna open it up to questions from you guys quantum computing something I still haven't quite gotten my brain around right you've been focusing on this more what do you think the way that people should pay attention to quantum is and what do you think the potential is there should the way we got started on this was there was a CTO at Microsoft called Craig Mundy was still in fact very much associated with us who multiple years ago god this program started at Microsoft the intuition for it or the motivation for it quite frankly is a lot more easy to get today than when we got even started because if you're spending 10 plus billion dollars a year of capital on essentially building compute you are going to be very sensitive to what comes next in terms of compute power and there are all these computational problems whether it's that enzyme in food production or the catalyst that's gonna have to absorb all the carbon when we're looking for the miracle around climate change which are still computational problems that can't be solved by classical computers so the intuition for why or the motivation for why we need quantum is right there the approach we took it's controversial because what we we sort of said he's look it's not even about achieving that quantum supremacy as a milestone because if you just did that when it is not a general-purpose quantum computer you wouldn't have really achieved say what the PC represented or the mobile phone represented as sort of a democratization and the birth of a complete new era of computing and so we're going for it which is we're going for building the general-purpose quantum computer and the challenge of course is how do you stabilize these qubits so they this guy who is a Fields Medal winner who works at Microsoft he came up with this concept of a topological property that's a way to stabilize these qubits so we've bet on that now the challenge of course is to go find the physical instantiation of topological matter and somewhere in the 1940s or 1930s I think a paper was written by a theoretical physicist that there are these particles called Marana particles that will exhibit these topological properties lo and behold we have these world-class physicists who someday will win a Nobel Prize because we're you know close to stabilizing those particles so essentially it's math instantiated in some physical properties that we discover and then of course you gotta build an entire computing stack and there's all sorts of sophisticated things what's the controller to the quantum computer so we're in it we're spending a lot of money you and the board approve it yes the nice thing is if this goes back a little bit to the blitzscaling thing is one of the other at least terminology we use is what we call no regrets move right even let's say a lot of these things take a lot longer than what we have envisioned are their byproducts of what we are doing that can in fact be monetized used in other contexts a great example of it is we now have the quantum simulator on Azure and the quantum simulator on Azure I thought who will it be maybe some students it turns out though there are a lot of people who are in fact at scale consuming a lot of compute cycles because they want to get ahead on the quantum algorithms and one example of that was a couple of researchers are writing Case Western or Cleveland Clinic who had an an an algorithm for fast lookup on MRIs to do tissue matching basically so you can even discover a tumor while you're doing your first MRI and but they couldn't solve it using a classical computer so they're doing the simulation on Azure so we're finding of course the azure simulator is one but there are as you can imagine other things that you do in order to build a quantum computer that are massively you know advantages for anyone who is in the cloud business for questions yes exactly if your mind hasn't been a little fried and I can continue if there's nothing but I wanted to make sure you guys are I just when you're doing blitzscaling or you're doing what you did at Microsoft you know the CEO recommends the strategy but the board approves it and you know board is a collection of people a lot of them didn't necessarily grow up in a digital age lot of them are used to looking at backward looking metrics and efficiency so how do you get a board of directors to be in the right place to sort of make the right decisions around strategies like blitzscaling and when when to do it and when not it's yeah I can start I mean it's it's it's a you know something that I've I would say grown to recognize as one of the foundational jobs of a CEO quite frankly growing up people one level removed from a CEO all these years unlike many of you who are entrepreneurs who deal with boards and investors all the time I didn't have that skill set and I realized how important it is when you especially as you said not everybody in the board is Reed Hoffman or Bill Gates so we have I think you know what would our board size of Thor 13 with lots of different back you know adapt in different areas and the one thing that I realized though is what the board is trying to do is pass judgment on your judgment when we say it's not as much it's kind of that derivative you've got to get right because if you think that your job is to explain to the board in full detail the quantum computing like what what causes you to make that judgment that's gonna be hard it's going to be hard and it sort of unreasonable even so therefore one of the things that at least I realized is what's the framework for them to evaluate me and my management team on the judgment we are passing and they're quite honestly this is where being transparent being super intellectually honest is the most helpful thing in high-risk businesses like ours where there is so much betta and when you take a high beta thing and describe it like a sure shot is when you can absolutely lose all credibility so those are some of the things that I would say at least I've learned and the most important thing is that don't think that they're passing judgment on the strategy they're passing judgment on your judgement of strategy yeah and and and what Sachi said is exactly right two other techniques one is a board as a number of people you feel we need to move in this direction add someone who's the catalyst the board have that be an explicit conversation with them about look I think this needs to be going this way do you buy in in which case as opposed to because because classically the board signs hang okay is the management doing the right thing do they have the right capability the future this is the the the the second derivative of judgment that Sachi is talking about but it's like okay here's someone who is also saying look we need to be going here we need to be understanding that and so forth so so think of it as a team and then in some cases I think one of the things that's very useful to do and this is this is a kind of it isn't the kind of a full-stop I realist but to really invest in some board education you go this key thing this battlefield this product this piece of technology they need to understand they're not digital natives that's fine they need to understand this and say look in order to do this you guys need to come we need to set up a one day to day training thing and you need to come for it right in order to do it and and that's a big cost and a big play but sometimes that's the only thing that actually work okay first of all I want to thank you for coming this has been fantastic and in the blitzscaling context I think context is really important as far as racing and certainty to where you want to be we've all seen how Facebook has been in the news with data and some of the challenges around privacy if they've had and Microsoft you know I think by and large has been perceived along with Apple and some others of really taking a a kind of a more measured approach to this but arguably with all the data that Windows collects with the social graph of github and and LinkedIn and some other stuff you have a lot of data of not just you know my cat preferences and crazy stuff like that but like real stuff about real companies that matter and if you really take that to the extreme like say NATO or something like that that's using your products and as you're applying AI to this and you're racing to this in this competitive environment to the future what are what is your responsibility as far as privacy and AI and all these issues that's a great set of questions and this is one of those places where I think we are really confronted with scaling while at the same time in that unit of scale building in right in the core the ability to deal with any unintended consequence so let's take first I'll just say the largest part of our business is foundationally around math helping our customers whether it's individual consumers or large organizations manage their own data so when somebody moves to Microsoft 365 or o 365 we don't start by saying this is our data it's their data so tenancies a massive software construct for us and for most part it's the tenants data and what is it that we need to do to help them get benefits from their own data so think of it that way and our business model helps when you have primarily a software sort of slash subscription or a consumption based business model you sort of our incentive to do so so that's and this is not about saying ads are bad or not I mean I'm you know it's sort of I'm just saying that large part of what we do is foundationally about making sure that customers are dealing with data on their own terms now having said that there are three major areas that we are absolutely at work in all of these carriers we have to do a bunch of work I believe the industry has to do a bunch of work and then there will be governments involved as well so one is on privacy I think the font the way at least I approach privacy at this point is assumed that this is a basic human right and that it's going to be a an expectation of every customer in every context that there's going to be full transparency and that they will be able to control what data is being collected and what it's being used for so GD P R is the beginning of that so in some sense now you even have a regulation that you actually have to be compliant with and we for example took the data rights of Gd P R and made it globally available across Microsoft so we are not even saying because I think it's good for in fact the world to not have transactional costs where we fragment on privacy regulation in fact if anything I'm hopeful even in the United States I know California passed law which is great except we want it as a federal law and the more we harmonize I think privacy laws I think we'll be better off and on other area and privacy is cloud act I think I don't know how much you all track cloud act we you remember we went and took the United government of the United States to the Supreme Court twice because of the balance between privacy and public safety we realized that there's a balance that's required but it needs to be done within a framework of law and the cloud Act is very helpful in that so we finally have a piece of legislation which the US thank God is leading but one now what we need is the United States to do bilateral agreements between the US and the UK and the rest of the European Union so that we can start establishing a real quorum and an equilibrium around this very important issue of privacy in public safety a second area is around cyber and in fact you know that read reference this there's a lot one needs to do around cybersecurity we ourselves are converting our own operational security all the signal and all the data that we have whether it's the login data the security events the machines we scan or what-have-you all that how do we convert it into better security products for our customers right that small business that's being attacked or the in do the account guard is a new product we launched which is a very good example of that which is email safety and this is all about converting our operational security posture into better email safety around say strontium attacking you or what-have-you and this is what happened with a couple of senators and that's how we got to this product now the last point I would say is oh and that's where the digit that digital Geneva Convention comes in right so what we do is good but we as a tech industry need to come together and this tech Accord a lot of you support it and a lot of businesses I mean a lot of tech companies support it is fantastic this is us taking the pledge that we will use all of our technology to protect the most vulnerable which is the individual users in countries and small businesses that's a great step we need to now even go to the other forums where I think nation-states also sign up for that pledge and then the last one is on AI and ethics and the idea that you should have a set of principles that are even design principles and we've even thought about talked about it lies as what is the moral equivalent the Hippocratic oath that we as creators the way I can take in order to create AI that one empowers humans also protects against bias so they we need to start with a set of principles but also be open to reads earlier point that when sort of there's a technology which is going to have real consequences let's take like facial recognition that's having regulation is not a bad thing in fact if anything you know in fact increase the adoption of technology knowing that there's trust in it and so that's how we're approaching at least our work across privacy security and ethics around AI so we promised Satya that he would actually be able to make his plane which means that we will take drew okay fine wait you're playing last question you became CEO of a company massive scale you mentioned growth their textbook as a favorite you know all the books are I'm sure you talk to many people but read a lot of books any parting book recommendations the the other book that I read and it's kind of a an interesting one and and the reason I think a lot about drew the benefits if you think about the foundational challenge we all have like the thing fish you got to start as we all won the lottery right here we are because we work in this industry at a time when this industry and this technology is shaping everything and everybody and when I came to the United States in 1988 from India one of the things that struck me was this country is magical in terms of its I'll call it egalitarian egalitarianism and in fact I've never seen such a large scale population of middle-class Americans and the prosperity that was so broad spread it's just stunning to me to then conceive just kind of like a science fiction place and in fact angus Deacon has this beautiful phrase he uses which he says in the United States is the only country ever in our history to have that blue-collar aristocracy and that's what's lost today and so there's this book I read recently called squeezed I forget the name of the author it was for me as someone who's grown up here to really get a better micro economic understanding how precarious middle-class jobs are middle-class lives are and these costs like health care education child care which all by the way really technology can help I mean the health care cost somebody described is not some miracle drug it's all work flow and so in some sense that grounding there are so many problems to be salt are so many costs that can be tamed using digital technology this book and their many many I can go on but it helped me get a better life and one of the things I'm doing a lot more is reading individual lives to be a lot more in touch with what are the real challenges and this was one of those very well written books which was helpful for me the other thing I'd add in case some folks haven't encountered it yet is anti fragile my job is highly worth reading yeah so with that all right thanks out here for coming down thank you so much [Applause]

Channel: Greylock

Views: 33,508

Rating: 4.8808193 out of 5

Keywords: startup, blitzscaling, growth, business, technology, Microsoft, Greylock Partners, podcast, company culture, strategy development

Id: HvO9G4h5vsc

Length: 68min 55sec (4135 seconds)

Published: Wed Nov 14 2018