PHILADELPHIA -- In a talk earlier this week to a packed house at Wharton, Microsoft CEO Satya Nadella stressed the importance of fostering empathy because it unlocks customers' needs.
The CEO of the software giant also told the audience at Irvine Auditorium how he unplugs at night and reads books. Here we present an edited version of his remarks and questions posed by Wharton marketing professor and author Adam Grant.
Adam Grant: Talk to us about your early ambitions.
Nadella: All I wanted to do was play cricket for India, work in a bank, and study political science. That was it, but my father ... led me to explore the world outside. I had curiosity.
Grant: You took an entrance exam to study computer science and failed it. How did you rebound?
Nadella: My father was stunned at how my report cards were so bad. He was very nice about it, and said, "That must mean you have some other passions." I was in ninth grade when he bought me a Sinclair ZX80, my first computer. That turned me on to a passion. I was a tinkerer. I got a computer science engineering degree (in India), and then a masters at University of Wisconsin. Then I went to work at Sun (Microsystems).
Grant: What's your story about getting to Microsoft?
Nadella: I was going to go to business school at the University of Chicago, and I got an offer from Microsoft. The guy who hired me convinced me to drop out, saying 'you'll end up working here afterward anyway. Join now!' And so that's what I did.
Grant: You joined during the early days, before Windows 95 came out.
Nadella: We make platforms and tools for others to create more technology. There was a profound shift to the Intel-based architecture on desktops and servers. We were able to ... take that shift and democratize technology for small and large businesses. Look at productivity stats at that time; the last time technology truly contributed to productivity was the late '90s and early 2000s thanks to some of the work at Microsoft and others.
Grant: Then-CEO Steve Ballmer stepped down. You were not on the short list for CEO. How did you prove you were the guy?
Nadella: I was not sitting around in my office waiting for Steve to retire! (Laughter) I was asked to raise my hand and the board did what it should do -- I talk about this in the book. I was asked by the board "Do you want to be the CEO?" and I said, "Well, only if you want me to be." That's just who I am. I remember recounting that to Steve (Ballmer) and he said, "Well, it's too late to change."
Grant: Every year in leadership class, we show Ballmer doing his monkey dance. But that's not you.
Nadella: I grew up in the company that Paul Allen and Bill Gates founded, and that Bill and Steve built. The best advice Steve gave me was, "Don't fill my shoes. Be your own person." I did the best to learn from them.
Grant: You organized a major culture change. One of your first quotes: "We're known as the know-it-all company. We need to become the learn-it-all company." What led you to that?
Nadella: The product was a hit. Microsoft had grand success. In the late '90s and 2000s, there was daylight between us and the competition. Now it's a cluster of six or seven of us. The inspiration for that quote came from reading Carol Dweck's work, around mind-set, I borrowed it completely.
Grant: You're candid in the book "Hit Refresh" about challenges in your family and how you developed empathy.
Nadella: Most people think empathy is a soft skill, not relevant to the hard work of business. If you look at innovation, it's your ability to grasp the unmet, unarticulated needs of customers. It comes from empathy. It's not a button you switch on.
Life teaches you that. The birth of my son, Zain, changed that. That night everything changed. Because of complications, he was born with cerebral palsy. For years, I struggled with it. Why did this happen to me? My plans are out the window.
Then, I watched my wife driving him to appointments and doctors, trying to give him the best shot, the best chances. Over the years, I realized nothing happened to me; something happened to Zain (now in his 20s). I had to step up and be the parent and the father. See life through others' eyes, even someone as close as your own son. (The Nadellas got married in 1992. Besides Zain, they have two daughters, Tara and Divya.) People talk about compartmentalizing work life and private life. The reality is, how does one do it?
At work, I was open about accessibility, that became my passion. Zain really is locked in, so we like him to be in control of his own music, for example.
Grant: Microsoft was once known for stacked performance rankings, and people being pitted against each other. You're shifting that, bringing empathy to the table.
Nadella: That's customer obsession, meeting unarticulated needs. Looking at log files, sales people talking to the customer. Diversity and inclusion, the culture comes by behaviors in every meeting. Do you recognize differing styles? Also, no competitor respects boundaries of our organization.
Grant: It's your four-year anniversary as CEO on Feb 4. You have more than 100,000 people working for you. What's your road map?
Nadella: What bothers me, maybe because my father was a Marxist. Anyone at any company can walk out. The notion of "I work at Microsoft" -- that's what I wanted to change. You should vote with your feet. Microsoft works for you. I stayed for 25 years. Microsoft gave the most amazing platform on accessibility. It's not beautiful everyday, you have to tolerate imperfection.
Grant: What happened after the Grace Hopper conference? (Nadella made tone-deaf remarks about women not asking for raises, advising they wait for "karma.")
Nadella: I made a completely stupid mistake. It's a nonsensical answer at a women's conference, for a CEO of a company talking around what someone should do if they're not comfortable asking for a raise. It was a great learning moment; no one cared about my personal experience. Did I get my responsibility as a CEO to shape the system? We have a real challenge in our industry; it's not just about having parity of pay, being able to have equal opportunity for equal work. On aggregate, women's representation, is it growing? In tech, we're seeing glimmers of hope but we have a long way to go.
You have to work at multiple things: We have to make sure young girls are attracted to computer science, such as the curriculum around Minecraft, for example. We have to make it possible for people to get into Microsoft and once they're there, the support, the mentoring that helps them feel a sense of belonging.
Parental or caregiver leave are more conducive. Unfortunately, still the burden of some child care and parental care falls on women, so you've got to create systems to support them.
Grant: There's a lot of humility from you.
Nadella: From ancient Greece to modern Silicon Valley, the one thing that has brought down empires is hubris. So I approach it as confidence, but understand confidence with humility.
Grant: What's the role for A.I.?
Nadella: What's fascinating to watch when we launched Window 10 is eye-gaze. That's an input for someone who has ALS. They can type with their eyes. Learning tools can give dyslexic kids the ability to comprehend and read. A.I. can read tumors while doctors spend more time with patients. A.I. can help humans. That said, we should be clear-eyed about displacement. What are all the new jobs created?
Grant: Elon Musk -- a famous Wharton alum -- scares a lot of people, if A.I. lacks human ethics and goes off the rails. What do you say?
Nadella: The debate on AGI, when artificial general intelligence happens, let's leave that aside; let's not abdicate out control of how things are shaped. It's a design choice; start with people building the app. How do decisions get made? We should in fact -- like for user interface, we should have good guidelines. ... You have to have processes to ensure there aren't unintended consequences. Design for empowering humans.
Grant: Now the audience questions. What was your favorite class in college?
Nadella: My favorite class in middle school or high school was poetry, which is related to my love of computer science. Poetry, I learned about compression, expression, the abstract is so beautiful.
Grant: Why do you wake up so early?
Nadella: I wake up at 5 or 5:30 ... why? Because I got to get my run in before I go to work.
Grant: As CEO, you invited Bill Gates back into the company. A lot of people would have been terrified to do that. What's it like to work with him?
Nadella: For me, it's super important. A founder has a status in the company that can't be replicated. No one goes to Bill and has an average day. You prepare. He draws the best from folks. That's invaluable, even for me. He calls it as it is. That intellectual honesty is rare. He pushes me and sets high standards.
Grant: Your work-life balance. What's the challenge like with a special-needs child and a commute to Vancouver?
Nadella: I wish I had a formula. It's quality of time. How much time do you spend with your kids and you're not reaching for your phone?
Grant: Do you unplug from technology?
Nadella: I read before going to bed -- analog. No screens makes a real difference.
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