♪ david: you have now had to follow bill gates and steve ballmer, two legendary figures. satya: look, the clear message was don't try to be like us. david: did steve say if you do this well, we will be happy? satya: look, if you do a good job, maybe you will have another job, maybe you will not. david: the result of having empathy made you a better ceo? satya: my pursuit is the growing sense of empathy for people around me. david: do you get a standing ovation for what you have done? satya: no, i get a lot of people asking me, saying, hey, come and fix my computer. [laughter] >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪

david: i don't consider myself a journalist. and nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? you have now had to follow bill gates and steve ballmer, two legendary figures. did you feel at that time you were really ready for the job following those legends? or were you saying i could do a better job than they did? satya: the best advice i got from both bill and steve i think helped me a lot. because they're clear message was, don't try to be like us. don't even bother to sort of say, oh, i am seceeding these

say, oh, i am seceeding these people. just be your own. in fact, i remember very distinctly, even during the interview process, the board was conducting -- they asked me, do you want to be the ceo? and i said, only if you want me to be the ceo. the feedback i got was that people who want to be ceos are like, i want to be ceo. i said, look, that is not me. i remember when i was going talking to steve, and he said, yeah, just be yourself. people who want to be ceos are like, i want to be ceo. it is too late to change. david: since you have been the ceo 3.5 years, the stock is up, i guess about 120%. when you go to your annual shareholder meetings, do you get a standing ovation for what you have done? a standing ovation for what you have done? satya: no, i get a lot of people asking me, hey, look, come home and fix my computer.

david: they wanted me to stop playing cricket and take my studies a little more seriously. david: you were an avid cricket player, is that right? satya: yes. david: when did you realize you wouldn't be a professional cricket player? satya: pretty soon. [laughter] satya: quickly i realized at satya: quickly i realized at best i would play what is considered perhaps first-class in india, but i was not going to go much further than that. but that is when my dad, in fact -- i remember one of the big decisions that changed my life was -- my entire outlook was so provincial when i look back at it. which is, hey, i want to stay in hyderabad, maybe study economics and political science and work for a bank. that was about the extent of my ambition. he looks at me and said, what are you doing? you have got to get out of this place. he pushed me out to get to an engineering school, and that pretty much, of course, pretty

much defined the trajectory afterwards. david: your father was a member of the senior civil service, which is an important position, i guess, in india, is that right? satya: my dad was a different guide in me. his academic prowess, which is humorous when you look at my report card. he was always humorous. he would look at my report cards and say i don't understand how anybody can have these kinds of marks. but the nice thing about it was he would say it in such endearing ways, that he would never make me feel bad. [laughter] david: the marks weren't high enough? satya: not high enough. the guy never met an exam he did not ace, as he would say. [laughter] david: ok. satya: and so, it was astounding to me that he would have a son who could not ace an exam. david: your father is still alive? satya: yes. david: he must be proud of what you have achieved? satya: not enough. [laughter] david: so, you went to college in india, and then you decided to go to graduate school in the united states. satya: yeah. david: where did you go? satya: i went to the university of wisconsin in milwaukee, and that is when i switched from electrical engineering to computer science. david: but, if you are from india, the university of

wisconsin-milwaukee could not have been that well-known. how did you happen to wind up there? satya: i had never been to bombay, and then i showed up in milwaukee. david: did you have a winter coat? [laughter] satya: that was my first valued possession in life, a winter coat, which is very important. unfortunately, i picked up this bad habit of smoking in india, in college. the one nice thing about going to school in milwaukee is you are a smoker, you have to go out in the winter and smoke. that one winter in milwaukee cured me of my smoking habit. [laughter] david: wow. good. so, you got a job after you graduated at sun microsystems. and what was your job there? satya: i was a software developer. david: ok. and then you got recruited to go to another company called microsoft. and that was in 1992? satya: that's right. david: so, but you also had applied to go to the university of chicago school of business, so how did you decide to do one or the other? satya: you know quite frankly, david, i was very committed to saying oh, i want to go to the business school, maybe even go to wall street.

david: the highest calling of mankind, right? [laughter] satya: says david rubenstein. [laughter] david: right, right. satya: and i thought, wow, maybe that is what i should do. then somewhere along the line, i started talking to people. and they said, hey, why would you do that? you are in tech. you should really come back. it was an amazing time because windows nt was just starting out. and i subsequently went and did some combination of part-time and other courses, and actually finished my mba, which i find astonishing. david: you were commuting, working, and on weekends commuting to the university of chicago. and that must've taken a lot of energy to do both. right? satya: it was crazy. david: so, you are beginning your ascent up, but dealing with some personal issues. your first child was born with cerebral palsy. he is 21 years old. so how did you realize that was going to change your life and how have you dealt with that issue?

satya: yeah, even, i was 29 years old when our son was born. and if you had even asked me an hour before he was born, what was going through my head, it was all about, oh, is the nursery going to be ready? what is going to happen to our weekends now that we have a son? when will my wife get back to a job, and so on. but obviously everything changed that night. he was born because of an undetected in utero distress. he is quadriplegic now. the first, maybe even two years or more even, i was more about, why did this happen to me? what happened to us and all of these plans i had are now have all been thrown up in the air and changed?

whereas my wife, what came naturally to her as a mother was she said, ok, i'm not going back to my job. i am going to really care for my son, drive him around for therapy after therapy. and i watched that. without schooling me, i got schooled. nothing happened to me. what happened was to my son, and that it was time for me to understand that, realize that, see life through his eyes and do my duty as a father. that, to me perhaps, did not come to me in one moment. it is something i think that took time, but as i figured it out, it changed me, both as a parent, but also who i am today and how i approach everything. david: your wife is trained as an architect. satya: that's right. david: she has given of doing that for a while? satya: that's right. david: and you have two daughters. one daughter has a severe learning disability as well.

how did that affect you and your wife? satya: in fact, one of the things that happen because of our son is we built up a tremendous community of people, whether it was therapists, or other parents of children with disabilities. and so we were involved in that community. by the time our youngest daughter came into our lives, i must say that we had the richness of this community to support us, and when we recognized very early on, my wife and i, my wife in particular was quick to realize she would need additional help. and so, we found this school in vancouver, bc, which was all around neuroplasticity. the idea was you can train your brain to learn, sort of compensating. and so, we decided that we are going to move the family to vancouver. my son would stay with me in

seattle. my daughters and my wife were going to live in vancouver and we were going to commute again over the weekends. but the thing that, quite honestly, that is where it came all naturally to us. in some sense our son had taught us what it takes to give people with disabilities the best shot, and so it is something we took on. david: and your son lives with you now? satya: yes. david: and one of the qualities you say you got from all this was empathy. and that the result of having empathy made you a better ceo and a better person. is that fair? satya: yeah. in fact, when i look at empathy, and most people think that empathy is something you reserve for your life, your family, your friends or what have you, but the reality is, it is an existential priority for a business. because you look at it, like what is our business? our business is to meet unmet, unarticulated needs of

customers. there is no way our innovation to meet unmet, unarticulated needs is going to come about if we don't listen. not just listen to the words, but go deep to understand what the needs are behind it. so, i think empathy is core to innovation, and life experience, if you listen and you learn from, teaches you. i would not claim, and i have sort of talked about it, any inate capability of empathy that i was born with. if anything, it is life that has taught me. if anything, my pursuit is every year, is there a growing sense of empathy for people around me? david: did steve say if you do this well, we will be happy. if you don't to this well, you might not get another job? satya: one of the things that is amazing about bill and steve is, their candor. it is not like they sugarcoat anything. they are very honest about most things in life or everything in life.

they are very clear. if you do a good job, maybe you will have another job. if not, you won't. [laughter] ♪

♪ david: you are rising up in microsoft. you are running the business solutions division, but then they said, we would like you to run the search business, called bing, and did you say you can't compete against google, i do not want to do that? or did you say i am happy to do that? satya: i had just been promoted to lead our business solutions team. i mean, i was loving that job. it is something that i aspired to do. and steve comes around and he says, hey, you know what, i have an idea for you. i think you should go run this

group that has high attrition and we have a very tough task ahead. and i don't know whether it is a good career move, but i need help and, you know, think wisely and choose. [laughter] satya: and i was like, wow, this is an interesting choice in front of me. and i remember very distinctly going that night to the building, in which the bing team and our search team was housed. and it was what, maybe 9:00 or so, in the parking lot was full, people were in. and i said, wow, what is the deal here? i mean these people are like working hard, inspired, so i said well, i have got to join this team. the fight that they showed caused me to not to take the easy path and get in. david: did steve say if you do this well, we will be happy.

if you don't do it well, you might not get another job? satya: that is correct. steve was -- one of the amazing things that is amazing about both bill and steve is their candor. it is not like they sugarcoat anything. they are very, very honest about most things in life, or everything in life. and you are lucky. if you do a good job, maybe you will have another job. if you're not, you won't. david: and you did a pretty good job, but then they came along and asked you to run another business which was not competitive at the time, and that was your cloud computing business. how did it happen that amazon, which was not a computer company more or less, became a giant in cloud, and microsoft, right nearby, wasn't a giant there? satya: the interesting thing is what happens when a company becomes successful is is beautiful, virtuous cycle that gets created between your concept of product, your capability, and your culture, right? you really have all these three things fall into gear and they are working super well, but then

what happens is the concept that made you successful runs out of gas. it is not growing anymore. you now need new capability, and what happens is the concept that in order to have that new capability, you need a culture that allows you to grow that new capability. we, our server business was growing strong double digits, a higher-margin business, and you look around on the other side of the lake -- here is a very low margin business called the cloud, and people look at that and say, why would we do that? when we have such an amazing, fast-growing, high-margin business? and so, i think that is the challenge. to be able to see the secular trends long before they become conventional wisdom -- change your business model, change your technology, and change the product, is the challenge of business. tech is unforgiving, but quite frankly, now that tech is part of every business, i think all

of us have to deal with it. david: you get to be ceo of this company, and are following two legendary figures. how did you say i am going to change things? satya: i was the consummate insider. i spent 25 years, 22 years or so when i became ceo. growing up in the company that bill and steve built, i understood like the back of my palm all the things we got right, and all the things we got wrong. and i had a point of view on what i wanted to do if i was going to become ceo. we need now to make microsoft thrive in a mobile first and cloud first world. it was not about trying to criticize our past or praise the past, but what we were going to do in the future? david: one of the things you try to do to change the culture was to change what was known as a very proprietary culture at microsoft. microsoft said this is the way we do things. we don't want to cooperate with other firms necessarily, competitors or other firms.

how did you change the culture? satya: i said look, let me not these things as zero-sum. if anything, let me approach, even our traditional competitors and say customers are hetero genius. they use some of what we do, and some of what you do. let's figure out a way to combine forces where it is market expansive and satisfies customers. at least that is how i have approached it. and it is a lesson i learned in my early days at microsoft. david: historically, windows and office were your two cash cows. they are the biggest source of profit? satya: absolutely. david: so after those two, and you expected them to be a major source of profit for some time, you have other things. you spent $26 billion, the biggest acquisition for microsoft ever, to buy linkedin. what does linkedin have to do with microsoft? satya: if you look at it, we have one billion users of windows and microsoft office 365. and what is the common thread there? they are all professionals. they are all people who are trying to get things done.

so, we have the professional cloud and the professional devices in the world. and the vision was to combine that with the professional network of linkedin. in fact, if you look at some of the integrations that we have since launched, you can be in outlook, you can get an email -- i can get an email from david rubenstein. i can go look up your linkedin profile, which i hope you have. david: i will get one today. but yes. [laughter] satya: and then sort of look up all the mutual connections we may have, so the idea that the professional network and the professional content can be brought together, i think ultimately it can be a big driver of productivity. so that is why. one of the other big pieces that has been a real game changer for us is linkedin is the way people do business to business sales. if you want to be able to reach

customers and sell, this integration is going to be a game changer. same with talent management. so, i think we have a lot of synergies between the products that are now coming to. david: you gave a statement about women's pay. satya: i just gave such an absolute nonsensical answer. when i talk to women who are very close to me, very senior, very successful women, that are key to microsoft and heard even their own personal experiences, that is when it struck me. david: did you hear from your wife about that? satya: absolutely, my mom and my wife. ♪

♪ david: almost everything you have done since you have been ceo, the last three and a half years, has worked perfectly. the stock is up, the market value is up, everybody likes you. the only thing that i could find that anybody criticizes you for was you gave a statement about women's pay at one point, and you correctly, i think, changed your position the next day, but can you explain what happened? satya: absolutely. i was asked about pay equity and, in fact, i gave such an absolutely nonsensical answer, which maria who was interviewing which maria who was interviewing me was kind enough to correct me

while i was on stage. i was answering a question literally using some past -- i mean, my own personal experience without understanding the broader context, the depth of that question, which is what is a person like me, who is the ceo of a company, doing to make sure that, one, women can fully participate in our companies and in our economies, there is equal pay for equal work, and more importantly, there is equal opportunity for equal work? that was the real question. it was not about what about you, what career advice you have for what career advice you have for me? it was a great learning moment for me. it is something that i obviously whether it is gender diversity or ethnic diversity, can first come into the company, do their

best work, so that we can then serve our customers. that is a realization which i thought i had, quite frankly, but i am glad i messed up so publicly because i think i internalized the lessons from it. david: did you hear from your wife about that? satya: absolutely. at that time, my mom was alive as well, so my mom and my wife. my wife had to give up her career because of our son. but even in my mom's case, she struggled. she in fact, now i realize it a lot more than i did growing up, the trade-off she had to make, where the system that she was working in did not support her reentry into the workforce after she had both myself and my sister. david: so, you have about 125,000 employees, something like that. so, what percentage are male, what percentage are female, and how many senior women do you have?

technology is not a place where a lot of women have risen to the top yet. relatively speaking. satya: in fact, one of the things we have made good progress on is on the women's representation, which we have a long way to go. i mean you have got to remember that in tech we have a particularly tougher issue because of technology disparity in terms of gender diversity, but let's start with the progress, which is in the last year, we have gone from around -- we improved to 27.7% of women coming into the organization, which is around two points more than historical. and in the technology side, where we have improved by four points. so that's, i would say, movement in the right direction, but not enough obviously. one of the things our board also did was to change the compensation system for me as well as my directors, to say, look, progress despite all the work that we may do, programs we

may have, let's even tie compensation of the senior-most people, including the ceo, to real numerical progress. so, we are doing everything, but quite frankly, it is going to take continuous vigilance, continuous push, and it is a top of mind issue for all of us. david: you have only been doing this 3.5 years, which is a relatively short tenure for microsoft ceos. how many more years would you like to do this? [laughter] satya: you know, i have been at microsoft now for 25 years. and i think the thing that i feel that gives me that source of energy, is really that sense of purpose of the company, because quite honestly it is not -- i do not know how it is up to me or how many years i will be there. i think it will be fun for me to do it each day and it is a real privilege to do it each day. ♪ retail.

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♪ nejra: breathing room. the sec gives a 30-month reprieve on mifid research rules. mifid ii creates opportunities for exchanges and the level of preparation is well advanced. and, the castle walls are about to come down for european banks. we break down how traditional lenders will have to share their data with best in tech rivals. welcome to "bloomberg markets: rules and returns." i am nejra cehic. "rules and returns" is where we