“I don’t think anybody knows what the industry will look like in five years because every eight or ten years there’s an inflection point,” John W. Thompson, chairman of Microsoft Corporation, said when asked how the company’s business will evolve in the next few years. “There’s a pattern of change and it’s difficult to predict.”
Thompson, a Silicon Valley icon who succeeded Bill Gates as chairman of Microsoft in 2014, joined UCLA Anderson Dean Judy Olian in a wide-ranging conversation Monday before a capacity crowd in Anderson’s Korn Convocation Hall. The event was part of the school’s Robertson Lecture Series on Global Business Leadership, which provides students, staff, faculty and others the opportunity to hear top business leaders discuss issues that affect global business and the political economy. The lecture series is made possible by Chip Robertson (FEMBA ’06) and his family in conjunction with UCLA Anderson's Center for Global Management.
With Olian guiding the hour-long conversation, Thompson touched on a variety of topics. While declining to predict what Microsoft will be like in five years, he did say the company would be guided by three core principles. First, he said, the company would focus on personal computing with a goal of making it easier for people to interact with technology. Second, Microsoft will look to help users become more productive through business enterprise software such as Office and Word. It’s in this realm that Thompson believes many users will feel the effects of machine learning and artificial intelligence.
“The third one is obviously the cloud,” Thompson said, noting that in 2014 Microsoft pivoted from protecting its Windows operating system and began shifting emphasis towards the cloud.
Before joining Microsoft, Thompson was the CEO of internet security company Symantec, starting in 1999. He retired from Symantec ten years later and within a year became chief executive of Virtual Instruments, a privately held business technology startup. In March 2017, Thompson left Virtual Instruments as it merged with another San Jose startup, Load Dynamix. Thompson began his career in 1971 at IBM, advancing through the ranks over the course of 28 years to serve in senior executive positions in sales, marketing and software development, and as general manager of IBM Americas as well as in the company’s Worldwide Management Council.
On machine learning, artificial intelligence and virtual reality
Thompson says that artificial intelligence and machine learning are different from virtual reality. Artificial intelligence and machine learning, he says, will continue to perform tasks that are now part of certain occupations. “That will have a profound effect on lots of jobs,” Thompson says. “Tech has already had a material effect on the job market. We have to embrace the new.”
Virtual and augmented reality, though, “will make some jobs more efficient and productive.” As example, Thompson described surgeons receiving assistance during an operation, receiving real-time insight into the work. Thompson said that Microsoft has an advantage in the AR/VR space as most companies use tethered technology but “Microsoft has the only untethered AR technology.” (“Tethered” means the AR/VR headset is connected to a computer with a cable, with Microsoft’s technology the headset is fuly unethered, including a CPU, GPU and dedicated processor.)
On strategic business decisions
Thompson described the rationale behind two of Microsoft’s strategic business decisions, its acquisitions of Nokia and LinkedIn.
In the mobile space, Thompson said Microsoft looked at two models, Apple’s fully-integrated approach or Google’s model where other companies build phones that run Google’s software. Microsoft wanted a model that resembled Apple’s, so the acquisition of Nokia made sense. Thompson also disclosed another reason the deal was a good one for Microsoft. The company, he said, had $70-80 billion in offshore cash. With the Nokia acquisition, Microsoft was able to use $8 to 9 billion of its offshore cash supply.
As for LinkedIn, Microsoft had asked its candidates for CEO (Satya Nadella assumed the position in 2014) for white papers on how they would redirect Microsoft business. Nadella, Thompson says, said he would buy LinkedIn. More importantly, was the approach to integration. Thompson said the two most successful acquisitions in tech were Google’s deal with YouTube and Facebook’s with Instagram. In both cases, Google and Facebook allowed the companies they acquired to operate independently. Microsoft has largely left LinkedIn alone and the deal has proved successful for both companies.
On cyber security
“The greatest security vulnerability is us,” Thompson says. “We’re stupid, we make mistakes and there are people out there fishing for these breaches.” (Thompson went on to describe a recent incident where he was the victim of a phishing attack.) “We all need to be a little smarter,” he says. “At the end of the day, institutions like UCLA and Microsoft need to do a better job of training employees and if they did a better job, it would raise the consciousness level. We have to behave differently in a digital world.”
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