Our guest on this week’s GeekWire radio show was Brad Smith, Microsoft’s general counsel and executive vice president of legal and corporate affairs. We covered a wide range of topics: Microsoft’s legal battles with the U.S. government over surveillance and privacy; the company’s decision to require its suppliers to provide paid time-off for their workers, how the company has changed under Satya Nadella, and much more.
Listen to the show here, and continue reading for an edited transcript.
Privacy and government surveillance
Todd Bishop: You once wrote, “Government snooping potentially now constitutes an advanced persistent threat, alongside sophisticated malware and cyber attacks.” It reads like something out of George Orwell. What have you learned over the last two years, since the Snowden revelations?
Brad Smith: I wrote that in 2013, as some of the Snowden disclosures began to come to light, and in particular, we were reacting to a disclosure that appeared in the Washington Post in October of 2013. There was a story that suggested, that showed, that the U.S. government, either by itself or with another government, was hacking into the data centers of Yahoo and Google, without legal process, without a search warrant. In all probability it was happening outside the United States. I think that story, more than anything else, really set the whole industry’s hair on fire, so to speak.
It played a large role in leading the industry, and Microsoft, among others, to deploy much stronger encryption. It led to calls for more legal reform. It led President Obama, in part, last January in 2014, to announce some reforms. But reforms still have a way to go. They’re not done yet.
Todd: It feels like, given the level of revelation, there should be greater outrage among the public, and greater reform among the government.
Brad Smith: The level of concern very much varies around the world. I don’t think it’s surprising that Americans are less concerned about the United States looking at people’s email in other countries, because it’s not our email. The White House has made a point of that. But you got to Germany, you go to Brazil, you go to Brussels, you go to parts of Asia, there is very substantial concern. But nonetheless, the bigger point remains: We need more reform. That’s why we as a company have brought three lawsuits against the U.S. government. That’s why we’re joining with the rest of the industry in pressing for more reform steps this year.
John: You mentioned the snooping on Yahoo and Google. Is there any evidence that Microsoft was also getting penetrated by these government agencies?
Brad Smith: We do not have evidence that they were trying to penetrate our data centers, but it’s not as if people are sharing everything with us. I just have to assume that any government that is going after part of the industry is probably going after all of the industry.
Todd: One of the cases going on right now involves customer email stored in Ireland. You’ve been served a search warrant by the U.S. government, and you’re fighting that search warrant. It’s currently before the appeals court. On what basis is the government claiming rights to that email?
Brad Smith: First, to give a little bit of context, we have data centers around the world. We store customer email in data centers that are close to the people whose email is being stored. That just makes good, common sense. In this instance, we have a data center in Ireland. Our customers in Europe, for example, have their email stored there. The U.S. government served a search warrant on us, Microsoft, demanding that we get that email out of Ireland and turn it over, and our argument is that U.S. search warrants don’t reach beyond U.S. soil. The government’s argument is that this is like a subpoena: We’re supposed to get it, bring it back to the United States, and once it’s here they can use a warrant to get it.
We argue that’s not just something that’s impermissible under the statute, it just doesn’t make sense under any common standards of international law. If the U.S. can reach into data centers in other countries, then other countries are going to try to reach into data centers in the United States. Fundamentally this puts everybody’s privacy rights at risk. We need to find a better way to manage this problem under new international steps.
Todd: One thing you’ve talked about is an act that’s currently being considered by Congress, called the LEADS Act. How would that impact this kind of situation.
Brad Smith: Well, basically the LEADS Act, which has bipartisan support in both the house and the Senate, would do two things: First, it would say that the U.S. government can obtain email when it’s located in other countries, but only when the email belongs to an American citizen or resident. Second, it would call on the executive branch to improve its treaties with other governments. We all, I believe, should want law enforcement to do its job properly and effectively, but do it pursuant to the rule of law. Therefore we need new agreements between countries, so that the rule of law can be upheld, but people can get the email they need to investigate the crime.
John: Before we leave the privacy debate, I’m really curious to know, what do you think of Edward Snowden? Do you feel he’s more the hero or villain?
Brad Smith: I really don’t feel it’s my place to say, because there’s so much I don’t know. A lot I don’t know about him. A lot I don’t know about the documents he has. A lot I don’t know about the circumstances. What I will say is this: I think that the debate that we’re having today is a good one. It’s an important one. It’s one that in many ways I believe was inevitable, whether he sparked it or someone else sparked it, it’s the right kind of conversation for those of us to live in a democracy to have: What should the government do? What should our privacy rights be?
Microsoft’s new era
[Our App of the Week is Office Lens, a mobile document and whiteboard scanning app that Microsoft recently expanded to Android and iOS.]
Todd: Brad, you’ve used this on Windows Phone a lot.
Brad Smith: I have, and the other thing I like about it is that it integrates really well with OneNote. If you have Office, you have OneNote, but most people don’t necessarily know that. For me it’s probably the single application over the last three years that has most changed the way I work. It’s made me so much more productive, and the beauty of Office Lens is that it just extends it. If I happen to be somewhere where somebody is writing on the whiteboard, I take out the phone, take a picture with Office Lens, and integrate it right into OneNote.
John: How has OneNote changed the way you work? What’s so impactful for you?
Brad Smith: Well, basically I have my Surface Pro 3 as you’d probably expect. I have a notebook that I keep for all of my work during the year. Create a section for each day. I have all the documents for all the meetings. I mark them up, I highlight things to prepare. And then I take everything with me. I have all of my travel notes for the last three years. All my briefing memos. One of the fantastic things about it is that it’s all searchable. So I can be sitting in a meeting and a topic comes up, and I’ll recall that somebody wrote a briefing memo for me on that topic two years ago. I type in the search term, I instantaneously have it, and I have the data I need to contribute to the conversation in a much more helpful way. I have the ability to really understand it to what people are saying and compare it to numbers or facts or PowerPoint slides, so it’s made a big difference for me.
Todd: Office Lens is evidence of the change at Microsoft, where it’s not just dedicated apps for Windows anymore. Under the new CEO, Satya Nadella, the company has really opened up and made some changes. What changes have you seen over the past year, working for Satya Nadella.
Well, I think it’s been an exciting time. Certainly one thing you’re capturing is this focus on cross-platform applications. I think that’s a reflection of, the way Satya describes it, looking at “cloud first and mobile first.” Of course, we think that people may get their best experience using a Windows device. We want people to love the Windows devices, and I think with Windows 10, there’s a lot to love. But we also appreciate that people use iPhones, they may use Android tablets and then use a Windows PC.
In a cloud-first world, it all needs to connect with the services and the data center. Another thing that’s fantastic about OneNote, I use it on my Surface, and it automatically synchronizes with my PC. Everything needs to be mobile, it needs to be on the go. We need to design it for people on these various form factors. So there’s a huge focus on where we’re going, where the industry is going, on new innovation, engineering changes. It’s definitely, in my opinion, a very fun and exciting time to be at the company.
John: What culturally has Satya Nadella changed in the past year. Is there anything that you’ve picked up on in his style? Obviously a very different type of person than Steve Ballmer.
Brad Smith: I worked for Steve for many years. I loved every day working for Steve. I love every day working for Satya.
Todd: Really, you loved every day working for Steve?
John: How many chairs did you get thrown at you?
Brad Smith: No, believe me, I did. And the same thing, I feel extraordinarily fortunate to have worked closely with Bill Gates, Steve Ballmer and Satya Nadella. They’re each different, as you would expect. A couple of things really stand out with respect to Satya. One is his movement toward what he calls growth hacking, a growth mentality. Really encouraging engineers to be fast, build on each other’s ideas, build on open-source components if that’s needed, and innovate faster. I think that’s very important.
A second thing, even at the senior leadership team level, which I get to participate in every week, I think he’s just done a fabulous job of encouraging a sense of teamwork, helping everybody listen to each other, learn from each other, build together. It’s an exciting time, but I’d say more than that it’s a fun time to be there, as many times have been, but this in particular is quite a moment.
Tech talent, education and state politics
What type of talent pipeline are you seeing locally, in terms of the engineers and the key people you can hire out of the Seattle region?
Brad Smith: It’s a fascinating time. It’s been great for this area. Great for all of us to see more companies come here, and great to see the success and growth of Amazon in terms of what it means for the local economy. But it does mean that we have more open jobs in the computer science field than we’ve ever had before. It’s a drain on our economic opportunity, the fact that we have so many unfilled jobs.
Todd: Not only Amazon, but you’ve got Facebook expanding aggressively here, Google expanding aggressively, all these startups. We just published a list this past week — there’s more than 50 companies that have established engineering centers from out of town here in the Seattle area.
Brad Smith: I really think that what it means for our region is that we have to grow the talent pool. Certainly for this kind of growth to be sustainable, we’re going to need more people, and that’s going to require three things. One is growing more people here in the state. Second, we’re going to have to do more and better, frankly, to attract people from the rest of the country to come here. And third, we’re going to need a continuing supply of people from the rest of the world, as well. We need to focus on all three of these goals together.
Todd: One of the things Microsoft is supporting is a bill in Washington state called H.B. 1813, and this would allow computer science classes to count as math and science credit for a high-school degree.
Brad Smith: We have found that there are multiple things one needs to do in the K-12 system. Certainly one thing that has to happen is that computer science courses need to count toward high-school graduation requirements. Second, there need to be the courses that are available. The courses can’t be available unless there are teachers trained to teach computer science. We’ve supported a lot of that work. There’s TEALS (Technology Education and Literacy in Schools) that we founded and have really supported. Code.org does some similar work that’s really important. We need to get computer science in various forms, from early learning coding all the way up to advanced placement high school.
And then what we really need in this state is to expand in higher education. One of the things people often don’t appreciate is that the University of Washington Computer Science and Engineering Department is one of the foremost computer science departments in the world. But it’s not big enough. It’s turning students away because it doesn’t have the room to offer the the ability to major in that discipline.
John: They’re trying to expand the University of Washington computer science department with a new building, and there’s an initiative to put some money behind that. What else is happening on that front to get more computer science engineers in the region?
Brad Smith: If you look at our higher education system, obviously we’ve got a network of private colleges and public institutions in the state. They all play an important role, and I’ll say that the University of Washington plays the single-most important role in terms of our state institutions. We need the money to build a second building at the University of Washington. We need the appropriations so that then the enrollment is expanded. You need a building but you need enrollment capacity as well. And we want to see other new steps taken by the University of Washington, as well. There’s some exciting things that we think are on the drawing board for the future.
Todd: Microsoft, when it comes to education funding, faces some criticism from people who look at where you route your software licensing royalties. You do it through an office in Nevada, and so you’re not paying as much in taxes here in Washington state as you might otherwise, which is state revenue that could otherwise go to education funding. How do you respond?
Brad Smith: First, I feel fully comfortable with the fact that we do our licensing out of Nevada. We moved there at a time when we offered to make some changes for the state, and the state was not willing to sit down with us. The basic principle for taxes in every state is that you pay taxes on the revenue that you generate in that state, and you don’t pay taxes on the revenue that you generate in other states or other countries, and that’s what we effectively secured. So I feel comfortable with that piece, but at the same time, we have acknowledged that we are among many that want to see the state spend more on education, we want to see the state spend more on transportation and infrastructure, and we understand that that does raise important questions about the state’s revenue base. And so we’re certainly prepared to participate in a constructive way, including how we contribute.
Todd: Would you ever consider ending that practice in Nevada?
Brad Smith: I think there are better ways for us to address the state’s needs than that kind of step.
Todd: Another key policy issue, just recently that Microsoft announced, is a requirement that its suppliers provide at least 15 days of paid time off to their employees — the people who end up working for you, indirectly. Orange badges at Microsoft, there’s tens of thousands of them at Microsoft. Why did you decide to make that requirement of your suppliers?
Brad Smith: It was an interesting thought process. The question was raised late last year, including by some employees of some of our suppliers. It caused us to step back and ask ourselves what were we doing, what did others do, what did the law require? Basically, we looked around, and I was certain there must be somebody who required suppliers to offer paid time off. We couldn’t find anybody. We actually wanted to learn from somebody else’s experience, rather than forge this road ourselves. There was nobody to learn from, but we concluded it was the path that made sense to take.
This is the kind of thing that we believe is good for the people who are doing important work at our suppliers. But what I also found that’s interesting is I think it’s good for business. Right now, there’s tens of millions of Americans who are doing important work, more often at the lower end of the wage scale, who don’t get any sick leave, who don’t get any vacation. One fascinating thing we found was a University of Pittsburgh study that shows, not surprisingly, that when you don’t give people paid sick leave, they come to work when they’re sick. They infect their colleagues. A healthier workplace is one where you actually give people the ability to stay home when they’re sick.
Todd: It’s a fascinating example in part because this is something that political leaders at the national level have not been able to pass. Could this just be solved by the private sector requiring people they work with to do this, in much the same way that Microsoft has done?
Brad Smith: I don’t know that it will solve everything, but I think that it will perhaps give us a new base of experience from which to learn. I’m glad we took this step. We’ve been focused on having a real conversation with our suppliers, so we implement this in a way that works. We’re very conscious of the fact that this is going to raise the costs of some of our suppliers, and we’ve been very explicit in saying we know that those costs are going to come back to us. Perhaps more than anything, we’ll all learn something, and we’ll want to share what we’ve learned, and if it’s a success, then perhaps the success can spread, and if so that will be a good thing.
Todd: Have you gotten any pushback from the suppliers?
I don’t think we’ve gotten any real pushback. The fact that we were explicit in saying that we knew these costs were going to come back to us …
Todd: Microsoft will pay them.
Brad Smith: Yeah, in effect, that’s what we’re going to need to work through as we renegotiate or renew each contract. I do think one interesting point of feedback we’ve heard is that suppliers feel OK increasing their costs when they know that everybody else’s costs are going to rise, as well, because they don’t feel that they’ll be underbid by other companies that have a lower cost base. So that’s been an interesting point, and I think it’s far too early to know whether that’s narrow or widespread, but it’s been interesting to think about.
Seattle’s growth and the tech economy
John: So one of the big news stories of the past month has been Expedia’s decision to move out of downtown Bellevue and move to the former Amgen campus in Seattle. I’m curious what you think of that move, and secondly, would Microsoft consider having more of a dual presence on this side of the lake, an even bigger footprint than you already do?
Brad Smith: It’s not something that is on our radar right now. The Amgen property is an amazing piece of property. It was clear from the day that Amgen made that announcement that somebody would go there and get a great location. It’s got some challenges in terms of where people live, and how people get there. But let’s face it, the ability to look out at Elliott Bay is quite a unique situation.
I think generally we’ve got a very healthy situation in Seattle in terms of the tech sector, and that’s fantastic. The Eastside — Bellevue, Kirkland, Redmond — are all doing well. We’ll have to see as time goes on whether it makes a little more sense to be a little bit more spread out, or less so, but we don’t have any immediate plans to do something different in Seattle.
John: With Expedia, they made the argument that they would have an easier time recruiting new talent, maybe a younger generation of engineers, and it seems like there could be that opportunity for Microsoft with a Seattle address, or do you find that to be a challenge?
Brad Smith: What is important is that we give people great places to live, and easy transportation to where they work. By definition, if you have great places to live and it’s a two-block walk, you’ve solved the transportation problem. The challenge in Seattle is there’s arguably not enough places for young people to live. I also think that downtown Bellevue has just become a completely different place, and there’s lots of opportunities there, and I hear great things from our engineers. But I also hear from lots of young people who like living, for example, in Queen Anne, and taking the Connector to our campus in Redmond.
To me, what it speaks to is giving people a range of choices, and making sure we’ve got the infrastructure in the region that supports all of the options that people might be looking for.
John: Is the region doing enough? Is our government leadership doing enough? You look at what’s happening in South Lake Union and the growth of Amazon, for example. Many of us have been stuck trying to get out of the city or get downtown. Is the infrastructure keeping up with the growth of the tech industry.
Brad Smith: Well, this is a very important year for the region and the state, because this is a year when we need the state Legislature to approve a transportation package. It’s cleared the state Senate, it’s in the state House. We need that to finish the 520 bridge. We need that to round out the 405 infrastructure and the other highways in the region. I think if that passes this year, we can feel this is a good year. If that does not pass this year, it will not be a good year.
Todd: Microsoft just turned 40 years old. What do you see as the company’s role in the region, in shaping these kinds of policies and this kind of legislation.
Brad Smith: I think it’s important that Microsoft step up, step forward and continue to remain at the forefront in advocating for the kinds of improvements that we believe are necessary for the state to excel. That means great education, it means great transportation infrastructure. It means the kind of economic development strategy that will continue to keep this area at the forefront not just nationally but globally in terms of having a world-class innovation economy.
The second thing that I think is equally important is that we do this in broad partnership with others. I think that the whole tech sector needs to work together. I think that the whole business community needs to work together, and the business community then needs to partner with the non-profit community and others. That’s what it takes to have a great community.
Todd: If you look at the other big tech giant, the very well-known tech brand in the Seattle region, it’s Amazon. They have taken a very different approach than Microsoft in terms of their engagement with the community. If Microsoft is a bridge, Amazon is an island. Would it improve things for Microsoft if Amazon was more of an equal partner on some of these public policy issues?
Brad Smith: I’m encouraged by the fact that Amazon is doing more in 2015 in the community, certainly in Seattle, than it did a couple of years ago, and I think there’s a lot of opportunity ahead. … I think that Microsoft and Amazon have a lot to contribute together, with a lot of other companies, and I hope we’ll have the opportunity to do that.
Todd: Maybe it’s maturity, in some part. They’re still very much in their “Day One” startup mode, whereas you guys have been around the block a bit.
Brad Smith: It is less common for tech companies in their earlier years to be connected and invested in community work. I think it took time at Microsoft to do more, and I also think that Microsoft was unusual. I think that Bill Gates really brought a lot to Microsoft in part from the influence of his mom and dad. That led Microsoft to get connected to the United Way and other things much earlier in the company’s life than is typical. But what I really hope is that companies small and large, young and older — I won’t say old — can all work together, because I think we have such a great opportunity in this region. I look at other cities like Chicago, or Austin, Texas. Frankly, these cities are doing a better job than us. We need to rise to that level if we’re going to succeed in Washington state and Puget Sound the way we should.
Todd Bishop: What about workforce diversity? Satya Nadella announced a series of initiatives last year at Microsoft. Have you seen a measurable and noticeable change in the way Microsoft hires and promotes?
Brad Smith: I think we have a new focus. I would even go so far as to say there’s a new spirit at the top of the company in terms of wanting to do more and wanting to do better. But diversity is not the type of thing that one changes in terms of outcomes and impact, in two or three months, or one or two years. You can start to make real progress in years, and even some significant steps in months, and I think we’re starting to do that. But I think more than anything else, what Satya has brought is the kind of commitment that I hope and believe will take us forward year after year after year. What I really hope is that five years from now, we’ll look back at 2015, for example, and we’ll say, you know what, we’re better than we were five years ago. We’re more diverse, we’re more inclusive, and we’re a stronger company as a result.
John: You’ve been so engaged in these big state issues, whether it’s transportation or education. Would you ever consider a role in politics?
Brad Smith: I hope that we all have the opportunity to recognize that we can contribute to public service even if we don’t work in the public sector. I’m very excited by the opportunities that I’ve had, whether it’s the work that my wife and I have done co-chairing the United Way campaign, the work that I’m doing chairing the Opportunity Scholarship board here in the state, and hopefully contributing to other civic initiatives. I want to contribute to civic initiatives for as long as I live, but I don’t feel that I need to run for something in order to do something useful.
Listen to the interview below, starting at 9:30. Download the MP3 here.
