Brad Smith: The Opportunity Divide

Remarks by Brad Smith, General Counsel and Executive Vice President, Legal and Corporate Affairs
U.S. Chamber of Commerce Business Civic Leadership Center International Conference
Washington, D.C.
October 6, 2011

Thank you, Steven. I want to second what you said, and I want to certainly reinforce what Bill Gates, our chairman, and Steve Ballmer, our CEO, noted last night about the passing of Steve Jobs, and convey our condolences and my condolences to our colleagues at Apple.

We have a lot of colleagues who work for Apple, and they are partners and they are competitors, and they are friends. So, it’s a day where I think it’s more than appropriate for all of us to pause and note that and reinforce our own condolences.

It is a real pleasure for me to be here with you today. As Steven said, this is actually the last day of a 14-day trip for me, and I’ve had the opportunity to go from Nairobi to Johannesburg to Cape Town to Sao Paolo to Brasilia to Mexico City to New York, and now to DC.

One of the great things you get to do when you travel is every day you have the opportunity to learn something new. I’m sure you’ve found that, too.

Just the day before yesterday, I was in Mexico City, and one of the things I had the opportunity to do was to go to the Supreme Court and meet with some of the justices of the Supreme Court. And I had the opportunity to learn something new – or in this case remind me of something old that I had forgotten.

When in a Spanish-speaking country you are looking for the men’s room, it is important to remember that it is not behind the door that has affixed to it the big letter “M”. (Laughter.) It was a good day to have a security detail. I was very impressed. One person hurled himself in front of me to keep me from going into that room. (Laughter.)

If there’s one thing I’ve learned over the years, it is this: there are many appropriate places to meet a justice of the Supreme Court, but the women’s restroom is not one of them, at least for me. So, I was very pleased to be rescued from myself.

As one goes around the world, as I went from continent to continent the last couple of weeks, one is reminded of how varied the world really is. In a country like South Africa the unemployment rate is currently 24 percent. In contrast, in a country like Brazil it’s currently 6 percent.

And yet to me what was so striking was the fact not that things are different around the world, but everywhere I went everyone was having the same conversation. They were fundamentally talking about the same thing. They were talking about how much the world has changed.

I wanted to build on that and talk a little myself about the way the world is changing, not only in Africa and in Latin America, but the way it is changing here in the United States, and what that means for people in capital after capital, including here in Washington, D.C.

The world has become a smaller place, and I think that is instantly obvious to most people. It has become a faster-moving place with communications and transportation. But it has become a different place. There is more opportunity but there is more competition, and this is true for everyone in every country. The opportunities in some respects are greater than ever before, but a competitive world is an unforgiving place. If you don’t keep up, even more than ever before, you will be left behind.

This has changed the dynamic for economies around the world, and you see this in so many different ways. You see it here at home in the United States. You see it in the numbers of the day.

Tomorrow morning at 8:30, the Bureau of Labor Statistics will do what it does every month. It will tell us what the unemployment rate is. If it remains what it was last month, they will tell us that the unemployment rate in the United States is 9.1 percent, and that will be the headline.

But that is not the story. The story each month – the story that needs to be told – is in the rest of the numbers that are reported.

Last month, it was the case, as it has been in other months, that the unemployment rate here in our own country for individuals who have only a high school diploma was 9.6 percent. But the unemployment rate for individuals who had a college degree was less than half of that; it was only 4.3 percent.

What this shows us is that today there is an opportunity divide. And whereas a decade ago we talked about the digital divide around the world, what we need to talk about today is the opportunity divide. On the one side of this divide are people who have access to education, who are getting the skills they need, they’re getting connected to opportunities, and they are prospering. But on the other side of this divide are the people who do not have the skills they need, and who are not on a path to get the education they deserve.

You see this not only in the numbers of the day; you see it in the trends of our generation. In 1973, a generation ago, here in the United States only 28 percent of the jobs required any type of college education. But as of 2008, according to Georgetown University, that number had grown so that 59 percent of all new jobs in this country required some level of college education. And as Georgetown predicts, by the year 2018 that will continue to rise and fully 63 percent of the jobs in this country will require some college training.

It’s true not only at home; it is true around the world. A McKenzie study recently estimated that by the end of this decade, in the year 2020, two-thirds of the jobs that will be created in nine years don’t even exist today. New skills will be needed if people are to fill them.

As I meet with people around the world, I see this time and time again, and I see it not only in the numbers of the day. I see it not only in the long term trends. More than anything else I see it in the faces of the people I meet, and you see it in the faces of the people who live on both sides of this divide.

I saw it this morning on Capitol Hill in the eyes of a veteran here in the United States – the eyes of concern and worry about the plight of other veterans who are leaving the military and who confront right now, not an unemployment rate for them of 9 percent, but an unemployment rate of 11.6 percent. And if they’ve been not only heroic in their service for this country but they’ve been injured and become disabled as well, their unemployment rate today is not 9 percent, it is not 11 percent, it is 49 percent. They are on one side of the opportunity divide.

But I also see in other faces and other people around the world smiles and hope. I saw it in Nairobi last Wednesday morning. I met a young woman who told the story that just a few years ago she had no job and she had no hope of getting one. But because she had participated in the work of a community technology center that we’ve supported in Kenya, she was put on a path where she could develop new skills. She was trained on computers, and she developed the self-confidence and the skills that enabled her first to get a job. And then it enabled her to create her own business.

And what you realize is that hope rests not necessarily on where someone stands, but on where they are going. And if you can help someone take the first step, they put themselves so often on a path that enables them to take the next step and the next step and the next step after that. That is the opportunity divide that we need to help address.

There’s something about business that I think most people in the country and the world don’t necessarily appreciate. It’s this: In order to be successful you have to do a lot more to grow your business than to simply grow your company. You’ve got to grow your business partners. You’ve got to invest in your customers. You’ve got to do what it takes to build an ecosystem around you, and you have to do that by focusing on a lot more than yourself.

That’s one of the really interesting things about working at a company like Microsoft, and I know that it is so interesting for many of you working at many companies. When we go into a country, we don’t just start a business for ourselves. We focus on building a market.

Brazil is a really good illustration of this. Microsoft has 600 employees in Brazil. That’s not that big a number, but it’s nice. But we work with 18,000 business partners, because our business model is so fundamentally grounded in these kinds of partnerships. And those 18,000 companies employ in Brazil 230,000 people, whose job is to work with our software. And those 230,000 people work with our customers, and our customers in Brazil currently employ 480,000 people whose job is to deploy Microsoft software, support our software, and perhaps most importantly, write their own software that runs on top of our software. And they in turn support the 49 million people in Brazil who have a computer.

When we get involved in a country we don’t go to leave. We go to stay. And when we go to stay we don’t focus on training hundreds of people. We focus on skilling up hundreds of thousands of people, and ultimately millions of people.

If you look at our economy in this country or around the world, it is increasingly a high tech economy. But what our story typifies is that a high tech economy is a high skilled economy. And a high tech company is one that by definition has to invest in the skilling of so many people around it.

Over the years, we’ve developed three principal strategies to skill up an ecosystem and build up a country. Not surprisingly, you have to decide as a company where to start. And for us it’s pretty clear: when it comes to information technology, you need to start in schools, because it is just so fundamentally important to lift up the next generation of people in every country and to invest in the next generation of students.

But if you want to have great students, you have to start by investing in great teachers. And so that’s what we do. In a country like Mexico, which has been so committed to expanding education, we have done work over the last decade to train 790,000 teachers across the country.

And you have to do more than simply train teachers. You have to provide tools and training to students as well. So we’ve created defined programs that we have implemented and rolled out around the world. We have a program called DreamSpark, for example, that provides students with access to free software, and more important than that, free training so that they can develop their skills. That program has reached hundreds of thousands of students in Brazil. It has reached 2 million students in Mexico. It has reached 25 million students here in the United States.

And then what you need to do is create opportunities for students to take what they are learning and be creative and apply that in new ways. That’s why one of the most enjoyable and exciting things we get to do every year is run what we call the Imagine Cup.

Last year, 400,000 students from 100 countries participated in the Imagine Cup. It gives each student the opportunity to pursue a project, to create a software application, and then to compete at the local level, the national level, and ultimately the worldwide level, and show what they can do. And I have to say it is amazing what people can do.

Last Wednesday afternoon, I spent some time in Nairobi at Strathmore University, and I had the chance to sit down and see what the graduate students there were creating. And each person would show me what they had done. It was typically a new application for a phone. And it was fascinating not only to see the range of things they had done. Each person I asked “how long did it take you to do this?” And typically the answer was “four weeks” or “six weeks” or “a couple of months.” If you give people the tools, they will take it from there and they are more than prepared to spend every waking hour in pursuit of their dreams.

Of course, what we’ve had to learn is that it’s not only important to reach people in schools, but to pursue a second strategy as well, and that is to reach kids at the places where they spend their time. And that is oftentimes in community centers around the world. So, we’ve had programs to partner with nonprofits that run community centers around the world.

I was so impressed in Mexico City; there’s a group there called Fundamex. We’ve been working with them for a number of years. They have 148 community technology centers in 28 states across Mexico. And working with them and others we have reached 2.5 million students across Mexico over the last few years.

Ultimately, if an economy is really going to grow, one needs to help people not only take these new skills and develop them, but one needs to help them start and grow their own businesses.

And while technology has made the world more competitive, it is amazing to me to see the new doors it has opened for bright people.

In Brazil right now, the month of October, one of the events that people are talking about across the country is a huge music festival. It’s called Rock on Rio. It’s in Rio de Janeiro. One thing I’ve learned, as you may surmise, is they know how to rock on in Rio, I’ve got to tell you. (Laughter.)

There’s a small business there that was just started a year ago by three guys as they graduated from a local university. And one year after graduating, they have built a business where they created software that runs in our data center on the Windows Azure platform. And because the economies of scale have brought down costs, and because they can just load this into a data center and they don’t need to spend their own capital to buy servers or other hardware, they can do amazing things in an amazingly short period of time. They managed all of the online ticket sales for Rock on Rio, and they sold 525,000 tickets in 40 hours. Not bad for two days’ work.

That exemplifies the new kinds of opportunities that await people who can find a way to get on the right side of the opportunity divide.

One of the things that we do as a company is run a program that we call BizSpark. It’s designed to help young individuals get a business started. So, we provide these businesses with free software and training to get them going in the IT field. We’ve worked already with 2,000 companies in South Africa. We’ve worked with 16,000 companies in the United States.

And we do more than help the companies get started, we help them connect with the students that we’ve been working with and helping to train in universities. We have a program called Students-to-Business. I had a wonderful opportunity last Friday morning in Johannesburg to meet some of the students who had not only gone through the training program, they then were able to meet their employer through the Students-to-Business program. So people are able to work their own way quickly from being a student to being an employee in a new and thriving company.

All of these things are good, but what I think they really should cause us to ask today is this: how can we all together do more of these kinds of things to really help address the skills gap, not only in the Mexicos and Haitis and Hondurases and South Africas and Kenyas, but here at home in the United States as well?

I actually think the first thing we have to do – the first thing we have an opportunity to do – is help to start a new conversation. There are a lot of things that people talk about in day-to-day political and policy life, but I don’t know that people are really talking about the fundamental causes that have led the world to change in such a rapid way. It’s driven by technology. It’s driven by globalization. All too often people are perhaps too quick to spend time in the world of politics talking about who to blame for a high unemployment rate, when we need to step back and spend more time talking about how to solve it. (Applause.)

The truth is we need to start by acknowledging and recognizing some obvious facts: This is not going to be easy. There’s no quick fix, there’s nothing that can be done quickly; it will take work, it will take effort by many people. And it will take time, because we’re talking fundamentally about giving new skills to a new generation and other generations so that they will have what they need in order to fill the jobs that those of us in the private sector have the opportunity to create. So, we need to start by moving the conversation to a different level.

I think we then need to do a second thing: we need to recognize that it is going to take everyone working together to address this problem effectively. It will take leadership by governments; that is unquestionably the case. And here in Washington I think there’s an opportunity to look around the world and learn from things that are being tried and things that are working. I think it starts by looking at the goals that other people are setting.

I had the opportunity on Tuesday to sit at lunch next to the President of Mexico. He described the work that they had done to add 100 new universities in Mexico. He described the work that they have done to educate more engineers. He described the fact that today Mexico is graduating more engineers each year than Germany, and on a per capita basis twice as many engineers as in the United States.

While at one level there probably is no country that can match the quality of higher education that we have in the United States, and while quality matters, numbers matter as well.

In Washington State where I live the state government set a goal – we need as a state to graduate 40 percent more college students every year in STEM disciplines by the year 2018. We need more states to have a defined goal, and we need a national goal that will focus the country on producing the people that will fill the jobs that we have the opportunity to create.

While at one level there are so many big needs from government, it is also so important to recognize that this is the type of problem where individuals can make such a difference as well.

There’s a developer who works at Microsoft outside of Seattle. His name is Kevin Wang. He looked at the fact that in Washington State, a state of 6.5 million people, there were only 220 students last year who took the advanced placement exam in high school for computer science. And of those 220, only five were African-American and only seven were Hispanic students.

He said to himself, “I think I can do something about this.” He created a program all by himself called TEALS, Technology Education and Literacy in Schools. He has persuaded 29 of his friends at Microsoft to volunteer some of their time, and as volunteers they’re working with high school teachers to give them the expertise they need to teach computer science in high school. Their goal is to grow the number of AP tests this year by 20 percent, and then next year by another 20 percent. They’re already reaching 800 students this year. You just have to stop and think about what kind of impact this can have if more individuals come together and work together like that in communities across the country and around the world.

Of course, in addition to governments and individuals, so much of this work fundamentally rests on the work of the nonprofit community, the NGOs like those of you who are represented in this room. Because it is the NGOs of the world that bring people together. They’re the glue that brings together the public sector and the private sector and large groups and individuals. It has just become so clear that it will be public-private partnerships and new models of public-private partnerships that will be required to make the progress that we need.

And we need more innovation in what it means to create a public-private partnership. In Washington State on a task force for the governor that I had the opportunity to chair and lead last year, we recognized that we not only needed the universities to grow their capacity, we needed to make it possible for more students to go to college in the future. And that would require more financial aid.

We persuaded the state to adopt a new law, a law focused on building a billion dollar endowment by the end of this decade, not for any particular institution but for the next generation and the generations to follow in the state as a whole, an endowment devoted to financial aid. But what was really interesting about it was that we got the state to pass a law that says that for every dollar that a company or an individual or a foundation donates, the state will donate a dollar as well.

It took a lot of work, and until the last night of the legislative session, when with two and a half hours to go the bill was passed. And after it was approved, Boeing and Microsoft together stepped forward, and we each pledged $25 million so that our $50 million would be matched by $50 million from the state, and we’d be one-tenth of the way in the first month to the goal that we want to realize over this decade.

What I came away from that appreciating was that there are so many new ways for us to try to work together.

But while we need a new conversation, and we all need to come together, I think a third thing is needed as well. I think we need to recognize as a business community that we have a special responsibility and a unique role to play.

Here in Washington and across the country, I find that most people most of the time want most people in government to find a way to meet in the middle, to resolve their differences and actually make a decision and get something done.

But what I’ve also concluded from my own work in Washington State and elsewhere is this: It’s not realistic to expect people in government to meet in the middle if everyone outside of government insists on staying in their respective corners, refusing to budge. That’s actually not the way democracy works. If you want people in government to meet in the middle, those of us in the private sector and in civil society have to find ways to define and meet in a new middle ourselves.

And when it comes to these issues of economic growth, of building up countries, of skilling up people and closing the opportunity divide, it is right and it is even necessary for those of us in the business community oftentimes to be prepared to take the first step.

We should take the first step, in part, because we see these problems as almost no one else does. We’re the ones who are trying to create jobs and then finding difficulty filling them. We see firsthand what our employees can do and what they cannot. We have a unique perspective on the skills gap and some of the steps that are needed to address it.

I also think we should take the first step because we will benefit, as much or more than anyone else, from the progress that will result – because we will grow our businesses by addressing this problem.

And we should take the first step because we can. We can because we have the resources, we can because we have the knowledge, and we can because we don’t have to spend our time running for reelection. We can think about the long term and invest for the long haul. That’s what it takes to build a successful business.

Ultimately, people often step back and they ask questions, and they like to debate this: Is this fundamentally about corporate responsibility or is it about business opportunity? I think the answer is perfectly clear: It is about both. Because this is about doing the right thing and a good thing for society, and this is about doing the right thing to grow and be successful as a business.

And if there’s one thing that I’ve seen in my last decade in this position, it’s this: It is often precisely at the intersection between corporate responsibility and business opportunity that lightning is most likely to strike. It is at this intersection where each of you work every day that we have one of the biggest and best opportunities of our time to strike a spark, to fan the flames, to set things in motion with the kind of sustainability that market forces will reinforce.

We have the opportunity, coming together and working together, to make a huge difference, not just for our companies but for our communities. And we have an opportunity in the most positive way possible to help change the world.

Thank you very much. (Applause.)


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