The Business Community in a Time of Change

Remarks by Brad Smith presented to the Rotary Club of Seattle June 2, 2010.

BRAD SMITH: (In progress) — and thank you. It’s a great pleasure to be back here. It’s always great to be a guest of this club.

I wanted to talk for a few minutes this afternoon about the opportunities and challenges that we in the business community have the chance to address in a period of so much change.

Working at a company like Microsoft, one works constantly amidst change. It’s been that way for the 17 years that I’ve been there. And working with Bill Gates and Steve Ballmer, they’ve always been very good at highlighting a couple of aspects about working amidst change. One is to focus on both challenge and opportunity, because change always brings both. And as Steve in particular tends to say, it’s all about balancing realism and optimism. If you’re going to work through a period of change, you first have to look with your eyes wide open at the changes that are taking place, at the problems that you may have to address, but then you may need to combine that with the sense of optimism that typically carries you going through.

I think as a business community we have an opportunity to look at the world and the changes that are taking place today with precisely that combination.

I think once you’ve started looking at how the world is changing, because it is changing in some pretty dramatic ways, this graph captures the way the world is changing for the world of computers. It shows the seven largest PC markets in the world, and each and every year since the PC was invented in 1981, the largest computer market in the world has been reflected in that blue line, the United States. But that red line is catching up fast: That’s China.

And interestingly, in the next 18 to 24 months those lines are going to cross. China will become the largest PC market in the world, and the 1.3 billion people, once those lines cross, they’re never going to cross back.

In a sense this is important not just for PCs, it’s important for just about any part of the economy you might take a look at. And it causes one to look at the world in a somewhat different way.

We’re all used to seeing the world this way. This is the map that was created by Gerardus Mercator in the year 1569. He grew up in Belgium, and he’s the one who created the Mercator map. We see it each and every day in some setting or another.

But there’s lots of different ways to look at the world. One way I think it’s helpful to look at the world is to think of the continents as having different sizes based on the size of the economies. If I take that same metaphor for the size of the PC markets, this is the way the world looked in 1995, North America accounting for 45 percent of the world, and Europe accounting for 35 percent, Asia only accounting for 15. And yet over the last 15 years, we’ve seen a lot of change. Today, North America accounts for only 24 percent of the world market for computers. And by the year 2014 industry analysts estimate Asia will account for 38 percent of all of the new computers that people will buy each year.

In a sense, you can ask where is the world going. It’s not really that difficult to figure out the answer. You just have to look at the world according to population. Sixty percent of the world’s people live in Asia, 15 percent of the world’s people live in Africa, and only 5 percent of the world’s people live in North America. That is the reality that exists already.

Then you could look at that and you can say, oh my goodness, what does that mean? That’s realism, but there’s opportunity and cause for optimism as well.

In fact, I think there’s two great causes for optimism, especially for those of us in the United States and especially here in Puget Sound.

One needs to go back and look at the world a somewhat different way. The Mercator map made a lot of sense for the 20th century, and the 19th, 18th, and 17th. It’s no accident that it was drawn by somebody from Belgium, put Belgium in the center of the world, put the Atlantic Ocean in the center of the world. But as we look to the future, you can just as accurately redraw that map and put the Pacific Ocean in the center of the world instead. And, of course, if you do that, Belgium is no longer at the center, Seattle is instead. (Laughter, applause.)

And while it may seem a little bit facetious to look at it that way, location does matter for things in life, and it can matter for geography, too, especially if you take advantage of it.

Here in the Pacific Northwest, we’re not just at the crossroads of two great continents, we literally are at the crossroads of the future. We have the opportunity to look at what is changing in growth in Asia, and ask ourselves, what can this mean for our port, what can it mean for our airport, what can it mean for our exports? What can it mean, given the strengths that we have with a mix of diversity of people that we are so fortunate to have here in Puget Sound, people who come from around the world and often from Asia, how can we build on the educational ties with the University of Washington and elsewhere, is there an opportunity for us to attract inbound investment and make this a great place for businesses from Asia to use as a launching pad for the rest of North America? Amidst change there is lots of opportunity.

Of course, to seize that opportunity we all have to get to work. One always does. Such things never come easily.

In a lot of ways I think we as Americans need to recognize that there is a rich history in Asia. I’m often struck when I’m in meetings in Beijing, for example, it’s the only place I go to where government officials cite something that happened in the year 221 BC as being relevant to today. (Laughter.) That’s actually the year that the Han Dynasty unified society and has remained unified virtually ever since.

The Utah state schools recently announced that they were going to have Mandarin taught in every public school. It’s still good to learn French, I lived in Paris, and German, and Spanish, but it’s good for us as Americans in a world where we represent only 5 percent of the population as a continent to frankly do a better job of learning a lot more about the world around us.

And the good news is that our opportunity comes not just from our location. There’s an even bigger opportunity that we have as a country and a region. And that comes from looking at the world yet another way. This is the world based on American innovation that is taking place. Specifically this is where people invented patented inventions last year. Last year, North America still accounted for roughly half of the world’s new patented inventions.

And, of course, one has to open those little dots that reflect South America and Africa will grow over time as people with talent have more opportunities to put their ingenuity to work around the world. But it remains the case today that there is no country on the planet with greater ingenuity or with more innovation coming to market than the United States.

And for us the question is not just how as a country we sustain that, but how as a state and a region we sustain that as well.

The question is where do we want to be 10 years from now, and beyond. I think there’s a great opportunity for us to ask where do we want to be as a state in a decade, where do we want to rank among the 50 states in this country. I think the opportunity is clear: We should strive to be in the top 10 states when it comes to quality, quality of life, quality of business. And similarly, we should strive to stay out of the top 10 states when it comes to the cost of doing business. It doesn’t mean that we should be trying to race to the bottom. We don’t need to, and if we did, we probably couldn’t sustain our quality advantages. But if we can be a top-tier state when it comes to quality and stay out of being a top-tier state when it comes to cost, we will have a long-term, sustainable competitive advantage.

What does this mean? I think that’s a great question. Because fundamentally asking people to ask themselves how should we define quality, it certainly includes I think things like world leading innovation.

Right now, Washington is fourth in the country when it comes to creating patented inventions, but we have some work to do and some other things that are important, like K–12 education. If you look at our high school graduation rates, we’re not yet in the top 20. We should be focused on producing baccalaureate degrees, because that’s what it’s going to take for our children to compete, and we have a long ways to go to get into the top 10 there.

We have the opportunity to keep focusing on our transportation infrastructure, and the human safety net that you saw such a great example of before, the type of thing that we were talking about at the United Way this morning.

And, of course, as we do all this, we want to sustain so many of the benefits that we already have and had to move further when it comes to the culture and arts and the outdoors and environment.

At the same time, we have the opportunity to go to work on the cost side. We need to be mindful that we are number 10 in the country when it comes to business taxes. It would be nice to lower that at least a little bit.

And probably more importantly, when it comes to competing for the assembly and manufacturing lines of the future, whether it be for air traffic or anything else, it’s something of a challenge to be ranked as we do in the top three in terms of workers’ compensation and unemployment insurance costs. We’re fortunate when it comes to electricity, so it’s certainly not all bleak. We actually are one of the cheapest states in the country when it comes to that, in part because of our good fortune to have such great hydroelectric facilities. But in short, we have the opportunity to combine the focus on quality with a focus on costs.

I think for us the question is, where do we fit in. What is the role of the business community in pursuing these kinds of long-term opportunities and challenges?

Personally, I think there’s a lot to be inspired by, a lot to be inspired by our predecessors here in Puget Sound and also from other parts of the country.

I take a particular inspiration from a story told about the business community in Omaha, Nebraska. In 1948, Curtis LeMay, who is pictured there, was wanting to lead the new Strategic Air Command, and they put the Strategic Air Command or SAC headquarters in Omaha. Well, the government did a better job of creating SAC than funding it. As LeMay got to Omaha, one of the things he found is he found everywhere he worked over the course of his career was that he could predict the future of a community based on the strength and spirit of its business community. When the Air Force didn’t have enough money to pay for the bunks and mattresses in the barracks that had just been built, the business community organized a dinner, and there was an envelope at everyone’s table and they all chipped in to make it happen.

Now, the good news is there is no envelope at your table today. (Laughter.) I’m sure you’re glad to hear that. But I think it stands for something important, that when an opportunity comes, the business community all so often has to play the key role in helping define whether a city or a region is going to seize the moment.

I think as we look to our future, we have three roles that we can look to play as a business community here in Puget Sound. First, I think we have the opportunity to help lead the way in defining and pursuing a steady, long-term approach. We have the luxury of thinking in terms of decades or even longer, in part because, unlike politicians, people in business don’t have to seek re-election every two or four years.

And we have the ability of great business acumen and planning to the kinds of efforts that it will take. I think we need to continue to combine that with an approach that looks and reaches beyond ourselves. This is something that I feel is so well aligned by all of you in this room. It’s reflected in the efforts across Puget Sound to address homelessness, to advance early learning, to ensure that we genuinely are contributing more than to our success by itself, but to the success and health and welfare of the region as a whole.

And finally, I think we have perhaps a unique role in helping to build new bridges, bridges of all sorts, in fact. Earlier this year, we had the opportunity and we did come together to address a bridge that badly needed to be rebuilt. In this case it was the 520 bridge. And to me what was most encouraging about that is that we did come together. We came together in the business community but also with labor. We created an environment in which Democrats and Republicans worked together in Olympia. And by coming together we sorted through our differences, we made decisions, and we got something done.

That should give us inspiration to do even more in the future, because we not only need to build bridges of concrete, we need to build political bridges as well. And we need political bridges that go somewhere; we don’t want to become just the builders of bridges that go nowhere. We demonstrated that we can do that when it came to the 520, and when it comes to education and other issues we have the opportunity to do the same thing.

Ultimately, this vision I believe actually closely resembles the Rotary vision, and that’s one of the reasons I so looked forward to coming to this lunch today. As all of you know, the Rotary vision has inspired so many people, and when you look around the world, there are many, many clubs in many, many cities in many, many countries, and each of them is special. But of all the clubs this one is unique. It is unique because it was this club over a century ago that said it wasn’t enough to come together as a business club just to talk about business issues. It was important to come together and also put service above self.

Over the last century that is a vision that has rippled around the planet and changed the world. During the next century I believe that same vision can help us strengthen Puget Sound. Thank you very much. (Applause.)