Interview with Mr. N.R. Narayana Murthy, Founder & Chairman of Infosys Ltd.

Yeah. Yeah. Yeah. I'm ready.

Well, I think that's a very good question, very well thought-out question. First of all, let us understand what is capitalism. Capitalism is about unleashing the power of human enterprise in an environment of free markets. Capitalism also means less government intervention. The government not operating as a player, government operating purely as a regulator, fair regulator, fair, impartial, data and fact-based regulator. It does not mean that capitalism is against the poor. Even though Milton Friedman, whom you have all studied, one of the anchor persons of pure market-driven economic growth philosophy, did say that at the end of the day the task of a corporation is to maximize its profitability while being fair to its stakeholders, customers, employees, investors, vendor partners, government of the land and the society. Now we must understand that in a poor country like India where there is so much of poverty around us, it is very very important for the leaders of capitalism, the evangelists of capitalism, to make capitalism an acceptable philosophy for the masses because by and large India is a very very very poor country with a per capita GDP of $2,818 and in that about 800 million people receiving free ration. In addition many state governments have started giving free electricity, free bus transport etc. This is a very poor environment. Therefore, there's a lot of skepticism amongst the vast majority of people about the wealthy, about the rich and about the corporate leaders. Therefore, for us to make capitalism acceptable to the poorest, we have to demonstrate to them that capitalism is not just for the rich to become richer, but it is for the poorest to seek opportunity to overcome poverty, to escape poverty. Number two, the rich corporate leaders must go out of their way to demonstrate that they have concern for the poor in the society. How do they do that? They contribute, of course, their taxes legally and ethically. They do not pollute the rivers. They do not pollute the air. They pay fair wages to the employees. They contribute a part of their profits to corporate social responsibility and they will keep the society as an important stakeholder and they will also lead a life, they will eschew a life of vulgar richness. They will lead a life that even the poorest people in some way can relate to. That is what is called compassionate capitalism. And that is I coined this word in 1975 when none of you was born. Compassionate capitalism combines the best of capitalism with the desirable aspects of socialism and liberalism. Let me stop it.

Well, when I founded the company in 1981 I assembled six younger colleagues of mine who were very young. They had just started their career in my small apartment, one-bedroom apartment in Mumbai and we started discussing what should be our vision, what should be our objective. One fellow said we must become the company with the largest revenue in IT. Another fellow said we must be the most profitable software company. A third fellow said we must be the company with the highest market capitalization in the country. And my style was to allow younger people to give their views and finally come in. I said why don't we say that we want to be the most respected company in India. Why? Because if you try to earn respect from your customers, you will ensure that you will not short change your customers. You will ensure that you exceed their expectations of our performance. You will ensure that the quality of what we deliver is better than what they expected. Therefore, more and more customers will automatically come to you and more and more revenues will come. Second, if you earn respect from your employees, those employees will talk to their cohorts and talk about the goodness of this company and that will help us to attract best talent to the company. If you seek respect from investors, you will have to follow the finest principles of corporate governance. Every decision of yours has to be based on fairness, transparency and accountability to every stakeholder and that will bring in long-term investors. If you seek respect from your vendor partners, they will stand by you in your hour of difficulty. For any reason you are not able to pay them on time, if you explain to them, give them all the data, they will understand. Yes, we do have gone through this. Therefore, let us cooperate with these people. If you earn or if you try and earn respect from the government of the land, the government will set policies that will help you grow. The most important stakeholder is the society. Therefore, if you try to earn respect from the society, then you will automatically get respect from all other stakeholders because society contributes customers. Society contributes employees. Society contributes investors. Society contributes vendor partners. Society contributes bureaucrats. And society contributes politicians. Therefore, the most important stakeholder for any corporation is the society. And if you seek respect from the society, you will seek respect from all the stakeholders and automatically good employees will join you. Long-term investors will be there. You will get more and more business from customers. Your revenues will go up, your profits will go up. Therefore, your market capitalization will go up. That is how I argued with my people and they all agreed. So, we have conducted ourselves in a way that in every decision that we took, we asked will this decision enhance respect for the company and respect for the management, respect for the board of directors if we took this decision. That's the key decision we took and that is what is unique about Infosys.

Well, there have been many events that have brought lot of joy and happiness to me. For example, the day one of our fans invited me to the gruhapravesham of his house, of his two-bedroom house that he had bought in a very good locality in Bangalore based on the employee stock option plan. That was the day I felt very proud of Infosys because Infosys was the first company in the history of India that made it possible for a peon to buy, to build a two-bedroom excellent flat or house whatever. Similarly, when Infosys was declared the best managed company, when it was a very small company, hardly about $100 million of revenue compared to huge companies in the country. We were declared by Economic Times as the best company of the year in 1998 if I'm not wrong. That was a very happy day. So I can go on and on but definitely the day where I felt very proud of Infosys was when I sat on that high stool in Manhattan at the NASDAQ headquarters when we were listing Infosys on NASDAQ. We were the first Indian company to be listed on an American stock exchange. And I borrowed the words of Neil Armstrong and I said it is a small step for NASDAQ but a giant leap for Infosys and India. Therefore bringing an Indian company onto the world's most famous stock exchange for high-tech companies that is NASDAQ was an event that indeed made me very happy.

You know, I learned from my mother a very important principle. When there is a crisis, the leader should not panic. Leader should be calm. The leader should think of what action he or she should take quickly. For example, if in a house one of the children is pretty sick, if the father and the mother start panicking, the other child or other children in the house will be extremely distraught. They would lose hope. They would lose confidence. Therefore, that is the time when the father and the mother will have to provide confidence and hope to the members of the family particularly the children. Similarly, in a company, it is the responsibility of the leader to bring in a sense of hope and confidence and that everything will be all right if we continue our work, if we continue to work hard, if we continue to be disciplined, if we continue to have high aspirations when the situation is tough. So that is how I have tried my best never ever to get upset when there is a crisis.

Well, there are two major requirements for an entrepreneur to succeed in today's highly competitive world. One, a differentiated business value coming from the idea that is the product or services of the entrepreneur compared to his or her competitors. That is tomorrow when you become an entrepreneur, you should say my idea provides you better value than all the competitors that sell to you. It brings better productivity. It brings better quality of entertainment. It provides better health to you quickly. In other words, a unique differentiated value proposition vis-a-vis your competitors. That's the first thing. See, most of us operate in bringing some kind of innovation to existing ideas. Very few people create discontinuity and invent. For example, the first computer was an invention. Mosaic, the first browser was an invention. Internet was an invention but very few such things happen in the history of the world. What happens is constant improvement of what exists today. So that the entrepreneur can obtain better market share by demonstrating to customers that his or her idea is providing better value per unit price to the customers compared to all other existing products. That is the first thing that is needed if an entrepreneur wants to succeed. Second, the entrepreneur must conduct an inexpensive market survey whether there is a market in his or her menu for his or her ideas. Let me give you a very simple example. Today there is a real-time blood sugar measuring patch called Freestyle Libre 3. Libre 1 was there, Libre 2 is there, now Libre 3 but that's not manufactured in India why because each patch costs approximately about $50 or about 4,000 rupees, 4,500 rupees and a patch works only for 14 days. In other words, in a month you'll need two such patches. How many Indians are there who can afford to put in 9,000 rupees a month for having a diabetes patch on their own so that they can measure their blood sugar in real time? Very few. So that product they have not yet manufactured in India because they've realized that that market doesn't exist. So similarly when I founded my first company called Softronics I found that there were very few computers in the country and those few computers were with the government. Third it was very difficult to work with the government to obtain software contracts. So I closed Softronics in a matter of 9 months because I realized there was not sufficient market for my idea. So the second thing you have to do is conduct an inexpensive study of the market so that you know that there is enough market or there are enough people with sufficient disposable income to buy your product or service. The third most important thing is talent. As an entrepreneur, as a leader, you have to attract competent talent and create a team that has mutually exclusive and collectively exhaustive set of skills, expertise, and experience. Competent and value-based talent is extremely important because there is nothing as critical for success of an entrepreneur as the power of human mind that he or she collects with him or her. So if you have these three and finally all the people that you collect must have an enduring value system. They must all be ready to make sacrifice in the short term in the hope that long-term will bring better prosperity. They must put the interest of the company ahead of individuals. They must not put their hand in the till when others are not looking at it. They must lead in austerity, hard work and discipline by example. So they must be honest, they must have integrity, they must be transparent, they must be accountable, they must be fair in every decision. So if you collect such people and ensure that all of you have an enduring value system, then you are likely to run your marathon for a long time. So first an idea with a differentiated business value to the customers. Second, an inexpensive market study to ensure that there is actually enough market for your idea in the country or in the world whatever it is. Third, a team which has the required complementary strengths and an enduring value system. If you get these three, money is not important. It will all come. Don't worry.

You know I have traveled to about 80 countries, of them maybe about 45 developed countries about 35 developing countries. What I have found is that those countries where the bureaucrats and politicians do not interfere in the running of an enterprise are the ones that create prosperity and economic growth. So what is needed is to create a set of policies that will make the life of entrepreneurs easy. That will require the entrepreneurs to interact with the government as few times as possible. That will create systems that will help the bureaucracy take quick decisions to the requests of entrepreneurs. Create a system that will provide full transparency for where that decision is lying, how long it's lying, with whom, what is the reason etc to the entrepreneurs. In other words, we have to reduce bureaucratic delays. We have to reduce corruption. We have to make the life of the entrepreneur easier. We have to ensure that entrepreneurs spend 95% of their time in thinking of their enterprise, how to win better revenues, how to succeed in the market rather than waiting in the corridors of the government. I think if we succeed in those, I believe even we also have a chance of becoming a developed country.

Well, definitely lots have improved there is no doubt about it thanks to Dr. Manmohan Singh, Shri Montek Singh Ahluwalia, Shri Chidambaram the economic reforms of 1991 happened and that was a watershed event in the history of this country. Afterwards successive governments both at the center and in the states have been trying to remove obstacles to the wealth creators to the job creators. But that progress has been rather slow. Today India ranks in the global ranking of complexity of doing business at 177. In other words, China is 10. We are 177. So we have a long way to go before we can claim that we have created an environment where it is easy to do business in India. Let me give you one data point. It's not my point. My friend Swaminathan Aiyar who writes in Times of India, brilliant economist, about a month ago he wrote an article where he said one of the entrepreneurs who wanted to produce solar panels in India, solar panel manufacturing, he found that he had to face 2,375 approvals. These are not my words, these are Swaminathan Aiyar's words in Times of India. So yes I think we have a very tough path ahead of us. Our prime minister is trying his best, a very sincere man, but every bureaucrat, every politician of every party has to rally behind him and make sure that all hassles are removed both at the central level and the state level so that India can indeed have a rank of number one in ease of doing business.

Well you know first of all those were the days when globalization was starting. India was also very close, was a closed economy. There were lot of restrictions. There was no current account convertibility. Traveling abroad, you had to get permission. You couldn't open offices abroad. So there was a lot of difficulties. So we were slow. But today, thanks to the 1991 economic reforms and thanks to the work of successive governments, today's entrepreneurs can operate much faster. Now when you can operate much faster, what that also means is you want to see the fruits of your work faster than we did. So I don't blame current entrepreneurs for their desire to see the outcomes of their work. So what is very important is to remember that while we all want to see the outcomes of our hard work, we all want to become wealthier, we all want to share our wealth with employees of our companies. That path still takes certain years. For example, Infosys today is in its 45th year. It took 23 years to get to the first billion dollar of revenue. Thanks to economic reforms of Sri Narasimha Rao, it took just 23 months to get to the second billion. Now we are at 45 years and Infosys is about a $20 billion company. But in that process of building a $20 billion company, it took successive leaders to show, to accept deferred gratification, to lead an austere life, to accept that making sacrifice in favor of the company in the short and medium-term will indeed make the life of the individual better in the long term. All of that has happened. That's how today you have probably six, seven billionaires. You have about 50,000 rupee millionaires or whatever. But all of that took a lot of time and we understand. And it is the responsibility of the leader to communicate that nothing worthwhile is achieved in life without high aspiration, without a committed team, without a good value system, without hard work, without discipline, without honesty and without innovation. As long as the leaders are able to communicate these to their people by walking the talk, by leading by example, then I do believe that the followers will buy that argument because they would say if this man is leading a simple life that means he too believes that these values will indeed make him a more prosperous man in a certain number of years. So why not we do it too? So there is no principle like the leadership example of Mahatma Gandhi that the world has seen. Nobody in the world communicated the power of leadership by example as well as Mahatma Gandhi. I don't know if you know this story. Mahatma Gandhi used to travel by third class. Those days there used to be a thing called third class in train and he would wear his loin cloth. There would be thousands of people coming to see him at every station. His compatriots were all worried. Who knows there may be some crowds. He may be kind of shut down or somebody may give some poison food. So there used to be lot of plain clothes people who were accompanying Mahatma Gandhi in those third class compartments to safeguard him. Sarojini Naidu, one of his compatriots once she said it takes a fortune to keep this old man in poverty. It was well worth it. It was worth spending that fortune to communicate the power of austerity of Mahatma Gandhi to communicate the power of leadership by example of Mahatma Gandhi. Therefore, the leaders have an extraordinary responsibility to lead by example. If you want your youngsters to come to the office on time, you come ahead of them. Then you don't have to give big lectures. Everybody will be watching you and they will automatically come on time. So that's what I will say.

Yeah. Well, in our Infosys, I used to communicate often a very important principle and that was stated by the following sentences. Performance leads to recognition. Recognition leads to respect and respect leads to power. Therefore if IIM Ahmedabad, Bangalore and Kolkata which were the first three IIMs have become very prestigious, they became very prestigious because their alumni have performed very well in the corporate world. Why did they perform very well? Because the early teachers made huge sacrifice to teach these youngsters the various subjects so that they could indeed use them in running their corporations. So my belief is that in any competitive area merit is very important. For example, do you take some cricketer who has failed 10 times and do you make him the captain? You don't. Why? Why not? So while merit is important, it is very important to realize that there is a large section of Indians who have been left behind by the tyranny and oppression of certain sections of our society on the majority of Indians for almost 2 to 3,000 years. We must accept it. It is the responsibility of these merited, elite and powerful classes to work extremely hard to create better opportunities for these people who were left behind for no fault of theirs. Let us be very very clear. It is not the fault of the weakest sections of our society. It is the fault of the strongest section of the society. Therefore, while we should not give up merit, those who are selected on merit must be asked to work very very hard because they have a very noble task. And that noble task is to ensure that the vast majority of Indians who were left behind for 2 to 3,000 years they too join the mainstream and they too join the prosperity of the merited, the rich and the elite and the powerful. So to me the way I have always looked at is God was kind to me. But that opportunity came with a huge responsibility that was to create a large number of jobs. That was to share the wealth of Infosys with a large number of people. That was to ensure that Infosys paid its taxes properly. That was to ensure that we took part in corporate social responsibility activities because this country thanks to a certain environment that existed in the last 2-3,000 years the vast majority of Indians have not reaped the benefit of our progress. Therefore, it is your responsibility, it is my responsibility to work hard and hard and hard and smart to ensure that the poorer sections of the society who have been left behind for no fault of theirs that they are helped. Whenever you get tired after working whatever number of hours you have to say I am working hard because I have so many brothers and sisters of mine of this country suffering for no fault of theirs. So that is the responsibility that rests on the shoulders of those of us who have been blessed. That's the way I would say.

Well, you know, competition I was told in 1994 by my friend Rahul Bajaj. He's the best management guru. You don't need to read management books. You don't need to attend lectures by great management gurus. You just observe competitors, learn from what they are doing, catch up with them and do something better. That's how you increase your market share and that requires innovation. Now competition, true competition is providing better value to your customers per unit price that you charge. That is what is called value leverage. Economists say that price is what you pay and value is what you seek. When you go to the market, even though a product A1 is more expensive than product A2, in your mind you would have made a computation of the value of A1 versus A2. So if A1 gives higher value than A2, even if A1 is more expensive, we'll buy A1. Let me concretize that. Supposing there are two people, two vendors. Vendor one comes to you and the vendor one says you know I have used some mathematical model and I am providing you 200 rupees of value for this product and I charge you 100 rupees. So what is the value leverage here? Value leverage is 200 over 100 which is equal to two. On the other hand, a vendor B comes to you and says my model you can verify the model shows that you will get 300 rupees of value which is very similar to the other vendor who is giving 200 rupees of value. However, I charge you 120 rupees as my price. What is the value leverage here? It is 300 over 120 which is equal to 2.5. Let me tell you confidently that you will buy the second one that is the one that gives you value leverage of 2.5 not the one that gives you value leverage of two. So in a true competition people use innovation, people use legal and ethical methods to provide better value leverage to the customer compared to their competitor. Now look at the beauty of this case. In the first case, the realization is only 100 rupees and the customer gets 200 rupees of value. In the second case, both of them are winners. The customer gets 300 rupees of value and the vendor gets 120 that is he gets 20% higher price. That means he can pay better to his employees. He can build better infrastructure. He can do better R&D etc. Therefore, if you focus purely on value leverage when you are competing in a market, that to me is the real competition.

Again, I think those two are connected. But let me first talk about sustainability. Sustainability is very important because this is the only planet we have. We have already seen the impact of the average temperature going up, your unseasonal rains, your storms and all of that. So it is the responsibility of every living being on this planet or every human being on this planet to keep in mind that this is the only planet we all have. And it is our responsibility to pass it on in a better way to our children and grandchildren. If we didn't do that, we would be failing in our duty because those children for no fault of theirs can be inflicted a more polluted, a dirtier, a worse environment than we have. So sustainability is extremely important that every institution can do that. For example, at Infosys. We said that we will recycle water. All our toilets and bath water all of that they would all be treated separately and they would be fed back. In fact, we reduced the intake of fresh water. I'm talking of about 12 years ago, 11 years ago when I retired from 50 to 60% we had already done that. Today the other day I was there we have built 10 lakes in our campus. We designed all our buildings such that it's not in the direction of east-west so that the air conditioning load is minimized. Similarly, we designed and installed technology to switch off the power when there is nobody in the office when there's no human movement after a certain number of minutes all the PCs will be switched off, all the laptops will be switched off, all the air conditioning will be switched off, all the electric lights will be switched off etc. I don't know if you know Infosys was voted in the top eight in the world by Newsweek magazine in terms of sustainability success. It was in 2008 talking of almost 18 years ago. So we all have to make effort in our own area to minimize use of fossil fuel energy and for example we bought 500 acres north of Bangalore and there we have used 250 acres of that to produce solar energy. It takes about 4 acres per megawatt of electricity produced. So we produce about 64-65 megawatts of power. In other words, we have tried to become self-sufficient, not 100% but as self-sufficient as possible with green energy. So I do think that each one of us has to take up whatever initiatives we can. For example, if somebody is in a chemical company, he should not spoil the river, right? They should not allow effluents to go into the river. So it is our responsibility because we want to leave this world better for our children and that's the least we can do to our children. What was the second part of your question? I forgot.

No. No. You see our education system has not been oriented towards thinking and troubleshooting. It is focused primarily on passing the exam. It is nowhere. Perhaps it made sense during the British time because we were all hired as clerks and some minor officers and all of that. But today we are an independent country. Today our expectations are higher. Today the world expects better contribution from India. Therefore yes we have to think in terms of innovation and invention. Innovation is more common than invention because inventions are very difficult right they take you know whether it's electric bulb whether it's telephone whether it is internet whether it is browser whatever it you know or mobile phone they are all rare. Now unfortunately none of these existed in our early times. So going back to our early times maybe I am ignorant but I don't know if we used mobile phones, if we used airplanes and if we used internet and computers 3,000 years ago. I don't know. Maybe we did. So there. But however, in the absence of such data, I would not say go back to 3,000 years ago or 2,000 years ago and try to reinvent it or whatever. What is needed is to completely revamp our education system right from primary level up to the research level to encourage children to use the formal method they use in the classroom in STEM areas. I'm not talking about history. I'm not talking about social sciences which I don't understand. In STEM areas to understand the nature first. What is the meaning of saying sun rises in the east? Why does the sound of a car get reduced as it goes away from you etc etc. The next level is to see the various lacunae that exists in our world and then say how can I use my knowledge of STEM to overcome those. For example, when telephone was invented, Alexander Graham Bell and others asked a question, when I speak, why can't somebody who is a mile away from me hear? Let me find out a method whereby he or she can hear me? That's how telephone was invented. Second, when some of the British thinkers said, why can't I see what is happening 100 miles from where I'm sitting? I should be able to do that. Let me see how I can do that. That's how they invented TV, right? Somebody then invented computers. So every one of these things were invented because people found that there were challenging problems around them. That is what we have to teach our children. That kind of thinking, that kind of Socratic questioning, that kind of open discussion and debate. You know, let me try and remember. I think Richard Feynman once said, I do not want questions. No, I forgot. Anyway, so it's a very famous thing of Richard Feynman. So that basically what that thing says is I want an environment where children must be taught curiosity, questioning. They must be taught arguing based on data and facts. See unfortunately Indian culture we have for a long time said no no no he's an elder so you cannot question him. That is also one of the reasons why we have not made major progress in any invention. I think all of those we have achieved. That's what I.

There will be no need for work. Yeah, you know Elon Musk is obviously a very bright man but I have always been brought up both in my family and by my teachers and in my work to disagree without being disagreeable. I believe that the most powerful instrument that has ever been is human mind. Whenever you put a certain constraint coming from maybe some technology or whenever you say this cannot be done the human mind will say I am going to do it. So therefore human mind will develop further and further and further to invent new problems and to solve those problems that requires people to work. Let me give you a simple example. In 1975 there came a set of software tools called CASE tools, Computer Aided Software Engineering tools. CASE tools helped us do requirement definition slightly better, database design slightly better and they also came with program generators. They could automatically generate programs under certain circumstances. There were hundreds of articles written saying that there'll be no opportunity for programmers anymore because CASE tools are there. This was 1976 or so or 78 I don't remember. But you know what happened? There were a lot of bright minds who said if these CASE tools can handle this, program generators, these CASE tools can help us do database design better, CASE tools can do requirement definition better. Why don't we try and design more complex information systems? And they started designing, we all and we are all part of that, designing more and more complex information systems and CASE tools couldn't handle them and they were just forgotten. So I am not as radical as Elon Musk. He obviously is a very bright man probably much much brighter than me. However, there are others Steven Wolfram and others who have a different point of view and that point of view is the most powerful instrument is human brain and there is no limit to what human mind can do. Let me stop you.

No as I told you this is a poor country. We have lot of poverty in India. 800 million people have to be given free ration, free electricity, free buses. So it is the duty of those of us who are in a better position to work hard, to be disciplined, to have high aspirations because God has given us this opportunity to make life better for those citizens of our country who have been left behind for no fault of theirs. For me that is the only reason why it brings me to the office. I'm 80 years old now. I used to go to the office at 6:20 in the morning and I used to leave at 8:30 in the evening 14 hours a day and I used to work 6 days a week. Why did I work? Because I said what is this human life? This human life is you know God has given me ability, ability to think, ability to say what is right, what is wrong. I have been blessed but my life is useless unless I can make the life of the less fortunate ones better. So therefore I would say that the responsibility of those youngsters who have been blessed in this country is to make the life of the less fortunate ones better. Now some of you may be so smart you don't have to work hard at all. That's fine with me. I have no problems. But in every day you have to ask a question. In what way am I making the life of my less fortunate people better? You know when the people who fought for our freedom when they were making huge sacrifices whether it was Mahatma Gandhi, Jawaharlal Nehru, Sardar Patel, Rajagopalachari, you know you name it, Subhas Chandra Bose and so many others, their dream was they wanted the poorest child in the remotest village in India to have decent access to nutrition, healthcare, shelter, education and a better opportunity for its own progress. That's the kind of India that they were fighting for. That job is nowhere near complete. Nowhere. We are still in early stages. Therefore, you people cannot at this stage say no no no we will not do that. You have a huge responsibility. There's a noble opportunity. This is a noble calling. Therefore, please work to make this India a more equitable society. Make this India a fairer society. And to do that it is the bright, God-blessed, well-educated, powerful and the rich who have to contribute otherwise our life is meaningless. You know we can keep on eating and then sleeping and then go away that life is nowhere. So please do that.