Jan Muehlfeit: “This century does not belong to the West”

Jan Muehlfeit, is the Chairman of Microsoft Europe. He agreed to answer our questions about the crisis, the advent of a multipolar world and the lessons to learn from these changes.

Several things that must be taken into consideration have happened in the past ten years. Globalization is underway. And it is not just about the West, but also about Asia and Latin America. Ten years ago many emerging markets were in debt and the West was well off. Things are very different today. Asian has 4.6 trillion dollars in financial reserves, 2.6 trillion of these accounted for by China alone. The Western hemisphere, be it Europe, America or other countries, is in debt. And this is one of the things that will have a significant impact on the future. The other is demographics. Most Asian countries, the newly emerging tigers, will have a demographic dividend. In the West, and especially in Europe, the population is aging. And this will have an impact on when people retire and so on. And on top of all this we have the crisis. This is why I claim this will not be the century of the Western hemisphere. This will be the century of balanced globalization in which Asia will play a very important role. And it will play this role as a result of demographics and debt. And also, and this is clear when looking at many Asian countries, thanks to its competitiveness, which is increasing.

I think that what we are experiencing is not a crisis of capitalism, but a crisis of leadership. Not all Western countries have found themselves in the same trouble. For example, Canada, which had never softened its banking regulation too much, fared very well in the crisis. Even so, I think it is a good thing that we have moved from the G8 to the G20 as the cards, related to economic and political influence on how things work in this world, have now been handed out somewhat differently. And new markets should thus also get their say. If the G20 should resolve something right now, it is how to introduce balance in trade. Because we cannot have a situation in which huge surpluses are created on one side of the world while the other side of the world is amassing more and more debt. So there is a need to step away from ideological perspectives and to look at things rationally. And one more thing that I think needs to change is the models that economists use for their predictions. People are emotional beings. Yet very few economists focus on how they behave. This is why I believe we need to pay much more attention to psychology and emotions which are most certainly affected by the crisis and economic cycle.

One of the spiritual fathers of capitalism, Adam Smith, wrote 230 years ago in his Wealth of Nations that profit and care can exist in balance. And I find that we as a human society – and this is especially true of the Western hemisphere – have in the past thirty years focused very much on profit and very little on care – care for others, society, and also nature. And there is a need to return to this balance. This is for example related to how we train the leaders of our future today. Most MBA programs teach a lot about profit. But topics such as care, sustainability, and how to do business responsibly are missing. And this needs to change. For if a capitalist system is to function – and I think it is the best system that people have come up with so far – then the balance between profit and care must truly be preserved.

I am an incredible optimist. And when I speak with the representatives of other companies, in our sector and beyond, they feel the same way. I am optimistic thanks to the young generation. Thanks to social networks it takes a much longer view. And it understands technology much better than the current generation. This also means that it will be in managerial positions much sooner than my generation. This is one of the reasons why I am an optimist. What I am not as optimistic about is the fact that companies are publicly traded entities that answer to their investors every quarter. And if we want to change the things we are talking about here, we need to include investors in the discussion. And we are far from doing so. Another obstacle is represented by what is generally known as the concept of inclusive globalization. Globalization is working out quite well for Asia but not so much for Africa. And I think we need a model that includes Africa. This is for example related to how we handle the transition to a multipolar world. We had a bipolar world and now the G20 makes it clear that we are in a multipolar world. And this needs our behavior and leadership to change entirely. And last but not least there is a need to close the gap between rich and poor. Think of it this way: in 1945 rich countries were 5 times as wealthy as poor countries. This has now increased to 45 times as wealthy.

I think we will see a certain symbiosis, with both the Western model and what we can call the Asian model. I think that some Eastern philosophies will have a significant positive impact. Many managers also in the Western Hemisphere have started to meditate – without any religious connotations. Simply because it is a technique that lets them deal with stress. Many people from Asia are studying in the West and many Western companies do business in Asia. And this is why we will see a certain interconnectedness. When it comes to morals, I am convinced that a successful company will not be able to avoid what we call corporate social responsibility, or CSR, in this century. The most successful companies will be those that will strive to be the best on and for this planet. And this is tied to what I was saying about the young generation. For example, when I was hiring someone at Microsoft ten years ago and inquired whether they had any questions, there were many about compensation, bonuses and so on. Today there are more questions about how a company behaves; if it has for example been active in Africa for a long time, then the question of whether it will help Africa be part of inclusive globalization arises. And this is why I am saying that if a company wants to succeed in this century, that CSR must be an integral part of its strategy.

I think things are already changing. I am for example the chairman of the Academic Business Society, which brings together large companies and universities. It was originally founded in Europe and is now a global organization. And an increasing number of members come from Asia and Latin America. Our most recent symposium was held in Russia’s Saint Petersburg. So CSR is also starting to become an issue in these countries. This is also the result of cooperation between emerging markets and the West. Look at it this way: if you want to build a successful company, even if you are just a small company from the Czech Republic that supplies its products to Czech Škoda, you are thanks to the interconnectedness of the global economy competing with other small companies from around the world. And CSR can play its role in this competitive battle. This is why I do not consider it a burden for companies. For me it is truly a part of the strategy; a part of the strategy without which it will be impossible to exist.

Definitely. In part because of the things I have said – debt, demographics, competitiveness. The crisis is an incredible opportunity to undertake the necessary reforms. In Europe these are pension and social system reforms as well as the reform of the education system which must offer much more support to creativity and innovation as Europe must make its living selling ideas. It is high time for these reforms. The question now is whether politicians in Europe will have the courage to undertake these reforms. As sometimes there is a big difference between what we know needs to be done and what we do. The European Union for example has its 2020 strategy. It is quite respectable. But it needs to be implemented. And this is why I am saying that the crisis is an opportunity to make changes. This is also the case because people, voters, are much more open to change right now. If the reforms are explained well, there will be an opportunity to undertake them. The window we have is however limited.
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Interview done by Roman Chlupaty for Owni.eu and GlobeReporter.org.
Photo Credits: Flickr CC Stuck in Custom / Norges Bank