Narayana Murthy's Message to India's Youth: Don't Settle for Being the World's Back Office

Certainly. In the early years, I was a ‘player-leader’. I was deeply involved in technical and operational details. My specialisation was system software. I built an IBM 1401 simulator for the DG MV/8000 machine that we imported for our export work. I was the first person in the world to design a driver for the 7-track magnetic tape units on DG MV/ 8000 that we had imported for our data-centre work.

I had to do these because I believed in leadership by example. This was also necessary to ensure that a culture of excellence and speed pervaded the entire company.

As we scaled, I had to learn to trust to delegate after verification, as President [Ronald] Reagan often talked about. I had to transition into the role of a 'chief mentor' and a 'chief values officer', focusing on mentoring the next generation of leaders and ensuring that the culture of 'Powered by Intellect, Driven by Values' remained intact even as we grew to several hundreds of thousands of employees.

I focused much more on good governance rather than on management as we became bigger and bigger because good governance is the foundation on which the longevity of a corporation rests.

Commitment should be a function of the ‘inner voice’, and should not depend on the percentage of equity. For me, as I have said often, Infosys has always been and will remain my middle child—between Akshata and Rohan—rather than an instrument to make money. If the founders view their start-up as anything other than parental, they will be unfair to their conscience. But if they view it as an institution they are building to strengthen the country, then they will have passion, enthusiasm and energy to be the parent of their enterprise.

I have always believed that it is better to own a small part of a world-class, desirable pie than a large part of a mediocre and rotting pie. It is important to remember that nobler values like commitment come from the passion to solve a problem; from the hard work to create more and more jobs; from the zeal to increase the exports of the country; and from the enthusiasm to enhance the respect for our country in the comity of nations rather from the market-capitalisation table.

It is good to remember [Roman philosopher] Seneca’s words that wealth is the slave of a wise man and the master of a fool. Enriching oneself before other corporate stakeholders is the practice of ‘extraction capitalism’ and not ‘compassionate capitalism’.

A true leader who follows the ‘last-to-eat’ principle practises the following rules: no premature secondaries; always have skin in the game; keep arm’s length distance from related-party shenanigans; fully disclose to shareholders any potential conflict of interest; reject winner-takes-all model of equity and create a broad-based Esop; and be the leader who cuts compensation for self first before asking others to do so when bad times come.

Such a leader of compassionate capitalism will strictly adhere to the following pledges: I will be the last to benefit from the company's success. I will prioritise the junior-most employee’s security over my own luxury. I will never use company resources for personal or family enrichment.

I will lead by example, realising that my behaviour is the culture of the company.

Such a leader will also bring in independent directors based not on their resume, but their spine. Leaders must also remember that ‘a culture of silence is a culture of complicity’. It is very important for the independent directors of such start-ups to remember that governance is not about ‘policing’ the founders but it is about protecting the founders from their own human weaknesses. They should also realise their job is not to be members of the CEO’s fan club, but to be the company’s conscience.

One example where we are leading is in the application tier. India has currently done well in AI application and implementation. Our enterprises and start-ups are world-class at taking existing AI tools and weaving them into complex workflows to drive productivity gains. We are proving its unit economics at scale. This is where our heritage in software services gives us a massive head start in solving real-world business frictions.

There are areas where we are lagging. An example is the foundational tier. We are currently 'renters' of intelligence rather than 'owners’. We are heavily reliant on Western foundational models. This creates a significant gap in our ability to fully exploit the capabilities of AI.

To truly compete, we must pivot from building 'AI wrappers', which are essentially layers of code over someone else’s IP [intellectual property] to investing in deep tech. This means developing indigenous large language models that are purpose-built for India’s unique linguistic diversity, cultural nuances and specific social datasets.

This means developing ‘self-learning’ algorithms for our applications. There are not too many ‘machine-learning’ algorithms that we have developed independently. We have a long way to go. We need to move from the 'implementation era' to the 'invention era’.

Yes, the attitude has changed dramatically since I started Infosys in 1981. Back then, ‘security of job’ was the primary goal, and failure was a social stigma. Today, the youth are smarter, more knowledgeable, much more confident and aspirational. They are willing to take bigger risks than we did. However, I distinguish between ‘taking reckless risks’ and taking ‘educated and calculated risks to achieve a strategic goal’.

While the affinity for risk-taking has increased, we must ensure that it is backed by disciplined and innovative planning and execution rather than just a desire for quick exits. We must also become a society that honours the journey of the entrepreneurs, rather than their destination.

Work productivity is effectively decoupling headcount from output. AI is adding value in the productivity area. We have, in some way, conquered the problem of scale by using productivity technology of which AI is one. I have heard from youngsters that they have reached a factor 10 in work productivity in many business applications.

What this means is that a small team of intelligent, innovative, hardworking, disciplined and nimble start-ups can challenge legacy incumbents in speed, productivity, innovation and quality in developing critical business applications. This is one way of lowering the barrier to entry for start-ups.

However, the 'legacy majors' still have two massive assets. They have deep domain knowledge and institutional trust. For the newcomers to win, they must move beyond being 'cheaper and faster' versions of the old model. They need to exploit the incumbent’s dilemma. Large legacy firms are often too structurally tied to 'billing by the hour' to embrace technologies that shrink those hours.

The start-ups that succeed will be those that solve high-stakes, unstructured business critical problems through outcome-based models rather than traditional labour-arbitrage models. They should limit their smartness just to do the work faster and cheaper. They have to change the fundamental nature of the contract.

Finally, as we look towards ‘India at 100’, my message to the youth is this: do not settle for being the world’s back office. Strive to be the world's moral, business and intellectual leader. Technology like AI will come and go, but the values like high aspirations, hard work, discipline, honesty and integrity are timeless.

We have the intellect. We must match it with an unwavering commitment to advance compassionate capitalism by creating good jobs and sharing the outcomes of our companies to make the lives of the poorest of the poor better. Only when we use our entrepreneurial success to create a ‘Better India’ can we truly say we have built a ‘Better World’.

Remember that ‘Growth is the result of what you do, but respect is the result of how you do it’.

I would like to be known as a fair person. Fairness is following the golden rule—do unto others what you want them to do unto you. I would also like to be remembered as someone who proved that context was not a constraint and that it was possible to create a world-class, globally competitive, multi-billion-dollar enterprise in India without compromising on values.

I want my legacy to be the belief that ‘good governance resulting in respect from the stakeholders is the best business policy’. I want to be remembered for my belief and for my actionising that belief that a group of ordinary people can achieve extraordinary results when they are guided by a common set of enduring values, and when they put the interest of the company ahead of their personal interest in every decision they took in the company.

I would also like to be remembered that I was one of the very few business leaders who have practiced compassionate capitalism.