Nikola Tangen, CEO of the Norwegian Sovereign Wealth Fund, interviews Arvind Krishna, Chairman and CEO of IBM, in New York. Krishna has been with IBM for over 35 years, becoming CEO in 2020 and leading one of the most striking turnarounds in big tech.

The conversation covers IBM's transformation from a declining legacy company to a hybrid cloud and AI leader, Krishna's early prediction of AI's massive impact, and the lessons learned from Watson's failure. They also discuss quantum computing's potential applications and Krishna's leadership philosophy, including insights from Malcolm Gladwell, who described Krishna as exceptionally intelligent in his work exploring success patterns similar to those analyzed in Outliers The Story of Success.

IBM's Strategic Transformation from Hardware to Hybrid Cloud

IBM is now 'largely a hybrid cloud and AI software company' with software representing almost half of total revenue, consulting at one-third, and hardware only 20%

Krishna's diagnosis when taking over: 'We were trusted, but we were considered to be part of the past, not necessarily the future' - requiring focus on future-relevant technologies

The strategy involved doubling down on hybrid cloud transition and sovereignty concerns, with Krishna convinced since 2019 that 'AI would be big' three years before mainstream adoption

AI's Revolutionary Impact Compared to Previous Technology Shifts

Krishna believes AI is 'bigger than mobile and bigger than cloud' and 'probably in the same category as internet' but not the '10 times the internet' that some predict

The internet enabled global business scale, cross-country work movement, and supply chain integration - 'The direct revenue, even to the technology providers, is measured in the trillions today'

Krishna's early AI conviction came from recognizing that 'Data is going to overwhelm you and value is going to be derived from data' with AI as the only technology to unlock that value

Watson's Lessons and Modern AI's Industrial Scale Advantages

Watson proved AI could handle natural language questions with 'hidden puns and language' by winning Jeopardy in 2011, but failed due to 'monolithic applications' approach in healthcare

The mistake was choosing 'the vertical that is the hardest, health' instead of corporate applications like customer care or document processing

Modern AI is 'industrial scale' versus Watson's 'bespoke' approach - today's AI 'can do many use cases' and adapts when 'some of the data changes'

Quantum Computing's 2029 Timeline and Three Key Applications

Quantum computers 'harness properties of quantum mechanics to do a new kind of math' beyond traditional arithmetic or GPU matrix mathematics

First application area is materials science: better coatings for aircraft wings, pharmaceutical drug design, improved fertilizers, and potentially superior magnets for electrification

Financial risk pricing will benefit from quantum computers pricing 'complex instruments or derivatives or bonds' in milliseconds rather than using day-old data

Optimization problems like route planning could solve the issue that '30% of all truck miles and containers are empty' due to overly simple routing algorithms

Leadership Philosophy and the Getting Fired Mentality

A mentor told Krishna 15 years ago: 'You should live in pleasure of being fired' - meaning freedom from fear enables doing the right thing

The philosophy doesn't mean 'always pick a fight' but rather having confidence in abilities removes the fear that prevents proper decision-making

Malcolm Gladwell, author of Outliers The Story of Success, called Krishna 'the cleverest person he had met,' reflecting the analytical thinking that drives IBM's strategic transformation