Nikola Tangen, CEO of the Norwegian Sovereign Wealth Fund, interviews Arvind Krishna, Chairman and CEO of IBM, one of technology's most iconic companies. Krishna has spent over 35 years at IBM, becoming CEO in 2020 and orchestrating a remarkable turnaround of a company that had been declining for years into one now growing faster than it has in decades.

The conversation covers IBM's transformation from a hardware-centric company to a hybrid cloud and AI software business, with Krishna explaining how strategic decisions like the $34 billion Red Hat acquisition and spinning off the IT services division reshaped the company. They discuss IBM's positioning in the AI landscape, the thriving mainframe business, and Krishna's ambitious quantum computing timeline.

Krishna shares insights on corporate culture transformation, the importance of risk-taking in declining organizations, and his philosophy of leadership developed through his scientific background and influenced by his father, a Major General in the Indian Army. The discussion also touches on his reading habits, including The Technology Trap by an Oxford economic historian, which reflects his broad intellectual curiosity about technology's societal impact.

IBM's Strategic Transformation: From Hardware to Hybrid Cloud

IBM is now 'largely a hybrid cloud and AI software company' with almost half its revenue from software, one-third consulting, and only 20% hardware, contrary to public perception.

Krishna's diagnosis when becoming CEO: 'We were trusted, but we were considered to be part of the past, not necessarily the future' - requiring focus on future-relevant capabilities.

The Red Hat acquisition strategy emerged from recognizing IBM couldn't compete directly in public cloud: 'When you were that far behind, you would have to spend multiple billions, five to ten billion a year to try and catch up.'

Spinning off IT services removed a third of the workforce because 'something which is itself declining at 5% is something that should not be part of it' - making growth targets more achievable.

AI Market Reality Check: Infrastructure Ahead of Demand

Krishna warns of AI infrastructure overbuilding: 'About a gigawatt of power...cost you $60 to $80 billion worth of semiconductors' with over 100 gigawatts committed globally.

The math doesn't support current buildout: '6 to 8 trillion worth of buildout' would require '$1 to $2 trillion a year of revenue' that Krishna believes isn't achievable.

IBM focuses on enterprise AI rather than consumer applications: 'We want to build great AI that our clients...can they use this? Can I help them on procurement? Can I help them on accounts payable?'

Watson's lesson learned: 'We took that technology and we said, we want to construct monolithic applications. And we unfortunately picked the vertical that is the hardest, health.'

Mainframe Renaissance: Critical Systems Still Growing

Mainframe business has grown every year for six years after declining for a decade, handling 'retail banking...credit card transaction authorizations...airline reservations.'

Economics favor mainframes over cloud for critical workloads: 'Should those workloads have been moved to cloud already? If you want to pay three times as much.'

The Z17 mainframe includes AI capabilities with '450 billion inferences per day on the platform at zero latency and right in line, so no extra cost.'

Post-quantum cryptography built into the platform protects 'data you think could get attacked by quantum computers down the road.'

Quantum Computing: Production Ready by 2029

Krishna expresses '100%' confidence in having quantum computers by 2029, with production usefulness in the '28 to 30 range.'

First applications will be materials science: 'better coating so that things don't corrode...better pharmaceutical drug...better fertilizer...better magnet.'

Financial risk modeling represents the second major use case: 'if a quantum computer could price some of those things in milliseconds, then that gives you an advantage.'

Market potential is 'hundreds of billions' with IBM positioning itself 'a couple of years ahead' of competitors like Quantinuum, IonQ, and Pasqal.

Cultural Transformation: Embracing Risk in a Declining Company

The biggest achievement as CEO: 'Make the culture much more willing to take risk' after IBM had 'become a very risk-averse culture.'

Declining cultures naturally become inward-focused: 'When a culture begins to decline, the focus becomes inward...people begin to say, I survive by not raising my head.'

Krishna's approach to encouraging risk: 'Don't give me your 90% confidence. Give me your 50% confidence' while building buffers for inevitable shortfalls.

The 'getting fired mentality' philosophy: 'You should live in the pleasure of being fired...if you are living in the pleasure of being fired, that means you're not afraid of being fired.'

Leadership Philosophy: From Scientist to CEO

Krishna's scientific background provides credibility with technical teams: 'It gives me the ability to argue with them. I mostly lose the argument, but it allows them to have fun in the argument.'

Leadership focus on empowerment: 'I always think about it in terms of how does one empower the team to do their best. That really is the first job of every leader.'

Career advice emphasizes passion over compensation: 'Do something you have a passion for and interest in...Do not ever focus on the title or the compensation.'

Continuous learning through diverse reading, including The Technology Trap by an Oxford economic historian, biographies, and geopolitics to understand technology's broader impact.