Social Impact: The Philosophy of Zoho CEO Sridhar Vembu

Sridhar Vembu: There's no point in trying to serve the world when you are really wallet-fracking your customer. It's completely inconsistent. You come into work, you maximize what you can take from the customer, then maybe in your weekend persona, you go serve somebody. This type of dichotomy, this type of dualism itself, drives people crazy. And that is why the burnout, all that, because there is an inner sorrow that comes from this dichotomy.

Michael Krigsman: Welcome to episode 842 of CXOTalk, where we explore the intersection of AI, leadership, and the digital economy. I'm your host, Michael Krigsman, and today we're discussing social impact in business. Our guest is Sridhar Vembu, the founder of enterprise software company Zoho, and someone for whom I personally have the highest respect.

Sridhar Vembu: Zoho is now 28 years running, completely bootstrapped, still private, no outside money, no debt. About 16, about 15 plus thousand employees, almost 16,000 now, and with revenue that is between one and 2 billion approaching. We'll soon be approaching the 2 billion mark in the next, maybe, year and a half, and growing at a steady clip. The growth rate has come down this year, but still growing at a decent clip, profitable. We have about 750,000 customers around the world. We are B2B software, enterprise software, and about 100 million users worldwide. That includes our free users, but really the 750 paying organizations are our customer base.

Michael Krigsman: It's really interesting that you are bootstrapped, and I know from our prior conversations you don't have any plans to go public. Tell us about that. Why this approach?

Sridhar Vembu: One word: freedom. Public companies are on a treadmill with quarter-to-quarter pressure. Even if they are doing really awesome, they have to do even more awesome next quarter. You look at a company like Nvidia right now, top of the world, 3 trillion market cap. But is that done? In fact, the CEO's job is the toughest in that circumstance because how do you top that?

The buyer of the share at a $3 trillion valuation would expect to see a reasonable return on that investment. That means it has to go up to 4 trillion, 5 trillion, 6 trillion. Those are almost impossible numbers. In fact, I would have said 3 trillion is an impossible number. Impossible further.

So that's the treadmill the stock market, the public companies, face. The net result is that internally, pressure on the CEO and the board and the top management gets transmitted to employees, and there's only so much pressure people can take. This results in attrition, people burning out, and morale issues. I don't want our company to be that way. So, we choose to stay private.

Michael Krigsman: William, so there is a clear impact, then, on the way you operate the company and on the culture that you have very intentionally tried to establish.

Sridhar Vembu: The freedom of being private means we have to be profitable in order to grow because there is no outside source of funding. That's both a constraint and a useful disciplining device on ourselves. That means we have to balance our books and make a little extra to invest for the future.

This has operated to discipline us from our own tendencies to expand too rapidly or bet the house. In return for that restraint and discipline, we get the freedom of operation. We have autonomy in how we organize our teams and empower our employees.

That's also empowering for me because then I don't have to micromanage anybody, and my own job is not stressful as a result. I like to say that I want my job to be as stress-free as possible.

Likewise, for our employees, there can be occasional stress, but you cannot be permanently in that state. That's what a lot of companies, unfortunately, end up putting their people through. That's something that we avoid, and it's entirely because we are private and we can afford to do it this way.

Michael Krigsman: Sridhar, putting aside the question of running the business and having that discipline, it seems to me that gets right to the heart of your general approach. But it's also extraordinarily unusual to be at your size, not have raised any capital, and to have made social responsibility a core part of your mission. That's extremely unusual, especially in technology.

Sridhar Vembu: Yeah, sadly so, because I don't like to think of ourselves as exceptional in any way. I just wish more companies could do what we do and discover our way of life that is actually a happy way to be. Our employees are happy. I am happy, and that comes from this way of thought.

One more advantage of the way we operate is the long-term R&D and long-term investments we can make. We have sustained investment in technologies for ten years, 15 years, sometimes before we see a profit. These are critical technologies that need to be done well, but take time.

We have been able to afford to carry that investment for that long because we are private. This has other attendant benefits. It builds up capabilities in people because this investment in R&D is very much an investment in our people's capabilities.

That improves morale because when you are investing in building up capabilities, the people stand to benefit, and they are happier as a result. So there's all of those benefits, and then the customers benefit because the benefits of that technology flow through into our products. So we make customers happier, all of them.

Now, the critical part we figured out over the last five years, since I moved myself to a village in India, is how to link this whole R and D, long-term R&D outlook with rural development, rural economic development. To me, research and development and rural development are two sides of the same coin. They are closely linked.

Michael Krigsman: Why are they closely linked? And why are R and D, research and development, and rural development two sides of the same coin?

Sridhar Vembu: Let's step back and look at the state of affairs in America now. You have Silicon Valley with extremely valuable companies, Seattle, similarly, extremely valuable companies. Then you have vast stretches of the country where the opportunities for a decent life are diminishing. People have to get out of those areas to make it.

This has been sadly true in too many areas. Formerly glorious towns with a good civic history have declined because of the decline of their core industry. What is the root cause? This similar thing is true in India in a different way.

Really, what has happened is that everyone in the world, whether you are in rural India or in rural America, or anywhere in the world, has come to depend on critical technologies for our day-to-day life. Be it the smartphone, computers, or all of the technologies that surround us today, they become more and more sophisticated. The sophistication has meant that the production, the value chain of production, the capabilities, all of them, have become concentrated.

In other words, there are very many vast areas of the world, including vast areas in America, where we don't have the capabilities to put together something like the iPhone. Those capabilities are concentrated in a few areas, geographically concentrated. Now, that means the value derived from that capabilities goes to only those areas. That could be Silicon Valley, that could be New York, that could be Seattle. But vast areas of the country do not take part in the value chain of the production, but they do take part in the consumption, and that creates an imbalance.

That imbalance is what is really driving that economic decline. We are buying all this technology because our day-to-day life depends on them. But we're not deriving any income from all this. So the loop is not closed. Our money goes out, but it never comes back in here.

The stuff that we have to sell, including our own time, is not worth as much as the stuff we have to buy. And that's the reality in rural India as well. Now we can see the link between research and development and rural development.

Research and development create those capabilities; rural development situates those capabilities in geographically otherwise challenged areas so that the income from figuring all this out accrues to that area. And then there is a multiplier effect.

If I create some high-value jobs, even by my calculation, even one or 2% of the population engaged in high-value jobs in that rural area can drive that local economy, can act as the economic engine for that area, and create a massive multiplier effect. It could be a tenfold, 20-fold multiplier effect. It has an effect of spreading prosperity regionally.

So that's a connection between research and development, creating that high-value activity with high-paying jobs, and rural development, where you're spreading the fruits in a regional way.

Michael Krigsman: So, the reasons for decentralization, for your interest in decentralization, is it, a, to build a bigger, more profitable, more successful company, or b, because you have a philosophical desire to create greater equality?

Sridhar Vembu: It's closer to b because, honestly, I don't need more money. As I get older, my needs are diminishing. So more money doesn't make me any happier; it probably will make me only less happy than that.

But where I come from, people need jobs. And the same thing here, like in McAllen, Texas. We go to lots of people who have the talent, but nobody is willing to bet on them. Those are the people I want to create that opportunity for.

The opportunity comes from investing in R&D to figure complex things out, create those capabilities, and then create the income that can help, through the multiplier effect, regionally. The multiplier effect works by balancing. I'm buying a lot of technology, but I don't have any income from that. Now, with our jobs, we have, regionally, some source of income from that. So it helps balance the trade of the rest of the world.

From that regional point of view, that's really what we are doing. So it's closer to that to me, organically, without legislation, without all the attendant political fights, this can help balance economies and therefore address problems of inequality.

Michael Krigsman: So if I understand this correctly, then you are a private company, which gives you the freedom and the flexibility to approach business in the way that you do. But because you are a business, there's a natural set of boundaries that also gets placed because you know you have to be profitable. If you're not, if you don't continue profitability, then you can't stay in business. So all of these pieces feed together in a very, we could say, organic way. That's what I'm taking away from your comments.

Sridhar Vembu: I describe it as a kind of an experiment in philosophy, discovering certain truths, or proving to ourselves certain philosophical truths for us. But this experiment is constrained by the reality check of having to pay for them ourselves.

The problem with philosophical experiments is, if someone else has to pay for them, if the government has to pay for them, it can get very undisciplined, it can go completely out of hand, and then lose all touch with reality. That's the problem with trying these experiments in a political realm.

I think the private sector, particularly private entrepreneurs, are in a position to attempt to solve these problems in a context of discipline imposed by having to be profitable. And that's what I'm trying to do.

Michael Krigsman: So, for you, profitability is a must. And at the same time, exercising the philosophical aspects that you were just describing, can we say equally is a must?

Sridhar Vembu: Yes. And these two are two sides of the same coin because then the philosophy is grounded by the reality check. Are we able to satisfy customer needs? Are we able to make a living? Are we creating capabilities that are valuable to other people, or are our products, our technologies, relevant?

Because if there is an outside source of money, free money, maybe from even the government, all of that will go out the window. We can pursue flights of fancy with no connection to reality and delude ourselves into thinking we are making a difference. That's very much a problem with these types of approaches.

That's why being profitable, serving customers in this real world, keeps us grounded at the same time, that gives us the freedom to pursue that philosophical inquiry.

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We're talking here about enterprise software. We have not discussed at all CRM or the suite of products. So where does that fit in? You're an enterprise software company.

Sridhar Vembu: I situate that enterprise software in the broad suite of advanced technologies that we have come to depend on for civilization to continue. Today, it's very much part of the whole smartphones. And from there to the semiconductor fabs, all the semiconductor chips are made, the databases, the operating systems, the robotic automation technologies that populate our factories.

Enterprise software is very much part of the whole firmament of technologies that are needed for a complex, civilized world today. And I also see that as a part of those. So we are very much investing.

For example, we are investing in some automation technologies in manufacturing. Recently we made an investment in drone technology. These are small investments to power R&D right now, but at the same flavor, R&D capabilities in a rural context, creating high-value jobs that can then operate as a kind of an economic engine.

Regionally, that's the whole approach. But in that case, it will be drones. In some other case, it could be MRI machines, it could be robotics, automation. So, all of them are part and parcel of the same philosophical journey.

Michael Krigsman: I just want to remind everybody, we're speaking with Sridhar Vembu. He is the CEO of Zoho, and we're talking about social impact. And you can ask Sridhar whatever you want.

So, if you're watching on the CXOTalk site, just go to Twitter and use hashtag, I guess X now is what we call it and use hashtag #CXOTalk. And pop your question there. If you're watching on LinkedIn, put your question into the LinkedIn chat.

Take it, folks, take advantage of this opportunity. When else will you have a chance to ask Sridhar Vembu anything you want, so take advantage of it.

We have a really interesting question from Twitter from Arsalan Khan, a regular listener who always asks thoughtful questions. He says, "This technology creates haves and have-nots as the world pursues AI, how should AI be used by governments and companies in rural areas so they're not left behind?" He's saying, training, universal basic income. So any thoughts on that, Sridhar?

Sridhar Vembu: AI is very much part and parcel of this whole set of technologies. All of the technologies now have created the haves and have-nots because everybody is a consumer of those technologies, but only a few people get to partake in the value addition, the income generation, from the technology.

That's a core problem. And that is also a regional problem because most regions of the world do not have access to the value-addition potential of the creation of the technology. So they end up being passive consumers of the technology.

That is an economic imbalance. That's what the inequality, that's what the haves and have-nots problem. AI could accelerate these trends already evident even before the advent of AI.

Sam Altman, the CEO of OpenAI, has a good blog post on this topic, and he says AI could make inequality worse. And his preferred solution is UBI, universal basic income.

He believes that a few AI companies will dominate the world and generate most of the profit, and these profit streams are immense. For example, Microsoft, Google, and Apple each pull in about $300 million per day, every single day, weekends included, of operating profit. It's about close to about 120 billion, give or take. That's the scale of the profits today.

AI and Nvidia are getting up there. It's not yet quite in that league yet, but it's also growing fast in that league. And this is the $300 million per day I'm talking about. AI companies, two or three dominating the world, could be generating even bigger cash flows potentially. That's Sam Altman's bet.

In that world, he very much sees the problem. That means most of the world is dependent on it, but they don't get to participate in the income from it. Everybody is buying from me. I have nothing to buy from them, so they are going to be indebted to me.

So, what do we do? He proposes a solution that these AI companies essentially pay a dividend to the government, which you can think of as even a tax. The government takes that and distributes it to everyone in universal basic income.

You can see the purpose of it. Consumers in rural areas need the income since they don't have an organic way to earn that income by participating in this production value chain.

The income is created by the government in the form of universal basic income and completes the flow so the consumers pay these AI or tech companies. Tech companies pay what he calls a dividend, but it could be also called a tax, and that funds that thing. That's how the circuit is established, the flow is completed. That is his mission.

There is a blog post on samaltman.com on this topic. It's very interesting, and it's very much addressing the same kind of problems, but the solution is very different.

My preferred solution, and very much, it's an experimental philosophy. I'm going to tell you that upfront. It's not like I know this will work everywhere, or I've made it work everywhere. I'm attempting it in one or two places. I see promising results, but I don't want to over-market this as the grand solution. But somebody has to do this.

Somebody has to attempt these solutions. Because my problem with UBI is that it robs the human being of dignity. No one wants to be a passive recipient of a government dole.

At the end, it undercuts the dignity that comes from, I am worth something, I have something to offer. To me, that is a core component of being, a core part of being human. It's not that the government shouldn't be supplementing this; it's that my entire income, my entire being, cannot be just a passive recipient like that.

That's where I actually believe that we can create regional prosperity if we can spread the fruits of that technology capability around. In other words, we are not spreading wealth around. We are, in fact, spreading the foundational wellspring of that wealth, which are those capabilities.

Can we do it? That's a 100 trillion or $300 trillion question facing the world today because a lot of the fate of the world's regional economies, the question of UBI versus no UBI, all of them hang in the balance.

Can we get this answer right? Is it going to be possible to spread the wealth creation potential by creating those capabilities to many regional areas, particularly rural areas? Is that possible? That's what our experiment is about.

Michael Krigsman: For example, what you're trying to do in rural communities, which we'll be talking about, and the decentralization of technology that you spoke about earlier. The goal is to create the capability, the opportunity for folks outside of these traditional centers of technology, concentration, development, to give them the opportunity, and then they'll do with it what they will. And it will, in some cases, create wealth, but the point is to create the opportunity, the capability, the skills for wealth.

Sridhar Vembu: Exactly. Today, what happens is even when educational institutions, even really outstanding universities, come to exist in rural areas, which is very much the case in America, for example, you have, you know, whether it's the University of Illinois, Purdue University, and all of them exist in rural America, and they produce outstanding talent, but essentially all of the talent leaves those regions and goes to Silicon Valley or wherever.

What happens is that these universities become vacuum cleaners of talent. They suck the talent from those regions, the surrounding areas, and then deliver it to Seattle and San Francisco or New York or wherever, and the region stays the same way. It doesn't really benefit from any of the capabilities it created.

So, what I am trying to do is create those capabilities and enable the people to stay home so that their income gets invested there, and that creates additional wealth. That's how I see it.

Michael Krigsman: We have a question from Chris Peterson: "Given the animating philosophy behind Zoho, do you still have explicit DEI (diversity, equity, inclusion) and ESG (environmental, social, governance) initiatives, or are all of these social common goods just built in?"

Sridhar Vembu: It's the latter. It's built in. The problem I see with any of these is that it has to be woven into the fabric of the company. It cannot be just a DEI office or a sustainability initiative.

You know what happens, right? In the corporate world, you may have somebody with the title for DEI or sustainability. They may conduct some meetings or training. The rest of the employees, including senior management, often just politely tolerate them, sometimes pay lip service to them, and very often ignore them altogether. This is there so that it looks good on a brochure. We all know this.

I don't want to be that way. I want to create a real opportunity. We have to incorporate that into the fabric of our existence rather than just something that appears on a corporate website.

Michael Krigsman: How do you integrate these goals and aspirations into the fabric of the company so that you are not just simply assigning sustainability to the sustainability manager and saying, "Go do sustainability?" And by the way, let me just be clear. I'm not trying to put down sustainability managers. It's very important to me.

Sridhar Vembu: The real question is ultimately, there's one critical metric. How much energy do we consume per capita to lead a civilized life today? Compared to a pre-industrial society, even compared to rural India, the average American consumes maybe 200, 300 times energy per capita. That's everywhere. Heating and cooling our facilities, our homes, our cars, the fuel consumption on it, all of it, basically. And it's 200 times, 300 times per capita, not simply 5% or 50% more.

That's what separates a pre-industrial to a highly advanced industrial civilization today. This is a fundamental issue to tackle. How do we get that energy? What impact does that energy consumption create from a pre-industrial rural society to modern industrial society?

We are talking about a factor of 100, 200 often in terms of energy per capita energy use. How do we get the energy? What are the sources? What is the impact of using that energy, be it carbon emissions, be it mining, all of it? That's really the question.

It throws up some really difficult questions. These are not easy at all, and the fate of humanity may hang in the balance. And I know there are people who think all this is a hoax, but if you look, for example, just recently in northern India, we recorded temperatures of 115, 120 degrees F in many places.

Those places had never seen that hot. They usually see hot, but not this hot. And this seems to be going up every year. We are setting new records all the time, so it's clear that something is going on.

We have to think about our energy consumption per capita. This is related to the complexity of modern life that requires energy. There is this whole book by a complexity theorist. There's a field called Cliodynamics, and I believe the name of the person is Professor Tainter.

He has come from that physics angle of energy consumption. He makes the argument that complexity demands energy to sustain itself. Energy in joules. Any complex system requires energy to sustain itself.

Modern civilization is extraordinarily complex, with extraordinary dependencies across. We found some of that during the pandemic, and it requires massive energy when we run out of a cheap source of energy. That's how civilizational collapse happens.

He defines collapse as going from a very complex state to a less complex state. It's a very persuasive thesis. There's a book I read by Professor Tainter that I highly recommend. At least you should be aware of this thesis.

He quotes examples from Roman to Mayan civilization for this whole running out of an easy source of energy to sustain complex civilization. He believes that modern civilization may be at that juncture. Nobody can know.

But even without global warming as a threat, even if you put that aside, we still have this issue: Can all eight or 9 billion people on earth, all 1.4 billion people, raise our per capita energy consumption 50-fold, 100-fold to achieve the level of the average American today? Can we do that? Are there energy sources?

Leaving aside the question, can the earth withstand that level of energy consumption? These are fundamental questions that we must be asking. When cheap energy sources run out, you get a collapse of complexity.

That's what he calls the collapse of civilization. That means you go from more complex to less complex. And that's the thesis that I was talking about. This is independent of issues of global warming, climate change, all of that.

So sustainability has a broader dimension in terms of, can we afford to, all of the 9 billion people, or 8-plus billion people on earth, can we afford to consume 5,000 times the energy we are consuming today to achieve a kind of an American average of energy consumption? That's a really important question to ask.

Michael Krigsman: I have heard you use the term transnational localism.

Sridhar Vembu: Yeah.

Michael Krigsman: Please explain what that is and how that fits into this picture you're describing.

Sridhar Vembu: I always believe that to have a happy life, we must remain rooted in a place, to a culture, something that we call our own, like our own families, our own networks. All of that is essential for human happiness. I take it as an axiomatic truth, right? All of us know this instinctively. So that rooted part is important.

Then the second part, we must connect, be connected, in order to achieve the fruits of our technological age. And connected not just in terms of communication, but connected in terms of knowledge, acquiring knowledge, learning from each other, all of it.

Something is discovered somewhere. If we come to know it quickly, we adopt it, we achieve better productivity. So that's a connected part. So this rooted and connected is very critical. This whole transnational localism is really that put into philosophy, these two, rooted and connected.

So the localism part is a rooted part, the transnational part is a connected part. So rooted and connected, operationalized as a company. The philosophy is transnational localism. What it means in practice is we put down roots in regions. We don't look at it as a kind of a transactional relationship.

We put down roots. We actually build our own facilities often and then empower local employees. We want those to become part of our extended Zoho family, be rooted in the company, be rooted in their areas, and live long and prosper.

We are not in every place in the world, but wherever we are, we try to remain rooted and, of course, connected from the company itself and to the broader market society.

Michael Krigsman: A really interesting set of questions from Ramnath. He says, "Can you take us through the evolution of rural development research and development philosophy? Did you always have this larger plan as you went through this journey? Did you have to change any of your assumptions?"

Let me add to that, you moved from Silicon, the heart of the Bay Area, Pleasanton, right outside Silicon Valley, to rural India yourself. And so maybe take us through the evolution and also talk about your own personal story as far as reducing consumption.

Sridhar Vembu: Five years ago, when I moved myself to rural India, actually a few months before the pandemic, I moved myself because I wanted to be there. I had long dreamt of being there because I wanted to work on these ideas.

Did I have the connection, the rural development and research development all worked out? No, I didn't. I had an intuition about it, maybe an early preformed idea about it. But there's something, one thing that I always believe, you have to get in it, experience it, experiment. Then you will discover some truths.

That's how these things came to be. There's very much an evolutionary process where you attempt something, you learn something, then you attempt something new, you learn something, and that becomes a part of an experiment in philosophy.

My moving back was very much part of that broader experiment of life itself, where I long ago decided that's where I want to be. I saw wealth in Silicon Valley. I saw the hyper-wealth that's actually possible in Silicon Valley. There's extreme wealth, a concentration of wealth. I also saw that this lot of loneliness, for example, and in the midst of plenty.

In fact, I was in one very affluent community here in North America about three days ago. I asked my host, "What percentage of the people here do you think are depressed or lonely?" He said, without batting an eyelid, "Oh, at least 25, 30% or on antidepressants." He said, among this neighborhood, I said, I had observed the same thing.

And why is that true? Surrounded by so much wealth, why are people lonely? Why do they have to take antidepressants? This is a question I had pondered over. Then I realized this is, in a way, also a spiritual journey.

I realized that the message of wealth is, and this is true across religious traditions. You are, when you are gifted with wealth, you are also asked to serve. And there is a Bible quote I always remember, which is, "To whom much is given, much is expected," right?

Even though I'm not a Christian, this is a quote that I have internalized because that sharing, that serving others, is very much part of how we achieve our own happiness.

Modernity is cutting us out of those opportunities to serve. It's not that people don't want to share it, but somehow, our living arrangements isolate us from the broader needs of people who are the have-nots.

Modern society has become an efficient concentrating device where the richer people are efficiently separated. The highly capable, intelligent people who can create wealth are separated from the rest of society and set up in these very advanced gated communities. And then they achieve perfect wealth and perfect loneliness often.

I became aware of this through living. I realized that this is going on. And I also know, fortunately, I had that spiritual awakening that we must serve. I must serve in order to be truly happy.

There was a time when I actually was prescribed brand new [inaudible] myself. A doctor friend of mine said, "You take this happiness pill, a happy pill."

And I was thinking, "Why should I take a happy pill to be happy? Why am I not happy?" And then it dawned on me that I must serve. Without it, I'm not going to achieve true happiness. And that's why I moved back.

I've since been much happier. No, all these kinds of feelings of that thing have gone away completely. Being able to serve has also made me happier.

Michael Krigsman: So, this notion of being able to serve, how does that map onto what you're doing with Zoho and transnational localism? And there's also Zoho School, so there's a whole network of activities and things that you're building. How do these fit together?

Sridhar Vembu: First, we create opportunities in places for people who otherwise may not have had the opportunity. That's one thing we do.

Second, I also urge our employees to be rooted in their communities and be aware of the broader local society and find ways to take part and be able to serve. They are not just extended members of the Zoho family I described; they are very much also members of their surrounding communities. How do we take part in that life and contribute?

By situating ourselves away from places of extreme wealth, naturally, we are able to do this. That's part of the whole geographic location. Silicon Valley doesn't need our investment. It's already very prosperous.

But places like McAllen could use our investment that really benefits. Every job we create, our people then can help three others, maybe mentor and coach. What they do on the weekends, what they do in their communities, what they do in their churches, all of that can be helpful to others.

That's how I would like to do this. Many of our employees find this whole thing inspiring. They find this becomes part of the mission for many over time. They've been here five years, ten years. Slowly, they find that this whole thing makes sense. Let me take part in this. That's the kind of thing we want to spark.

Michael Krigsman: I have spoken with several of your employees over time who have expressed a sense of inspiration, but you are at the same time running a business. So, I'm really interested in how this desire to serve manifests in your business operations while maintaining profitability and success.

Sridhar Vembu: The way it manifests is through our commitment to practice outstanding integrity in our dealings with customers and always deliver outstanding value. We never take money without delivering at least an equal amount of value, preferably more, to them than we take from them. That is a crucial part of the ethos of this company.

In fact, we often say we like to leave money on the table. We don't want to be extractive. We avoid what one of my favorite analysts, Brian Sommer, calls "wallet-fracking" the customer.

This has always been part of our ethos. Our long-term customers realize that we won't take advantage of them because it's important to me personally. I feel there's no point in trying to serve the world while wallet-fracking your customer. It's completely inconsistent.

So much of the business world operates on a dualistic idea where you maximize what you can take from the customer during the week, and maybe serve someone in your weekend persona. I don't think that works. This type of dichotomy drives people crazy and is often the cause of burnout because there's an inner sorrow that comes from this split between your work personality and your off-work personality.

I want us to integrate these aspects, be truthful to the customer, serve them well, and then earn our living because they are truly happy to give it to us.

Michael Krigsman: I've been chuckling since you used the term "wallet-fracking." Having worked with many of the largest enterprise software companies over these last decades, I absolutely understand what you mean by that term, and I think enterprise buyers also understand what you mean.

So, would it be correct to say then that the way you lead Zoho is an attempt for you personally to integrate these different sides of your personality under the umbrella of your general spiritual outlook?

Sridhar Vembu: By the way, I want to give credit where it's due. The term "wallet-fracking" came from analyst Brian Sommer. It's his favorite term. I told him I'm going to steal it, and I use it because it always draws a chuckle. It perfectly captures what's going on.

I believe you cannot separate yourself with this dualistic pattern of thought where we separate our work selves from our regular selves. Our community involvement is separate from what we do for work, where maybe we get to "wallet-frack" on a day-to-day basis, but then we'll go and maybe give something for a United Way campaign.

This separation is part of what causes that inner sorrow. I've come to believe, and this is something that my own spiritual background and training emphasized, that contentment and humility are big virtues. These are things that I want to practice in our business, in the way we run our business.

Contentment means that this customer is paying enough. Let's not keep asking for more. Humility means we accept that we make mistakes, correct them, learn from them, and keep improving. Those two are fundamental practices we try to practice in our business.

Michael Krigsman: Sridhar, we have a question on Twitter from Ramnath. He asks how you preserve Zoho's culture as you scale up and spread out in rural areas and across countries. He notes that some of the Zoho culture is shaped by your philosophy, so how do you communicate that to Zoho employees?

Sridhar Vembu: If you are constantly thinking about how to preserve something very precious and spread it, it has to happen organically. Otherwise, it becomes preaching. We don't want to be constantly conducting sermons about this. They don't work. People get bored or they just turn off.

So it has to be a slow diffusion, an organic diffusion. People can disagree. I accept that this may not be for everyone. People may not be in the frame of mind to accept these ideas or agree with them. That's perfectly okay. They should try their own philosophical experiments.

Ultimately, we want people to be their own inner gurus, to listen to their own inner selves. I can only act as a catalyst. I encourage people to listen to their own voice and ask themselves: Does this make you happy? Does this way of thinking, this way of integrating, this being content, does it make you happy?

When people realize that, then they start practicing, and I won't need to preach to anyone anymore. That's how we scale it. The scaling principle is to render myself irrelevant to this, unnecessary to this, so that it gets automatically practiced.

Michael Krigsman: How do you do that? Many business leaders want to express a corporate culture that is very positive and promotes servant leadership and benefits, but something gets lost in translation. So how do you accomplish this?

Sridhar Vembu: You have to live it. Any hypocrisy, where you preach something and practice something else, discredits the whole thing. People are very sensitive to these things.

In my day-to-day interactions with employees, with customers, with anyone, I have to practice it. By practicing it, other people can see that maybe it's worth studying and learning from. That's the spark I have to create. So part of it is my responsibility.

You talk about my rural life, I talk about sustainability, energy consumption. I have voluntarily cut down my own per capita energy consumption from my Pleasanton American life significantly. It’s easily an order of magnitude. Much more energy has been cut from my daily use.

I'm happier as a result. But I don't preach this. I don't tell people to stop driving their cars. I won't preach this. But I am happy I'm voluntarily doing this. If you want to, you can. This is what I do. Maybe try this experiment.

Michael Krigsman: We have an interesting question from Lisbeth Shaw on Twitter. "How has your philosophy and the corporate policies that foster your vision of transnational localism affected company performance?"

Sridhar Vembu: If we don't keep up with technology evolution, technology revolutions, if our products are not relevant, we don't serve our customers, we will go out of business. Customers won't buy our product because they like the philosophy of the company. They have to like the product first. The product has to perform.

That's the reality test. All this abstract philosophy is nonsense if we don't deliver the product that the customer needs, and if the product doesn't perform and stay relevant. Fortunately, we've been able to do this.

Our engineers, our people in technology, understand that we have to maintain our relevance in this technology world. We are inventing things, and I am inventing things. I work on a lot of deep technology myself, inventing solutions to problems. That's part of the reality check on all of this.

Michael Krigsman: So there's a natural grounding that takes place, and the business is a forcing function. The realities of business are a forcing function to maintain that grounding.

Sridhar Vembu: Exactly. Grounding is a very apt word because if you don't ground the circuit, the free-floating voltage can go haywire. It can damage the equipment. Grounding is essential. The business staying relevant, serving the customer, earning their custom, keeps us honest.

Michael Krigsman: Tell us about Zoho Schools. I know that's a very large project and one that's very important to you.

Sridhar Vembu: Zoho Schools is another philosophical experiment. We believe that formal credentials are often not very relevant to real-world performance.

These rigid formal credentialing requirements also keep people out who could have performed the job. I believe both propositions are true in the real world. People who could have done the job are often kept out or keep themselves out for fear that they won't be able to clear that formal credential bar. This is very true in software engineering and programming.

The second part is that we can create capabilities in people. We summarize our schools this way: Education that is contextual, experiential, and relevant.

Michael Krigsman: How large an effort is this this year?

Sridhar Vembu: About 220 or 230 students are in the incoming class. This class entered just about two weeks ago. I met many of them recently. I try to meet the incoming class every year.

The program is about a year of rigorous, hands-on experience. It’s experiential learning by doing in context. Many of the technologies are relevant to how we build products. We train them, and we pay them while training. We also take care of their food.

This comes from the conviction that young people should not be trapped in debt. I am a strong proponent that societies that trap their young people in debt are doing a massive injustice to their own young people.

There's a proverb in Tamil that says there's nothing more cruel than young people in debt. I firmly believe that philosophy. So we pay them a stipend, and we train them. We create the opportunity for them so that they can live a debt-free life.

Michael Krigsman: What is the relationship between Zoho Schools, transnational localism, decentralized technology, and Zoho's ability to hire skilled and capable people?

Sridhar Vembu: Zoho Schools is a key component of how we create and nurture talent. It is a formalized institutional effort.

Everywhere we operate, we practice the philosophy, maybe less formally. For example, we may take people who don't have the precise background but are willing to learn. We may extend an opportunity that way. We often do that, and it's true worldwide.

We bring in people from maybe an unrelated background who still have the skills, like someone who can write good content. They may not know anything about the domain, but they become communicators in our domain. We have done this, and it has been very successful for us.

The philosophy of Zoho Schools, not worrying about formal credentials, is applicable worldwide. Transnational localism, creating jobs in places where jobs don't exist, means we have to create and nurture talent.

This idea of extending opportunity is relevant, and then we enable those people to be rooted so that as they prosper, as they become skilled, they are able to stand on their own and create good income for themselves. They are able to help others and spread that gift around. All of these are interlinked for us.

Michael Krigsman: This is from Arsalan Khan, who asked this a while ago. He read that an AI interviewer will interview humans. How do you address biases in recruiting with AI? Biases currently exist, for example, based on a person’s name.

Sridhar Vembu: Talent selection is a very valid concern. AI is not some kind of magical device. It incorporates all of the biases humanity has, and those are very much part of the training set. We don't know what it could do in a given situation. It's very much a black box. I'm extremely uncomfortable with this whole AI interviewing people idea. I don't agree with it. I don't believe that's a wise idea. I hope companies won't do this.

Michael Krigsman: Another question from Lisbeth Shaw on Twitter: "How do you infuse your philosophy into corporate policies and strategy at Zoho? How can you tell how closely the outcomes match your expectations?" I think that's a question of metrics and evaluation measures.

Sridhar Vembu: If you try to metricize all of this, create 18 metrics to ensure that all of these are correctly practiced, we are doing it wrong. This cannot be reduced to metrics.

I am opposed to this whole "measure and manage" practice in the human realm. As I often say, metrics are for widgets, for software, for factories, for how the goods are produced. Metrics are great for tolerances and all of that. But metrics are not great for human beings.

We don't have a notion of a standardized human being. Many ideologies try to create some kind of standardized human being with standardized testing. All of it is coming from that same source. I fundamentally don't believe in it. We will not metricize all of these things.

How do you measure? You don't measure. You have to know. This sounds like nonsense unless you are living it.

Fortunately, our senior management, our leadership team, has been with us through all of this. They've been very much co-creators in this journey. I am one of the most articulate ones, so I know I grab an unfair amount of credit.

Our founder, Tony Thomas, my brother Kumar, who was very much part of the initial founding, my other brother Mani, my sister Radha, and Shailesh, our co-founder, they've all been part of this journey. They instinctively know. We've been together for 28 years. I don't preach to them. They just know these things internally. We just have that philosophical core weaving us together. That's why things work.

Michael Krigsman: It sounds like it would be very hard to transplant this system to other companies.

Sridhar Vembu: The idea is not to transplant it but to nurture and grow into this. You create small groups like this and then steadily grow them.

Michael Krigsman: Sridhar, what advice do you have for business leaders who are listening to this and want to adopt some of these lessons?

Sridhar Vembu: Start with small ideas, small experiments, maybe in one team. Change the way you hire. Create opportunities. Find someone who believes in these ideas, who has a philosophical conviction about what I'm saying. Find that person, empower them to run some experiments, and they will find these truths themselves. At that point, I am not relevant. They will discover these things themselves.

Michael Krigsman: Finally, for students who want to apply to Zoho Schools, how should they do that?

Sridhar Vembu: Go to ZohoSchools.com and apply online. We get tens of thousands of applicants. It's kind of gone viral. I'm not very proud of the fact that we get 20,000 applicants. I wish we got fewer applicants. I wish we could take many more of them.

We take about 250 now. We're trying to expand, but it depends on faculty availability. It's not just about investing the money. We need passionate people to do the training. Our teams have to have the needs. We want to be able to guarantee a job when students graduate.

We hope we are doing this in an equitable manner. It’s a challenge when you get so many applicants. How do you select some people? I don't want to claim that the ones we reject are not good.

Michael Krigsman: Very good. I want to say a huge thank you to Sridhar Vembu from Zoho. Sridhar, thank you so much for being with us today.

Sridhar Vembu: Thank you so much.

Michael Krigsman: Everyone watching, thank you for watching, especially those who asked such excellent questions. You guys are truly awesome.

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