Inside Oracle

The Big Questions

Oracle CEO Mark Hurd on the US economy, global competition, and the impact education will have on the next generation.

By Rob Preston

Spring 2019

Mark Hurd has always been a student of economics, as a student at Baylor University through his tenure as CEO of Oracle. His decades of experience now put him in a unique position as both an economic actor and as an analyst (even a predictor) of global business trends. Profit magazine had the opportunity to catch up with Hurd recently at Oracle’s headquarters in Redwood Shores, California, to pick his brain about a range of economic, business, social, and technology issues.

US/China Relations

At the top of Hurd’s mind is the ongoing trade negotiations between the US and China. He emphasizes that the US must take a long-term view, even as China’s trade surplus with the US reached a record US$323.3 billion in 2018. “The current generations have all grown up in a US-dominated world, where one economy dominated,” Hurd says. “We appear to be moving to a world in which two economies will dominate the world, and we don’t know what a shared environment looks like yet.”

We appear to be moving to a world in which two economies will dominate the world, and we don’t know what a shared environment looks like yet.”—Oracle CEO Mark Hurd

In the context of China’s most recent, highly ambitious five-year plan, which is publicly available, the ongoing bilateral trade negotiations appear to be tactical, he says.

“At the end of the day, this is a long game, and it’s about education,” Hurd says, especially STEM (science, technology, engineering, and math). “It’s about the ability to lead in core technology categories,” with artificial intelligence at the top of the list, he says.

Hurd says China, which produces at least twice as many science and engineering undergraduates per year as the US does, is winning that long game by “outeducating us.”

Different Approaches

China, whose gross domestic product grew 6.6% in 2018, to just over US$13 trillion, is expected to pass the US, with a GDP of US$20.66 trillion, up 3.5% from the previous year, as the world’s largest economy within a decade. Hurd believes that China’s goal is to become the premier economy in the world—and one tool to achieve that end is artificial intelligence.

“If you just want to look at economy versus economy, they have less ‘technical debt’ than the US does,” Hurd says. “The US continues to invest in physical infrastructure; China continues to invest in cyberinfrastructure. For example, we spend close to US$700 billion a year on defense. China spends more like US$175 billion. Would you rather own the aircraft carrier or the software that automates the aircraft carrier? That’s going to be a big economic benefit to them in the long run.” Despite this debt, Hurd sees significant strengths in the US economy.

If you can educate and graduate great young people who innovate and start companies, create jobs, this is what’s going to be—long run—the best thing.”—Oracle CEO Mark Hurd

“The US has amazing resources,” he says. “Now that the US is technically energy-independent, importing only around 15% to 16% of its consumption, it’s pretty well self- sufficient. It is loaded with smart people. Our demographics are good. And our higher education system is still strong.”

But Hurd believes that the US must continue to build its technical brain trust to make the most of its advantages. “We continue to let people come from outside the country to get education and training, and then we force them to leave,” he says. “This is not the brightest idea I’ve ever heard.”

Hurd notes that it’s not in the interest of the US economy to train talented people from other countries but then send them back home after graduation to become national competitors. “I’m talking about the smart kid from Chennai who graduates from Stanford with a 4.0 in engineering, and then we tell him he has to leave town because now that he’s no longer a student, he can’t start a family here, he can’t start a company here, make money and pay taxes here,” Hurd says.

At the end of the day, this is a long game, and it’s about education, especially STEM. It’s about the ability to lead in core technology categories with artificial intelligence at the top of the list.”—Oracle CEO Mark Hurd

“I believe that the core of any economy is education, innovation,” he continues. “And if you can educate and graduate great young people who innovate and start companies, create jobs, this is what’s going to be—long run—the best thing. I still think the US is in the best position to do it. But it’s the first time the US is running into a highly capitalized competitor that has got lots of assets at its call.”

A Higher Calling

Hurd, who is vice chair of Baylor University’s board of regents, sees Oracle’s deep involvement in higher education as much more than a customer opportunity. For one thing, Oracle depends on US colleges and universities for talent, as it hires thousands of recent graduates every year. “Higher education is directly tied to the economy, and the economy is directly tied to the health of the nation,” he says. “The big question is: Can we get those things aligned?”

At Oracle Cloud Day in New York earlier this year, in an onstage interview with Bloomberg Executive Editor Tom Giles, Hurd offered his views on a related subject: recruitment and talent development. Hurd mentioned that he gave new priority to hiring from the college campus—a pivot away from the common practice of hiring experienced staff away from competitors. “Everybody would put their people in the middle, and then we’d just trade people,” he said.

But when Hurd started in the tech industry, decades ago, the corporate strategy was different. Employers would invest in training and developing recent college grads. He recalled recent hires spending as many as eight months on training alone. “It was fantastic,” he says. “It was the only time you had with no pressure, time to learn and develop. But our industry got tripped up, because training came to be viewed as an expense instead of an investment.”

Many of Oracle’s college hires from several years ago are now moving into management positions at the company, Hurd notes. “We find amazing talent on the US college campus. I just wish we could get to the rest of that talent,” he says, alluding to those students from other countries who are forced to go home after graduation.

Hurd personally invests in college talent as well. He and his wife, Paula, contributed the lead gift to “Give Light: The Campaign for Baylor” in November 2018. The gift will go toward the Mark and Paula Hurd Welcome Center, a high-tech complex that will serve as the epicenter for academic, cultural, and social activities.

Future of Tech

Profit asked Hurd for his perspective on the core value of cloud computing. Oracle Executive Chairman and CTO Larry Ellison has said that two Oracle products in particular—cloud-based ERP software and the company’s Oracle Autonomous Database—will determine the future of the company.

“We’re fortunate that Larry—10, 12 years ago—started rewriting all of our applications for the cloud,” Hurd says. “I mean, literally going through a rewrite. Now, if you want to be an unpopular CEO, go out and increase your R&D from US$3.7 billion to close to US$6 billion a year. And the reason we had to spend US$6 billion was that we couldn’t stop doing what we were doing today while we wrote all the new stuff. Today, that turns into a good thing, but it wasn’t so popular back seven, eight years ago.”

The basic promise of the cloud is that in the end, it costs less, delivering continuous innovation at the price of the subscription.”—Oracle CEO Mark Hurd

The reason the cloud is here to stay and not just the latest IT fad “is because it’s more than a technology,” Hurd says. “It’s really a business model. And at the core of it is to take the risk of IT and move it from you to the companies providing the cloud services. You give me your problems, and they now become my problems. I go do the work for you. Not everybody likes that model, because some people find it threatening.”

Hurd gave a quick overview of how the IT industry arrived at the cloud, going back 30 years. In the beginning, IBM dominated almost every sector, from microprocessors to operating systems to databases to computer hardware. But as four or five competitors emerged in each sector, their customers started piecing together these incredibly complicated, heterogeneous IT architectures to the point where it became extremely difficult for them to upgrade, modernize, and secure those myriad technologies, Hurd says.

“What most of these enterprises are now doing is trying to figure out how to make things simple,” he says. “Most of our customers spend more than 80% of their money maintaining the old stuff they’ve got, not innovating. The basic promise of the cloud is that in the end, it costs less, delivering continuous innovation at the price of the subscription.”

Photography by Charlotte Fiorito/Compass Photographers