← Fareed Zakaria GPS
Fareed Zakaria GPS
Exclusive Interview with Microsoft CEO Satya Nadella; Prospects for Democracy in Venezuela
00:42:39
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NetSuite Announcer
This podcast is powered by NetSuite. They say that every day your business is late to AI, you fall two days behind. But how do you keep up? The competition is only moving faster. Fortunately, there's NetSuite NEXT. You may already know NetSuite is the 1 Cloud ERP business management platform that brings together finance, inventory, operations, CRM and reporting in one unified system. Now there's NetSuite NEXT. Built with AI at its core, NetSuite NEXT helps you work in a more natural, intuitive way. Ask questions in plain language, get answers instantly, uncover insights faster, and automate everyday tasks across your business. It's everything you value about NetSuite, enhanced with the power of AI to help your teams move faster, work smarter, and stay ahead of what's next. For the first time ever, you can try netsuite Next for free. If your revenues are at least in the seven figures, go to NetSuite AI GPS. Built for every industry, ready for every boardroom. NetSuite AI GPS
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Host
this is GPS, the global public square. Welcome to all of you in the United States and around the world.
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Fareed Zakaria
I'm Fareed Zakaria.
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Host
Today on the program, I will talk to the CEO of Microsoft, Satya Nadella. I want to know how he thinks about artificial intelligence.
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Fareed Zakaria
Is it a bubble or is it the industrial revolution times 10?
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Host
Will it destroy most jobs?
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Fareed Zakaria
And has China's technology caught up with
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Host
the all that and more. Also, Venezuela's opposition leader, Maria Corina Machado. She won the Nobel Prize for her
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Fareed Zakaria
work promoting democracy, and she's now living in exile.
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Host
Polls say she would win an election back home in a landslide, but reports are that the Trump administration has barred her from going home. What is going on?
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Fareed Zakaria
I will ask her.
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Host
But first, here's my take. This week, Britain installed its seventh prime minister in barely a decade. France has churned through almost as many in just a few years. Its next president may well be the once outcast Marine Le Pen. In Germany, the far right AFD tiny just a few years ago, now poles in first place. Even East Asian democracies, often viewed as stable, cautious, even boring, have seen governments in Japan, South Korea and Taiwan struggle in the midst of growing public anger. And where the populace are in power, the situation doesn't seem that different. Donald Trump now hovers near the lowest approval ratings of any modern American president at this point in a presidency. Can modern democracies function? Across the democratic world, many countries tax, borrow and spend exorbitant amounts. Spending now averages more than 40% of GDP in the OECD countries and the debt to GDP ratio in those countries has more than doubled over the last 30 years. But people don't seem to think they have benefited. Why has this happened? Some of it is economic. Expensive housing, stagnant incomes, and a widening inequality problem have fueled public anger. But economics is only part of the story. America has enjoyed stronger growth than most other advanced economies. France under Macron has lowered unemployment, and it has attracted more foreign investment than any country in Europe for seven straight years, According to an Ernst and Young analysis, South Korea is an economic success story. Japan was experiencing a comeback. Yet democratic governments almost everywhere are unpopular. The larger explanation is that we are living through one of history's great technological revolutions, and these transformations always produce deep anxiety and fear. The last technological transformation on this scale is came between roughly 1880 and 1920. Electricity, the telephone, railroads, the automobile and movies overturned entire industries and ways of life. Millions left farms for cities, global trade disrupted local economies. New fortunes appeared overnight, while old occupations disappeared. In this turmoil, frustration and anger found political pathways. The left turned to communism, the right to fascism. What followed were new mass movements, cultural upheavals, and world war. Our own revolution is digital rather than electrical, beginning with computers, then the Internet, and then smartphones, social Media, and now AI. The latter might prove more transformative. As DeepMind's Demis Hassaba said last week, we've essentially found a way to make sand think silicon chips are made of sand. The ability to mass produce intelligence that gets more powerful every month is surely the greatest technological triumph in history. But that means it could be the most disruptive. The great political scientist Samuel Huntington noted, the primary problem of politics is the lag in the development of political institutions behind social and economic change. Large scale change causes anxiety, and anxious societies ask more of politics. Citizens want leaders to restore order, provide security, and help them regain a sense of control over forces that seem increasingly beyond anyone's grasp. But while today's technology dramatically increases expectations, it also makes democratic governments less capable by comparison. We summon a car these days in three minutes. A package arrives the same day. Artificial intelligence answers complicated questions in seconds, doing work that took people months in mere minutes. Naturally, citizens begin to expect similar efficiency from government. But democracy is not designed for speed. It's designed for legitimacy. It bargains, compromises, consultant independent courts, protects vulnerable groups and balances competing interests. Those safeguards are precisely what distinguish democracy from authoritarianism. Yet in an age shaped by technology's warp speed, these increasingly look like paralysis. Social media widens the gap. Every governmental mistake becomes instantly visible. Every disappointment becomes a viral controversy. Every frustrated citizen can mobilize thousands of others before governments have even begun to respond. This helps explain the strange trajectory of modern populism. Politicians such as Donald Trump, Jair Bolsonaro, Javier Milei and others rose to prominence, promising to bulldoze through institutional gridlock. Yet once in office, most have encountered the same reality as the leaders they displaced. Today's insurgents quickly become tomorrow's disappointing incumbents. People don't seem to have lost confidence in democracy. They have not turned their backs on elections, constitutions and independent courts. But they are deeply unhappy with democratic performance. Democracies must once against prove that they can build housing and infrastructure, modernize public services, manage technological change, reduce inequality, and do so with urgency and effectiveness. History offers some grounds for optimism. Free societies often look weakest in the midst of great technological upheaval because they move slowly and argue constantly. Yet over time, they have usually adapted better than autocracies precisely because they can learn correct mistakes and change course without violence or repression. Democratic leaders should not try to outrace technology. They can't. But they should prove through relentless focus and competence that democracies can deliver. Then people will understand that the friction of accountability and the weight of legitimacy are not bugs in the system. They are the features that keep us free. Go to fareedzakhariya.com for a link to my Washington Post column this week. And let's get started. Artificial intelligence is fueling the American economy.
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Fareed Zakaria
Right now.
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Host
The appetite for anything AI related seems never ending as tech companies rush to build data centers, buy chips and fuel technology development. But so much of this spending is one massive bet and many on Wall street are worried about whether they will see returns on these investments.
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Fareed Zakaria
Here's part one of my exclusive interview
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Host
with Satya Nadella, the CEO of Microsoft. Satya Nadella, welcome to the show.
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Satya Nadella
Thank you so much Fareed for having me.
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Host
Are we in an AI bubble and has it begun to deflate?
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Fareed Zakaria
You have a 30% stake in OpenAI. They have promised to spend hundreds of billions of dollars.
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Host
They make tens of billions of dollars. They'll make $25 billion this year in revenue. It just feels like the math doesn't
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Fareed Zakaria
add up and there is going to be a moment of truth. Am I wrong?
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Satya Nadella
I think the moment of truth really more is the following. The way I look at it is this is a new input. This is a new general purpose technology that is going to drive productivity and that productivity has to translate into very broad spread economic growth that is economy wide in terms of GDP growth. And if we don't see that, then we are going to have a problem. So unless we see that broad economic growth, we are not going to have this movie end well. But I am also about, how do you ensure not about any one firm. Right. Quite frankly, it's about every firm in the economy.
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Fareed Zakaria
Right.
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Satya Nadella
Whether it's a small business, whether it's a large multinational or a public sector institution. Can they see real benefits of this technology? We are in the early innings of it, but there's real proof points of that.
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Host
So the big news this week is
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Fareed Zakaria
that a Chinese firm, Moonshot AI, released a model, Kimi, that is open source or open weight, which means you can kind of see the innards of it, which American firms by and large do not allow. People think it's very, very good, almost, almost as good as the top American models.
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Host
Is it not likely that the most
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Fareed Zakaria
of the world is going to adopt these open weight Chinese models because they're
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Host
much cheaper, they can do mostly what you need to do.
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Fareed Zakaria
You know, most companies are not using AI to solve Fermat's theorem, they're using it to rationalize their inventory systems or things like that.
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Host
So is this, you know, does this
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Fareed Zakaria
mean China has an edge?
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Satya Nadella
When I think about, let's say American competitiveness in the digital sector or in tech, it's always come from not any one thing, but it's come from this approach I think the US has always taken, which is the ecosystem approach. All over the world it's been export led. It's been about trust in our technology. Right. So for example, if you take the Chinese models, guess where these models run? They run on a lot of the hyperscalers that are American all over the world. In fact, that's good because we then these are open weight models. That means we get to monitor them, we get to test them, we get to post train them. So when Tinker Machines or Thinking Machines releases a new model, is that an American model? Is it a Chinese model? There may have been a base model that was trained, but they've done post training, they've released it. So I think that one of the things that's lost in this is the understanding even of how the US became competitive in the first place. They didn't become competitive because of one invention. We became competitive because we took our technology. We built a rich ecosystem where others could participate in other countries and trust our stewardship of this ecosystem. And as long as that remains, we will absolutely be competitive and we will win. The Chinese will have a role in it, whether it's in the open weight models or other technologies. But you know, it's not about that zero sum. It's about really thinking in ecosystems.
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Host
Next on gps Many people are worried about how AI uses their data. It may come as a surprise, but so is Satya Nadella. We'll discuss when we come back.
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NetSuite Announcer
This podcast is powered by NetSuite. They say that every day your business is late to AI, you fall two days behind. But how do you keep up? The competition is only moving faster. Fortunately, there's NetSuite next. You may already know NetSuite is the number one Cloud ERP business management platform that brings together finance, inventory, operations, CRM and reporting in one unified system. Now there's NetSuite NEXT. Built with AI at its core, NetSuite NEXT helps you work in a more natural, intuitive way. Ask questions in plain language, get answers instantly, uncover insights faster, and automate everyday tasks across your business. It's everything you value about NetSuite, enhanced with the power of AI to help your teams move faster, work smarter, and stay ahead of what's next. For the first time ever, you can try netsuite Next for free. If your revenues are at least in the seven figures, go to NetSuite AI GPS built for every industry, ready for every boardroom.
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Claire Duffy
NetSuite AI GPS I'm CNN tech reporter Claire Duffy. This week on the podcast Terms of service are virtual wallets on the way to replacing the classic billfold? And as a tech reporter, I cannot help but wonder, what are the risks of storing so much personal information in one place on our phones? Thankfully, Consumer Reports investigative reporter Lisa Gill spent months trying to answer those questions. She joined me to talk her own digital wallet journey and how to keep your financial data as secure as possible.
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Lisa Gill
Google Wallet, Samsung Wallet, and Apple Wallet tell you that they do not hold funds, they merely facilitate a transaction. Your information is stored on your phone, not with them. PayPal, Cash App and Venmo actually do hold funds, and they, in my mind, act a lot more like a bank.
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Claire Duffy
Listen to CNN's Terms of Service wherever you get your podcasts.
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Host
Microsoft CEO Satya Nadella made headlines earlier this month when he warned that companies using AI pay for intelligence twice, once
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Fareed Zakaria
with their actual payments to the AI
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Host
firms and again with something even more precious that data and their unique knowledge. In other words, asking AI questions doesn't just result in answers for us, it tells AI what we're thinking. This creates what Nadella has spent the reverse information paradox, where AI models and their providers are the ones gaining more knowledge and Overwhelmingly reaping the benefits. More now of my conversation with Satya Nadella. So this is something you've been quite
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Fareed Zakaria
vocal about, the idea, you know, to put it in layman's terms, that every time you use an AI model, you're giving them your data, you're giving them your thought process, and they're essentially stealing that and making their models better. And eventually they have all that information you don't. A version of this happened to the media companies, you know, and the newspapers and magazines when Google and the Internet came about. So there's two arguments against this. One, what you're describing is of course very beneficial for Microsoft because your business model relies on commoditizing that space and then, you know, putting value where Microsoft has lots of products.
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Host
Is it feasible? Is there a way in which you
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Fareed Zakaria
can take advantage of AI and still control your, your data and your reasoning, particularly for an average person? Maybe a fancy company like yours can do it.
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Host
But how does, how does an individual
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Fareed Zakaria
say, look, I do want to use AI, but I want to in some
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Host
way be in charge of my data 100%.
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Satya Nadella
So in fact, this is the real question, because my thesis is simple, which is, if the firm has to exist, let's leave consumer markets outside, because to some degree there's got to be some value exchange in the consumer space where you're getting something for free, maybe for your data. That's sort of how the advertising business model has worked. So let's leave that aside. But at the firm level, this is the first time where the decision should be, okay, I am a firm that creates knowledge, and I need that knowledge to stay inside the firm. I not only have human capital, but now I have increasing levels of token capital. The only way to preserve that is what I describe as your control over ensuring that the reverse information paradox doesn't happen. Right? Which is every time you use the model, all of the metadata around it is sort of retained by you so that you could use all of that to train perhaps your own weights or your own model. And to me, that's what I think is going to be absolutely. You know, if you go back, the patents, copyrights, trademarks, all were created to protect the seller. This is the first time where we will need to have, I would say, even the rights that protect the buyer. But even short of that, in the immediate term, there is a technical approach that's kind of what I wrote in my post that you could take to protect yourself, right? Where not only are you able to use the frontier models, but for Example, by keeping the harness separate from the model, the context and memory separate from the model, you absolutely can use multiple models for what they're great at at the same time. Any one model can go away and you can still continue to be in control of your own destiny. And so to me, there is an absolutely an approach and that's what makes a sensible approach. And it's of course not what Microsoft does, but it's not about a firm specific thing, because any firm that doesn't have this control, I will claim, will not remain a firm because you've essentially outsourced your thinking.
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Host
Let me ask you about the future of work. Microsoft employs about 200,000 people, but the
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Fareed Zakaria
number of AI programs, programmers, you know, what people call agents, it's probably 2 million or 20 million soon.
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Host
Is it likely that 10 years from now Microsoft will either have the same number and not have grown, or maybe even have fewer, given the amount of
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Fareed Zakaria
work and the kind of quality of work Anthropic says almost all its code is now written at the first level by computers, by AI.
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Host
What happens to human beings?
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Satya Nadella
Yeah, it's a great question. You know, if you think about this is the real challenge in all of these transformations, right? The lump of labor fallacy and our lack of imagination get in the way, right? Which is if you sort of somebody came to us fareed in the early 80s and said, hey, you know what? 3 billion people, people are going to get up in the morning and start typing. We would have said, why does the world need 3 million typists? Except we invented in the last, whatever, 40 years, this entire economy of knowledge, work and all of us went to work in IT in different roles. And so that's the type of transformation even inside of Microsoft, right? What does it mean to be a software engineer? It's changing because at some level these coding agents have made all of us, right, Creating a document or a software probe to some degree are now the same. Does that mean somehow the specialized deep systems engineer who we still needed in order to be able to build the distributed systems in Azure goes away? No chance. But will anyone be able to create an app that required in the past some it Absolutely. And so as that change diffuses, I think the core spine of the organization, how we are organized, what functions we have, the work artifacts, the workflows will change, wages will change, and that process is going to have some significant displacement. It's all not going to be hunky dory. But when we come out on the other end, I absolutely believe there will be new jobs that we will value as humans. In fact, you can see it even today, right? What are the reasons all of us react to someone who gives you just pure AI output? And you say, well, I don't want that. I want to know that there was a human behind it who actually looked at it. And our ability to discern what that human did with the AI output is going to be the new quality we will in fact value. And so I think as we get through this transformation, we will understand how humans continue to evolve and value each other's contribution to advancing our societies.
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Host
People say that human creativity is the one thing that AI models cannot match. What if that's not true? I'll ask Satya Nadella that next. And now more of my exclusive interview with Satya Nadella, the CEO of Microsoft.
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Fareed Zakaria
I'm struck by something about AI. People often talk about creativity as one of the things that human beings will be able to do that AI can't. But I'm struck by because of the nature of AI, you know, it's a kind of predicting what would the next likely word token. It's actually quite creative because it's kind of like in a sense, hallucination is the is is a feature, not a bug.
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NetSuite Announcer
It's.
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Fareed Zakaria
It's thinking up things, right.
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Host
And so you love poetry.
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Fareed Zakaria
I love poetry. AI is astonishingly good at poetry.
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Host
What does that tell you about what's left for human creativity?
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Satya Nadella
You know, the fascinating thing is it's that ability to empower each of us to be more creative. I'll just give you even a simple example this morning, right. You know, with something like GitHub now, right? The ability even for me, like I was a programmer, you know, over the years as I've sort of evolved in the organization. It's not like I'm daily programming, but now I am like this morning I come in and I wanted an app which went into my inbox, triaged my inbox, created a project tracker application just for myself. I was able to do that to me, to be able to have that power that somehow I can express a high level intent. Right. The intent itself is creativity. But then the rest of it was all executed and automated. I think is going to create, I would say, new form of art, a new form of expression, new form of ability to. I sort of sometimes describe the new work as macro delegation and microservices steering. Right. Every one of us will become better at management through intents and at the same time having the ability to steer it exactly to the place where we want it.
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Fareed Zakaria
So a bunch of Microsoft employees, former employees, have started a company and they say that that company is going to be run at the CEO level by AI, by an AI agent. So effectively, they will, they will execute the orders that the AI CEO tells them.
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Host
Do you think that will work?
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Fareed Zakaria
And why? And why or why not?
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Satya Nadella
I mean, having an agent that works for a CEO is like essentially a delegated AI that takes your identity and your credentials. So to some degree, I think we're already at an age where I think, think about the fundamental unit of work is a human plus their agents. And at the end of the day, human control is what I think all of us will value personally as institutions and as a society. So that is the key thing. So even when, for example, I thought what the Pope did at the encyclical was fantastic, right, because he talked about any technology that takes away human dignity and, and agency is going to be rejected by definition, right. I don't think we will accept it as a society. But anything that empowers us to do more, to achieve more, to be more ambitious about what we can do, whether it's a CEO or a frontline worker, we will accept it. And so at least that's certainly the direction of travel that I'm for.
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Host
And so do you think that it's
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Fareed Zakaria
fairly clear that the human being will be in control? You say he should, or he or she should be in control. But do we have the kill switch?
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Host
Can we pull the plug?
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Fareed Zakaria
Or do you worry, as Elon Musk used to, that the machines will eventually rule us?
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Satya Nadella
I think I have much more faith in our political economy and its institutions that the backlash. Right? I mean, you've written a book about this. Revolutions are great as long as the backlash is managed. And that's sort of been the lesson of history. And so I always say that's why I want an English Revolution, not a French one. And that will only happen if we really, really manage through this process where we are in control. And that, I think, is the foundational issue that will be defining our era.
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Fareed Zakaria
Satya Nadella, pleasure. Thank you for coming on.
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Satya Nadella
Thank you so much, Fareed. It's a pleasure.
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Host
Next on gps. In January, after American forces captured Venezuelan President Nicolas Maduro, many expected President Trump to install Maduro's main opposition, Maria Corina
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Fareed Zakaria
Machado, as the country's new leader.
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Host
But she remains in exile.
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Fareed Zakaria
Why? She joins me after the break.
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Host
Earlier this week, a federal judge stipulated that former Venezuelan President Nicolas Maduro and his wife would face trial in June 2027 on drug trafficking charges. When U.S. forces struck Caracas and seized
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Fareed Zakaria
Maduro in January of this year, many
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Host
had hoped that the opposition leader, Maria Corinna Machado, would lead the country through a democratic transition. Instead, Maduro's Vice president, Del C. Rodriguez, was installed as interim president and has been in power ever since. Maria Corinna Machado is a Nobel Peace Prize winner and she has been in exile since December 2025.
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Fareed Zakaria
She joins me now.
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Host
Maria Corina, welcome. And first let me ask you what are you hearing about the situation on the ground in Venezuela with regard to the earthquake? How bad is it? Has it settled down?
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Maria Corina Machado
On the contrary. Every day that goes by, the situation is more and more critic. This has been certainly the largest tragedy in Venezuela in recent history. We're talking about thousands of dead still. We don't have the right number, the clear number. The NGOs and civil society estimate over 40,000 people still missing. Hundreds of buildings have collapsed. Infrastructure damage is estimated by the UN in over $20 billion. So this has been a huge tragedy. But that has also shown crucial realities. On one side, the solidarity, resilience, courage and capacity to organize of the Venezuelan people. But on the other hand, we've seen the, the absolute absence of the state with no zero capacities. They did not react and when they did it was to upt the efforts that were being done by citizens, private citizens and international foreign, foreign rescue missions. So this has, you know, we're still seeing people, hundreds of people that it's already a month digging with their own hands, with no equipment whatsoever, looking for their loved ones. So this has brought first fear, then indignation, and now I would say it's rage that it's growing in the Venezuelan population and the sense of urgency that grows every day.
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Host
So you wanted to go back to
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Fareed Zakaria
Venezuela and visit your country partly because
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Host
of the earthquake, partly because you feel
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Fareed Zakaria
it's important to start a process of democratic transition.
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Host
The Trump administration, from all reports, essentially barred you from going.
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Fareed Zakaria
Why?
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Maria Corina Machado
Well, I've been in contact with President Trump, Secretary Rubio and many U.S. officials during this last month and exchanging views in terms of how to move ahead into the three phase plan that the US Government has put in place in Venezuela. And the third phase, it's very important to remember, is a transition process that requires a legitimate election. We are seeing now the same regime that was in place when all these criminal activities were denounced. And the lack of trust towards the regime and institutions that are in ruins in Venezuela is huge. So the only way we can move ahead into bringing relief and hope to the Venezuelan people and also getting all the investment Venezuela requires now after the emergency, which is estimated in over $50 billion, but also to take advantage of the huge resources Venezuela has. That requires trust, that requires institutions, that requires legitimacy. The huge transformations that ought to be put in place in Venezuela have to have the support of the Venezuelan people and the regime. The Elsie Rodriguez regime is in its lowest point of support ever. And it was, as I say, exacerbated after the earthquake. So, yes, my desire from day one is to go back to Venezuela. And when the tragedy took place, I realized it was my duty to be with our people, being together, mourning together, praying together. And that's the reason why I'm going to go back soon to my church country.
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Fareed Zakaria
You will go back soon?
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Host
I will in the next month.
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Maria Corina Machado
Well, we are planning the logistics that are required for, you know, not only for reaching Venezuela, but for being in Venezuela, for operating, for organizing the democratic forces, for channeling all these anxiety and urgency that I mentioned before in a peaceful and democratic channel. That's precisely my goal and why I believe I need to be back.
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Host
But President Trump has spoken of you often in kind of dismissive ways and
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Fareed Zakaria
suggesting that it's not right. You know, it's not time for you to go.
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Host
It's not right for you to even go.
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Fareed Zakaria
The situation is great.
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Host
Do you regret having given him your Nobel Peace Prize?
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Maria Corina Machado
No, I don't. And I think that we wouldn't be here with this huge opportunity of having Venezuela, you know, turning into a democratic nation if it wasn't for the decision President Trump took on January 3rd. The Secretary of State has been very clear in terms of what it's needed in terms to, to bring Venezuela and turn Venezuela into the great ally of the United States States, not only from a security perspective, we need to dismantle these groups, get rid of Russia and Iranian, Cuban, the guerrilla that is taking over has taken over Venezuelan territory. But turn Venezuela into the largest energy partner, a long term alliance. And look, I've been in contact with American enterprises, companies and investors in the financial sector, the tech sector. They are all so excited about the potential of Venezuela, but they all realize that in order to do that, you need to have legitimacy. And Secretary Rubio has said these decisions that the Venezuelan people have to make in terms of what we want to be our leadership, and we've proven that we are a society that is organized as never before. It's united around principles, values and vision and is determined to be free.
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Fareed Zakaria
Thank you so much. And I wish you a safe travel to your country.
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Host
And maybe next year in Caracas next
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Maria Corina Machado
time I will host you in a beautiful country. It's going to be free, prosperous and safe. Thank you very much Fareed.
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Fareed Zakaria
A pleasure.
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Host
Next on gps. The war in Iran has taken a devastating toll on that nation's economy. So why isn't Tehran more motivated to make peace? I'll explore next. And now for the last look. One of the great mysteries surrounding the U. S. Iran war is why the economic toll from the months long assault on Tehran has not compelled that country to make peace. Iranian officials estimated in April that US and Israeli strikes had caused $270 billion worth of damage to Iranian infrastructure. Iran had to borrow heavily from the central bank to keep fighting. Inflation is expected to rise and it was already at more than 40% last year. Ordinary Iranians are undoubtedly suffering. How has the country then not been brought to surrender by now? Part of the reason is that nations are not moved by economics alone. Nationalism, dignity, pride, all play their part. But it is also worth noting that Iran's economy, as strained as it has been by decades of sanctions and now the war, has nonetheless been surprisingly resilient. For all the perceptions of Iran as an economic basket case, for all the real pain inflicted, it is also true that Iran is one of the region's more diversified, functioning industrial economies. Iran borders seven countries and can trade over land. It also has several ports, some of which have been operational even during the war. Iran exports more than just oil. Protectionist policies and entrepreneurship have fostered booming industries such as steel, petrochemicals, iron and food products. Iran has adapted to international sanctions by producing more of what it needs at home, including cars, pharmaceuticals and home appliances. These goods are not always internationally competitive, not by a long stretch, but they do cater to local demand, and that helps the country during wartime as well. And as for the oil, the Wall Street Journal reports that an increasing number of transactions are taking place, but in Chinese yuan rather than dollars, helping Iran evade sanctions. In 2024, Iran earned an estimated $43 billion in oil revenue, and the Journal found that most of the sales were made in yuan. Tehran also uses cryptocurrency to evade sanctions, which is similarly hard to track. And it's crucial to understand that Iran's elite directly benefits from the way the economy works right now, that is, in an opaque system controlled by shadowy interests, including the country's clerics and its Islamic Revolutionary Guard Corps, the irgc. As Khan Walid Begi writes in Phenomenal World after the Islamic Revolution the government seized elite assets and distributed them into two camps. Some, like banks, insurance companies and heavy industries, were nationalized and run directly by government ministries. Others, including the Shah's foundations, were distributed to social organizations known as Boniads, which answer to the clerics. The Bonyads headed reconstruction and relief efforts surrounding the Iran Iraq war in the 1980s and grew into sprawling conglomerates over time. Many of the nationalized industries were eventually
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Fareed Zakaria
privatized and many of those companies ended up in the hands of the IRGC, Valad Begi writes.
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Host
Today, the IRGC's commercial interests span Iran's shipping, construction, oil, carmaking and telecom industries. And as Reuters notes, sanctions have reinforced
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Fareed Zakaria
the Revolutionary Guard's control of the economy
- [38:48]
Host
because it facilitates clandestine exports and trade through intermediaries and shell companies. In other words, they control the smuggling. It is now estimated that the IRGC and the Boniads control more than 50% of Iran's economy and as Reuters notes, whenever post war reconstruction is attempted, the Guard Corps will be a main beneficiary because of its dominance in construction and engineering, Iran's economy has of course operated at the expense of ordinary citizens, but there are millions of people who benefit from proximity to the regime. As the Journal reports, members of the volunteer paramilitary force the Basij and the IRGC can enjoy positions in government linked companies or access to cheap loans. One of the many problems with Donald Trump's approach to Tehran is that he acts as though he's dealing with the straightforward imperatives of a normal market economy. But Iran's economy is dominated by a web of perverse incentives. Sanctions and isolation are bad for the country, but they are good for its rulers. Thank you to all of you for being part of my program this week and I will see you next week.
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