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- [00:00]
A
Our first guest of the show, Satya Nadella. The cereal of Microsoft. There were a ton of bullet points in the announcement today. Can you just zoom out and explain it to me like I'm five. You've been in partnership with OpenAI for six years now.
- [00:14]
B
It's an important moment and the story continues. But the story actually got started, even the OpenAI one. I've known Sam for a long time. It started, I think in 2016. In fact, we were. Azure was the first cloud provider.
- [00:27]
A
That's right.
- [00:27]
B
When OpenAI got started in 2019, Sam came and talked about sort of, hey, we're going to really. We think this scaling stuff works. In retrospect, I mean, who would have thought, hey, I didn't put in that, you know, billion dollars saying, oh yeah, this is going to be what, a hundred bagger? I mean, that's not like what was going through our head. We kind of had a little bit of high risk tolerance.
- [00:49]
C
It keeps coming back to this moment when AGI will be declared.
- [00:54]
B
First step to me is even to get to broad intelligence first. Forget sort of general intelligence. We've got to get rid of these jagged problems. And that I think is the first place to do. We will achieve more robustness. Let's call it that for different systems. Right. So coding is a good one. I think the entire goal with GitHub and GitHub, mission control and Agent HQ is can I just like how I use compilers, can I use agents to generate better coding artifacts? If you ask me about, you know, first, how do you get rid of this jagged intelligence Problem is you build a great knowledge work system that is multi agent, multi model, multiform factor yet to a great benchmark and an eval where you can trust it at two nines, three nines, four nines. And until you achieve that, you're not going to be able to move and say, hey, we have anything general intelligence.
- [01:48]
A
How are you thinking about the interplay between OpenAI what you do internally at.
- [01:52]
B
Microsoft, I'm much more like, again, my mindset is all platform man. Like, hey, on Azure, do you run Windows? Yeah. Do you run Linux? Yeah. You're on SQL Server? Yeah. Do you love Postgres, App Net, Java? Hey, I'm happy with OpenAI. I would love to have anthropic Mai rock anyone. If Google wants to put Gemini on Azure, please do so.
- [02:13]
A
What is that like culturally like, what does it mean for the next Satya Nadella, Somebody who's working their way up in Microsoft, do they need to be okay? I'M building something internally but. But my company isn't going to favor me. I need to fight it out with all my competitors across.
- [02:29]
B
We all grew up in that culture where it doesn't mean. Because it's always we are going to bring our pieces together. As a platform company, you kind of want to support everything. Office was born on the map before Windows was even.
- [02:43]
A
Yeah.
- [02:44]
C
If you don't give people choice, developers here will churn.
- [02:48]
A
Right.
- [02:48]
C
They'll find other platforms. Right.
- [02:50]
B
The concepts Bill had when he started Microsoft was, hey, we're a software factory. We love all software categories and we're just going to go create software. And so to me, we definitely want to sort of have that same attitude to innovation. We definitely need to stitch out stuff together so that they come together to solve bigger and greater problems.
- [03:10]
A
If somebody's pursuing a career in tech, is becoming a great deals guy or deal maker like an important path now?
- [03:17]
B
Yeah. You have this great investment and it has great return and no carry all it all the value goes to my shareholders. That's awesome. Like maybe we should start a venture first. I think the thing you're touching on is something that actually platform companies should think about, which is what's the ecosystem upstream and downstream. Right. To your point, right now we have to as an industry, the reality is let's take power. Right. Which is if they sort of say intelligence is about tokens per dollar per watt, we've got to get efficient on all of it. Yeah. In order to get more efficient on it, you got to really think about even in our own industry, the token factory itself, itself really getting better order of magnitude. This is like again a renaissance time for systems architect. Then the next barrier is going to be man. Can we generate energy faster? Can we build faster?
- [04:07]
C
Do you think you're more ROI focused than others that are throwing around big numbers?
- [04:11]
B
I'm always focused on long term return.
- [04:15]
C
Well, well. And, and we're at a time right now where there's people that have come out and effectively said, I, I don't actually care about roi, I just care about winning.
- [04:24]
B
You always have someone else willing to give you the billion dollars when or the $10 billion. You can always be about I'm out winning and the return. But at some point that party ends and everybody needs to sort of have a plan in that context. In these platform shifts, to be short term oriented doesn't help at all. Right. Because you kind of have, you know, I always say long before it's conventional wisdom. I mean if you look back, you asked how you be put the billion and the is we put the 10 billion.
- [04:53]
A
That's right.
- [04:54]
B
Or the 13 and a half was fully committed.
- [04:57]
C
Yeah.
- [04:58]
B
Before it became a thing. Right. And remember that was all done before Chad GPT became a thing.
- [05:03]
C
Feels very possible to predict like a year out, two years out and then 10 years out is extremely fuzzy. What's your view on that? Given that going back to the original OpenAI investment and the original partnership, it seems like you've had at least really good like six year foresight abilities to sort of invest against like a six year time horizon. But how are you thinking about managing over you know, the next decade?
- [05:29]
B
You know one of the things about tech is as a percentage of GDP you're like around 4 or 5%.
- [05:36]
C
Yeah.
- [05:37]
B
If you ask me five years from now, 10 years from now, is that percentage going to be higher or lower? I think the answer is pretty straightforward. It's going to be higher. It's just a question, is it going to be 10 or 15? So why is that? Because the rest of the pie, the rest of the GDP would have grown faster. So that's why I always go back to at the end of the day the only rate limiter here is the overall economic growth and the factors of sort of input to it. So tech as an input, I think AI and everything that it entails is going to be a core driver and some of it will come from just this intelligence and it's sort of continual march or capability but it'll also come from I'll call it great engineering and product making that I think is going to be the big difference maker.
- [06:24]
A
I was talking to Eric Lyman at Ramp who makes the show possible. Of course he had a question about how you what like what advice you would give to someone running a decacorn thousand plus employees in this age of spiky intelligence where they're is the possibility that tools are going to get better very rapidly and maybe you don't want to scale up too fast and then have to do layoffs or retraining. How do you think about managing human capital in what feels like an uncertain time? Does it feel more uncertain to you now than it did 10 years ago?
- [06:57]
B
I think the key is learning the new production function. This one is interestingly enough both the tech shift, a business model shift because this is the first time you have marginal cost software that's not like Cogs of the SaaS world but true marginal cost and three, the way you produce your artifact, your software is changing. So the product development process is Completely getting ripped and replaced. Unlearning is the hardest part.
- [07:25]
A
It seems like the console wars are over. Take me through the journey.
- [07:28]
C
You're a peacetime CEO now.
- [07:30]
A
We're a peacetime CEO. The war's over. But take me through the evolution of the business model shift on the gaming side of the business. It's one of the most interesting pieces of Microsoft.
- [07:40]
B
Remember, the biggest gaming business is the Windows business.
- [07:43]
A
Yeah.
- [07:43]
B
To us, gaming on Windows. And of course Steam has built a massive marketplace on top of it and done a very successful job of it. First of all, now we're the largest publisher after the Activision. So therefore we want to be a fantastic publisher. Similar approach to what we did with Office. We are going to be everywhere in every platform. So we want to make sure whether it's consoles, whether it's the PC, whether it's mobile, whether it's cloud gaming or the tv. So we just want to make sure the games are being enjoyed by gaming gamers everywhere. Second, we also want to do innovative work in the system side on the console and on the PC. People think about the console PC as two different things. We built the console because we wanted to build a better PC which could then perform for gaming. And so I kind of want to revisit some of that conventional wisdom. But at the end of the day, console has an experience that is unparalleled. But most importantly, the game business model has to be where we have to invent maybe some new interactive media as well. Because after all, gaming's competition is not other gaming. Gaming's competition is short form video.
- [08:52]
C
It feels like the entire world's competition is sure shark video.
- [08:56]
A
Is there some sort of advantage of being a hyperscaler, a 4 trillion dollar company that you can go and retool a piece of the business over here, change the business model and, and have almost the, the privilege of, you know, not having shareholders come to you and beat you down about a slight shift in a business model, in a subdivision.
- [09:14]
B
Diversity of business models, diversity of the portfolio that Microsoft has, has been helpful. But that said, I don't think you can take that and say somehow you can make it. Yeah, if you don't reinvent yourself. So I think what happens in tech, unfortunately, yeah, is that when these shifts happen, whether you like it or not, you have to first be relevant. It doesn't matter what the business model. And so given the binary nature, you got to make it to the other side. But then the category economics matters because if you can't sustain long term innovation, if There is no category economics. I mean hyperscale is a great one. In fact, the best day in hyperscale business was the day Amazon announced their operating margins.
- [09:56]
A
Aws, ipr.
- [09:58]
B
Yeah, because that's when everybody knew hyperscale business is an unbelievable business. It's a commodity, but at scale, nothing is a commodity. To me that is kind of going to be the key here. Think about our server business. Super profitable, except it was 110 the size when I look at it, compared to Azure. So we like we sold a few servers but man, we sell a lot of cloud VM or containers. Who would have thought how expansive the cloud consumption model is going to be in terms of people being able to sort of. It's kind of the gems paradox that sort of really played out in a massive way.
- [10:34]
A
But we aim for you in line.
- [10:35]
C
This goes and if it hit for 27%.
- [10:45]
A
As big as possible. Oh, there we go. That is a fantastic signature. Thank you so much. Thank you for coming on. Thank you for having us. This is really great.