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Technology's daily show (formerly the Technology Brothers Podcast). Streaming live on X and YouTube from 11 - 2 PM PST Monday - Friday. Available on X, Apple, Spotify, and YouTube.
Our first guest of the show, Satya Nadella, the CEO 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 with,
Speaker 2:OpenAI for six years now. It's an important moment, and the story continues. Sure. Yes. Uh-huh.
Speaker 2:But the story actually got started, even the OpenAI one. I've known Sam for a long time. Yeah. It started, I think, in 2016. In fact, we were.
Speaker 2:Azure was the first cloud provider
Speaker 1:That's right.
Speaker 2:When OpenAI got started. In 2019, Sam came and talked about sort of, hey. We're gonna 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.
Speaker 2:This is gonna be a, what, a 100 bagger.
Speaker 1:Yeah.
Speaker 2:And I mean, that's not, like, what was going through our head. We kind of had a little bit of high risk tolerance. Don't worry.
Speaker 3:It keeps coming back to this moment when AGI will be declared.
Speaker 2:First step to me is even to get to broad intelligence. Forget sort of general intelligence. Yeah. We've gotta get rid of these jagged problems, and that I think is the first place to do. We will achieve more robustness.
Speaker 2:Let's call it that Yeah. For different systems. Right? So coding is a good one. Yep.
Speaker 2:I think the entire goal with GitHub and GitHub Mission Control and AgentHQ is can I just like how I used compilers Yeah? Can I use agents to generate better coding artifacts? So 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, multi form 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 gonna be able to move and say, hey. We have anything quite general intelligence.
Speaker 1:How are you thinking about the interplay between OpenAI, what you do internally at Microsoft?
Speaker 2:I have much more like, again, my my mindset is all platform, man. Like, okay. On Azure, do you run Windows? Yeah. Do you run Linux?
Speaker 2:Yeah. Yeah. Yeah. Run SQL Server? Yeah.
Speaker 2:Do you love Postgres? Absolutely do.
Speaker 1:Sure.
Speaker 2:Sure. Net Java. Yeah. Yeah. Hey.
Speaker 2:I'm happy with OpenAI. I would love to have Anthropic, MAI, Turok, anyone. If Google wants to put Gemini on Azure, please do so. What is
Speaker 1:that like culturally? Like, what does it 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 I'm building something internally, but my company isn't gonna favor me. I I need to fight it out with all my competitors across
Speaker 2:We all grew up in that culture Yeah. Where it doesn't mean because we it's always we're gonna bring our pieces together. As a platform company, you kinda wanna support everything. Office was born on the map Mhmm. Before Windows was
Speaker 1:Yeah.
Speaker 3:If you don't if you don't give people choice, developers here, like, will churn. Right? They'll find other platforms. Right?
Speaker 1:If you
Speaker 2:Concepts Bill had when he started Microsoft was, hey. We're a software factory. We love all software categories, and we're just gonna go create software. And so to me, we definitely wanna 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.
Speaker 1:If somebody's pursuing a career in tech is becoming a great deals guy or deal maker, like, a important path now?
Speaker 2: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 firm. I think the the thing you're touching on is something that actually platform companies should think about, which is what's the ecosystem?
Speaker 2:Upstream and downstream. Right? To your point right now, we have to as an industry. The reality is let's take power. Right?
Speaker 2:Which is if they sort of say intelligence is about tokens per dollar per watt, we've gotta get efficient on all of it. Yeah. In order to get more efficient on it, you gotta really think about even in our own industry, the token factory itself really getting better order of magnitude. This is, like, again, a renaissance time for systems Yeah. Architect.
Speaker 2:Then the next barrier is gonna be, man, can we generate energy faster? Can we build faster? Do you think
Speaker 3:you're more ROI focused than others that are throwing around big numbers?
Speaker 2:I'm always focused on long term return.
Speaker 3:Well well and 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.
Speaker 2:If you always have someone else willing to give you the billion dollars when, or the $10,000,000,000, you can always be about award winning and Sure. Yeah. The return. But at some point, that party ends, and everybody needs to sort of have a path plan. In that context, in these platform shifts, to be short term oriented Yeah.
Speaker 2:Doesn't, help at all. Yeah. Right? Because you gotta you know, I always say long before it's conventional wisdom. I mean, if you look back, you asked how we put the billion and the reality is we put the 10,000,000,000.
Speaker 1:That's right.
Speaker 2:Yeah. Or the 13 was fully committed Yeah. Before it became a thing. Right? And remember that was all done before Chad GPT became a thing.
Speaker 3:Feels very possible to predict, like, a year out, two years out, and then ten 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 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?
Speaker 2:You know, one of the things about tech is as a percentage of GDP, get it right around four or 5%. Yeah. If you ask me five years from now, ten years from now, is that percentage gonna be higher or lower? I think the answer is pretty straightforward. It's going to be higher.
Speaker 2:It's just a question, is it gonna be ten or fifteen? 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 Yeah. And the factors of sort of input to it.
Speaker 2:So tech as an input, I think AI and everything that it entails
Speaker 1:Yeah.
Speaker 2:Is gonna be a core driver. And some of it will come from just this intelligence and its sort of continual march of capability, but it'll also come from, I'll just call it, great engineering and product making. That, I think, is gonna be the big difference maker.
Speaker 1:I was talking to Eric Lyman at Ramp who makes the show possible, of course. And 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 there is the possibility that tools are gonna get better very rapidly, and maybe you don't wanna 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 ten years ago?
Speaker 2:I think the key is learning the new production function. This one is, interestingly enough, both a tech shift
Speaker 1:Yeah.
Speaker 2:A business model shift because this is the first time you have marginal cost Yeah. Software. It's not like cards of the SaaS world, but true marginal cost. And three, the way you produce your artifact, your software is changing. Yep.
Speaker 2:So the product development process is completely getting ripped and replaced. Unlearning is the hardest part. It seems like the console wars are over. Take me through the journey You're
Speaker 1:a peacetime CEO now. We're peacetime CEO. The war is over. But do but but take me through the evolution of the of the business model shift on the gaming side of the business. It's one of the most interesting pieces of of Microsoft.
Speaker 2:Remember, the biggest gaming business Yeah. Is the Windows Yeah. To us, gaming on Windows. Yeah. And, of course, Steam has built a massive marketplace on top of it and done a very successful job of it.
Speaker 2:First of all, now we are the largest publisher Yeah. After the Activision. So so, therefore, we wanna be a fantastic publisher. Similar approach to what we did, with Office. Yeah.
Speaker 2:We we're gonna be everywhere in every platform. So we wanna make sure whether it's consoles Yeah. Whether it's the PC, whether it's mobile, whether it's cloud gaming Yeah. Or the TV. So we just wanna make sure the games are being enjoyed by gamers everywhere.
Speaker 2:Second, we also wanna 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 Yeah. Because we wanted to build a better PC Yeah. Which could then perform for gaming.
Speaker 2:Yeah. And so I kinda wanna revisit some of that conventional wisdom. No. 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.
Speaker 2:Because after all, the gaming's competition is not other gaming. Gaming's competition is short form video.
Speaker 3:It feels like the entire world's competition is short, short video.
Speaker 1:Yeah. Is there some sort of advantage of being a hyperscaler, a 4,000,000,000,000 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?
Speaker 2: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 Mhmm. And say, somehow, you can make it Yeah. If you don't reinvent yourself. So I think what happens in tech, unfortunately Yeah.
Speaker 2: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 is. And so given the binary nature, you got to make it to the other side. But then the category economics matters, Vera, because if you can't sustain long term innovation, there is no category economics. I mean, hyperscale is a great one.
Speaker 2:In fact, the best day in hyperscale business was the day Amazon announced their operating margins.
Speaker 1:AWS IPR.
Speaker 2:Yeah. It you know, 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 kinda gonna be the key here.
Speaker 2:Think about our server business. Right? It's super profitable. Yeah. Except it was one tenth the size when I look at it compared to Azure.
Speaker 2:So we like, we sold a few servers. Yeah. But, man, we sell a lot of Cloud VM or containers. Sure. Who would have thought how expansive Yep.
Speaker 2:The cloud consumption model is going to be in terms of people being able to sort of it's kind of the Jemin's paradox that sort of really played out in a massive way.
Speaker 3:But we yanked for you. We would
Speaker 1:land this gong, and if if
Speaker 3:it hit for 27%.
Speaker 1:Wow. That's a good good hit. Very strong Let's Sun is as big as possible. Oh, there we go. That is a fantastic signature.
Speaker 1:Thank you so much. Thank you for coming on. Thank you for having us. It was really great we had him.