Let's get started with the show. Our
first guest tonight is someone we've
been very excited we've been trying to
get them on the show for many years. He
finally agreed and he's here tonight.
Everyone please give a warm welcome to
Satya Nadella, CEO of Microsoft.
>> [cheering and applause]
>> Hello.
>> [applause]
>> Now Satya, I have to start by making a
confession which is that I have not been
a regular user of a Microsoft AI product
since 2023
when when one of them tried to break up
my marriage.
Um
Unsuccessfully I should add. My wife IS
RIGHT THERE.
>> [applause]
>> THOSE WERE THE DAYS WHEN WE DIDN'T
[laughter] have
Think about a world without guardrails.
>> But so much has been happening at
Microsoft with AI since then. So just
catch us up like what what for people
who may not have tuned in a little
while, what have you guys been up to in
AI?
>> Yeah, I mean, look
um
the fundamental thing that I feel we're
about to move from
um is not talking about AI as a one
thing
to sort of having even a mental picture
of what is an ecosystem
that is sort of driven by AI, right? So
today if you think about it even since
when you first used Sydney to now, it
has been about frontier model you sort
of talked about Fable, what have you.
But if we are ever going to transition
to an economy that is driven by AI, it
can't be about one model, it can't be
about three firms, it has to be
something that's broadly felt where the
economy is at the frontier, not a firm
or a model is at the frontier. So
Microsoft is a platform company, to me
that's what we are at up to, right? So
to me we had our developer conference
last week. It was all about, "Hey, can
we build a platform and the tools where
every enterprise in every country can
operate at the frontier?" To me, that's
the question. To be saying, "Hey, my
model does this, but the economy is
growing at 2%." means this is not going
to end well. Unless we sort of really
get to a place where the economy is
inflecting in terms of its economic
growth and it's broad-spread because the
frontier benefits are. That's what
happened in electricity and every other
technology which was a general-purpose
technology.
>> Let me ask about one of the platform
shifts that you signaled at Build last
week when you announced Project Solara.
You said it would be agent-first
hardware, kind of next-generation
set of devices that would have agents
running them. Tell us a little bit more
about that what that looks like. Like,
can you give us an example of maybe what
Project Solara looks like?
>> uh, Casey, we did at Build which were
interesting, right? One was we took the
PC itself. In fact, Jensen had done it
the previous, uh, night at Comdex, uh,
at, uh, Computex where he talked about,
you know, if you the the picture I one
of the my favorite pictures was Jensen
with the desktops, the laptops, and
because the and he obviously had the RTX
chip, which is a new SOC,
uh, with essentially a petaflop of
compute, right? Right on your PC. So,
that was about new functionality
coming to the old form factor, right?
So, think about the what I describe as
unmetered intelligence, right? So, the
fact that you can have a Windows
computer that can run a one bill, you
know,
a trillion parameter model locally, uh,
I think it's going to be very needed,
uh, if you're going to ever have token,
I mean,
agents running 24/7. But then, the
question it sets up is in a world where
we have these models
and these agents that are long-running,
can I have like a badge?
Uh, right? If I'm I'm in a hospital and
I'm walking to from station to station.
Can I just take out this device, which
can scan, which can input, which can
take my speech output, and turn it into
a prompt? Um that is what I think an
agent-first device looks like, right?
So, it's sort of really a new The
centrality of the phone, I think, is
still going to be there for a lot of
apps that we use. But in agent world,
you kind of have that ambient
intelligence that is like a sense of
feel that then works with your models.
And so, that's what our goal is, to
invent the new form factors that are not
beholden to the old form factors for
this functionality.
>> It's super interesting, and I want to
hear a lot more about it. We have many
more questions about AI, but I wanted to
ask about one more device that has been
in the news today, which is the Xbox.
Um the leaders of the Xbox division put
out a memo today saying that we should
expect a hard reset of Xbox coming soon.
They said that there are massive
increases in the prices of components,
and that Xbox might need a new business
model. So, as a big gamer who's enjoyed
many happy hours on Xbox, Satya, I have
to ask, what is your strategy for Xbox?
>> Yeah, so look, in fact, we're you know,
this is the 25th year of Xbox.
Um and
we're very thrilled about the progress
we have made. I mean, gaming, in an
interesting way, at Microsoft is older
than even Windows and Office, right? The
first
app we built was the Flight Simulator.
And so, it's got a long heritage. Xbox
itself has been there for 24 5 years.
The challenge now for us is to think
about how do you innovate both in
hardware as well as in the games going
forward in a world in an economically
viable way, right? I think one of the
things that Asha, who's just taken over
Xbox, put out is that we've invested a
lot. No one can accuse Microsoft of not
having invested
for the last 25 years. And now we have
to turn this into a sustainable business
that delivers what is fundamentally the
one of the best sources of entertainment
still. The challenge we have is we're
not the been monetizing that
entertainment. In fact, if anything
we've been subsidizing that
entertainment. In fact, like there's
more monetization of Xbox games
happening on YouTube
than at Microsoft.
And so that doesn't mean we go do things
that are unnatural. We want us to do
what is really our job, which is to
build great games, build great hardware,
but we've got to do it in an
economically sustainable way. So I think
Asha is really 100 days in and she put
out a post saying in the next 100 days
she's going to take a fresh look and
make sure we deliver on what our fans
expect of us both on the hardware side
or on the publishing side.
>> I mean, can you give us just any more
detail? Like like when I hear that I
think, okay, so maybe like the Xbox gets
way more expensive, the games get way
more expensive. Like is there any sort
of like carrot you can offer the gamers?
>> Like I I think we have to find ways to
deliver the games at which
it's economically relevant for the
customer and for us. So today there's a
issue, in fact, unfortunately because of
what's happening with the cloud and AI,
the prices have gone up, right? It's
happening with PCs, it's happening with
phones, Xbox is impacted
as well. So the scarcity of the
semiconductor supply and memory in
particular
having a massive impact on consumer
electronics all up. That's a temporal
thing.
That I think we'll get through. It is
not going to be a permanent. But there
is a permanent thing, which is what's
the Xbox model going forward. And that's
where if you think about it, like PCs
and
consoles both have their place.
Obviously, mobile has people play and
elsewhere. And so we have to now bring
it all together while staying true to
what we've always done.
>> Satya, I want to take you back in a time
machine. The year is 2023.
The board of OpenAI has just fired Sam
Altman, one of Microsoft's biggest
partners. You and your team spent a
harried weekend trying to pull together
an entirely new division of Microsoft
Microsoft Advanced AI Research to sort
of catch the employees that are making a
mass exodus from OpenAI. You're ordering
laptops. You're opening up an office in
San Francisco so that all these people
have a place to go work. Uh the company
looks like it's on the verge of
collapse. Uh and then nothing happens.
Then then Sam gets rehired and OpenAI
stands back up on its feet. Um and I
want to present you as part of this time
machine experiment with a piece of rare
merchandise, which I recently acquired
from an OpenAI employee, which is a
Microsoft Advanced AI Research
sweatshirt.
>> That is awesome.
>> To be clear, this division never existed
and I was told by the person who made
this that they had to sort of fudge a
little bit on the the sort of copying
and printing shop application, which
made them prove that they were a
Microsoft employee
>> [laughter]
>> to to get this. But this is for you if
you ever want to
>> Thank you. Thank you so much.
>> down memory lane.
>> Oh, man. That weekend, I remember that
forever. And thank you for this. But all
I remember, quite frankly, the weekend
is India getting thrashed by Australia
in cricket. That was the
>> [laughter]
>> the more tragic thing.
>> So,
if that had happened, in the world where
all of these OpenAI employees end up
working at Microsoft in a new Advanced
AI Research division run by Sam Altman
and Greg Brockman,
in that world is Microsoft better or
worse off with AI than it is today in
this world?
>> Look, we're thrilled that Greg and Sam
made it back to OpenAI and they are
where they are and they're now, as you
said, our father S1 or what have you and
look, it's fascinating, right? When we
initially
um
took the bet on OpenAI, it was a not,
you know, it was a
a research lab, a nonprofit entity that
had created a for-profit
uh unit and said, "Hey, they went and
shopped around and said, who can back
our crazy idea that intelligence is log
of compute?"
Uh and quite frankly, there were lots of
people that uh or at Microsoft at that
time who thought this is nuts.
Um but, you know, we said, "I think this
is a worthwhile thing to back." And
quite frankly, we changed uh I think and
they changed through their work and the
OpenAI through their work, the world and
here we are in 2026 and we're thrilled
about it.
>> You guys recently renegotiated your deal
um between OpenAI and Microsoft. And uh
I understand what OpenAI got out of that
deal, they got the ability to work with
multiple cloud providers, to be a little
bit more open about how they
commercialize their technology. What did
Microsoft get out of the revision of
that deal?
>> I mean, we have a lot of, you know,
interests in OpenAI. We're obviously on
their cap table and uh we're a They're a
customer of ours, a large one. We are uh
They're a source of IP for us uh all the
way to 32 and uh
and so all of the things and and and at
the same time we have the ability and
the flexibility to reuse the IP, build
our own IP. We just last week launched
MAI models, uh which have hill-climbed
from the ground up. We published, in
fact, the paper, which I think should
help people even get the capability we
have, especially if you take those two
thoughts, right, which is uh here is,
you know, intelligence is log of compute
and here is a pure lineage model from
Microsoft that climbed all the way,
means that we now have the ability to
keep going and to us and we would and
and our infrastructure. I must mention
that that we wouldn't have been where we
are with even Azure
but for that close partnership with
OpenAI. So, we have the compute, we have
now the model and we have still the
partnership.
>> Let's talk about those models. Is your
goal to make a frontier best model in
the world? And if so, what's the
strategy for overtaking a ChatGPT, a
Gemini, a Claude?
>> Yeah, so I think the way I would say is
our
real goal is to get everyone across the
ecosystem to the frontier. So, we are
going to take a slightly different take
in saying
for example, if you think about what's
how does one build a frontier model? Um
you hill climb, URL
um and then you need data, right? So, at
this point we have saturated the data
and so that means you're basically
hovering the data from every place,
right? So, the question is what if you
turn that around and said, "No, there's
a base model that has reasoning, that
has the agent loop, but you can bring it
into your R&D." Every company, right? If
you if the if the comp- the future of
the firm is human capital and token
capital. I want every balance sheet,
every income statement in every company
to have both. And that's our goal with
our frontier model. Our model should be
the best model that they can use as a
base and keep even the weights,
uh definitely the harness and the
context which is theirs and they can
replace our model with anything else.
So, that to me is more of a vision that
I think is what Micro- I always ask the
question, why does Microsoft
uh or why does the world need Microsoft?
And if we are successful, can the world
around us be successful? This I believe
is a more sustainable way to go at it.
>> We have to ask a question about the AI
backlash that we're seeing around the
country. Graduation speakers are getting
booted. AI is polling terribly. Uh lots
of people upset about data centers. What
role does Microsoft have in that image
or helping to solve that? And how do you
think the industry can
find a path forward that involves, I
don't know, being a little more popular?
>> [laughter]
>> I think we can start, but frankly, by
painting a picture
and delivering the results on why
there are more than, you know, everyone
is a stakeholder, right? You can't go
out there and say, "I have this
unbelievable technology. Uh except
you're not going to have a job and um in
fact, we're going to take all your water
and all your energy and, you know, uh
good luck." I mean, that cannot be uh an
an And then the no wonder there's so
much anxiety, right? You talked about
the students or you can talk about a
community. And so therefore, you got to
do the hard work at this point. It is
what it is, right? So, you can't deny
that the perception is terrible. And so,
I feel at Microsoft, we want to whether
it's like take the the data centers. Uh
it's fascinating. We've been operating
in Quincy, Washington for 20 plus years.
And I just, you know, uh we celebrated
our 20th year.
You know, if I look at what all has
happened in Quincy in the 20 years,
their tax base has gone up.
Their taxes locally have gone down. Uh
they have more employment locally.
>> Because of the data center.
>> Because of the data center. In fact, the
data center is it's kind of like
basically it's become a data center
town. Uh and we when we we we did this,
you know, cookout and people came and
they said they celebrate the
rejuvenation of Quincy, Washington
because of our presence for the last 20
years. That long That's the first
longitudinal thing of 20 years that I've
seen. And that's what the communities
where data centers are. They They
definitely can't increase price on
energy. They have to be, you know, very,
you know, in fact, they they should
replenish all the water they use
uh and create economic opportunity. So,
that's on the data center side. But,
across the economy, if there are small
businesses feeling like, "Wow, AI is
making me more productive." If every
large multinational is able to say, "Oh,
I'm building that token capital and the
human capital." Right? Because the the
the big question is employment.
Everybody thinks that all jobs are going
away. But, if you sort of And I'm not
saying there won't be real displacement,
the workflow doesn't change. But, take
software development.
Of course,
you know, software development is now
all agentic.
Except, if you think about even the
evolution of the GitHub app, right? You
know, when I had a hundred CLIs, what
did I need? I need a new IDE. It's
called an ADE, right? I'm back at again,
some piece of software that helps me
manage all of this complexity. So, I
think we have to think about new work
that gets done,
which will be meta-cognition, meta-work,
that is going to have wages. And we have
to be concrete about that.
>> But, but help us understand like what
your own view is of the potential
disruption, right? Like there because
I've I've been talking to so many
economists, like tech leaders like
yourself about this over the past couple
of months, and truly opinion is all over
the place. And I talked to some folks
who say, "Yes, you better believe I'm
hiring fewer people next year because of
AI." And then I talked to other people
that say, "I I can't get enough
engineers. I want more than I have." So,
where are you on that? In two years
you're going to have more engineers or
fewer?
>> Yeah, so I think the
if in the early '80s, if someone had
come to us and said, "Hey, we're going
to have three and a half billion people
in the world who are all going to be
typists."
We would have said, "Why does the world
need three and a half billion typists?"
Except, we do. We all get up in the
morning and type, but we're doing {quote
unquote} information work, knowledge
work, and so on. So, that type of change
is going to have to happen, and that and
each of them will have a name that and
it'll have a wage support. That
reinvention, right? So, the software
developer of the past to the software
developer of the future may have the
similar sort of skills, but the work
they do is different. Because they're
managing a group of 100 agents, 1,000
agents. In fact, there's a beautiful
term one of my colleagues has, which is
just like in software development we
already had this concept of test
coverage. One of the new things that we
are learning is what I'll call cognitive
coverage, right? So, what does a
software developer do? I might have I
have a repo full of code that was
written by agents. I am
cognitively understanding what happened,
and I now need tools for cognitive
coverage on what there has been. That's
a job, I think, of a software developer.
And in order to do that, you got to go
to school, you got to learn computer
science, and have cognitive coverage.
And so, this reinvention of work, the
work artifact, the workflow, right?
Because software went from input to
output. That's a format change, an
artifact change, the workflow has
changed, and the work changes with it.
>> I feel like what people really want to
hear is some combination of like, your
job isn't going to change that much, or
if it does change, you're going to get
paid more. Do you think that either of
those things will be true for most
people?
>> That's the thing. The wages, you know,
have always been about what is it that
we as a society value, right? Um I mean,
we have grown in the last 200 years, 250
years, was about a particular form of
expertise and accrual of knowledge. So,
when you have abundance of some form of
expertise, what is that human ability to
now build a new expertise that is not
trainable? Right? In fact, there was a
nice blog I read this morning from Sarah
Go, which was I thought was an
interesting one where she sort of
mentions, "Hey, what is the untrainable
part?" And that applies to organizations
and I think us as well. And it's
We as humans have agency, ambition,
that should not be counted out. And if
you look at even what is human capital
today, the human cap in spite of all the
digital systems we have in in at our
disposal, we do the glue work. We will
discover the new glue work that happens
in with all this automation. And that I
think is the process of change. One idea
that's been floated recently, including
by reportedly Sam Altman and and
President Trump has also weighed in on
it, is the idea of having the US
government take direct investment stakes
in frontier AI companies.
Do you think that's a good idea? What
percent of Microsoft would you like the
US government to own?
MSFT, you can trade.
>> [laughter]
>> Do you think that is a way for the the
gains of AI to be more broadly felt? You
know, look, this is all very new, right?
I mean, the idea that there may be
the United States, whether it has a
sovereign fund and the sovereign fund
has equity stakes and that somehow
is part of
what is considered this the wealth of
the citizens of this country, I think
it's a novel idea. Other countries have
done it. I think Alaska has some form of
it
in the state because of the oil wealth.
So, I'm not sort of opposed to
innovative ideas like this, but at the
end of the day, I mean, there's this
entire movement of if only we had
invested some portion of our social
security in S&P 500, we would have a
surplus or what have you. And so, to the
degree to which some of these ideas can
be played out and and they succeed, I
think we'll all benefit from it.
>> You um Dwarkesh Patel in February 2025
that your benchmark for achieving AGI
was 10% GDP growth. Seems like we're not
super close to hitting 10% yet. Um I'm
curious like how how you view that kind
of statement you made a year ago now and
do you see any sort of recent
acceleration that makes you think it's
more possible?
>> In fact,
it's one of the
things that I think a lot about is the
difficulty of even a very powerful
general purpose technology and its
diffusion and the amount of change
management that is required, right? I
mean, the systems, right? For example,
one of the challenges right now that
we're going to face in the next year, 2
years is this, you know, the economics
of tokens. Uh
for example, the hard truth is that the
marginal cost of productivity
improvement has to match the marginal
cost of the token. That's a management
discipline, right? So, you can't just
say, "Hey, I love token maxing because
it's sort of
money in my bank." That business has to
benefit from it. And that is what is
going to really drive it. So, in fact,
it's fascinating. The equation for the
10% growth would be when you have a
perfect match between the marginal cost
of the token
to the marginal value and it's priced,
right? So, that means it's the best way
to get at it. If that happens, 10% is
definitely going to happen. But not
definitely what's happening right now
where everybody goes and white codes and
token maxes, that's not a way to achieve
10% growth.
>> How much sort of token maxing has been
going on at Microsoft? And then you
Yeah.
>> [laughter]
>> And I'm out of it. Like get me
And what I mean by that is um
you know, look, I want people to
obviously and myself, I'm like a token
maxer, too. So,
it's addictive. It's kind of like, "Hey,
I love this thing." So, So you have to
step back when the novelty wears off to
say what is it that I'm trying to
create? Uh in fact the thing that I love
now in in Copilot now is our auto mode.
And so we now have a very good we have
an economic model that's feeding it as
well. Basically I say don't use frontier
models for non-frontier problems, right?
Please let's kind of match these things
such that you get the outputs, you get
the economics,
uh and it's not it can't be a race to
just doing things that just don't add
value.
>> Give us a flavor of like Satya's token
maxing. Like what are some of your your
big token projects lately?
>> Yeah, I mean like the one thing that I
recently um
built was you know
I always
sort of felt that
I want a repo
that is in sync all the time
with discussions that are happening out
of band
uh that I'm not in.
Right? Think about even that concept.
See I like that thing because it sort of
is sort of not possible today, right? So
you'll have essentially the ability now
to have an agent that literally is
looking at all the work discussions that
may be related to your repo and creating
the plan and executing the plan. And
it's just in fact all I did was I put
work IQ which is the database underneath
uh all of Microsoft 365 and as an MCP
server and to my
coding agent and I said keep watching
that and every time people discuss this
repo, please change my repo. And it
keeps working. And so this is like the
best way to keep your come basically a
model you know in sync with all
requirements that ever come up.
>> You've been thinking a lot about the
political economy of AI. Obviously, you
know, the things you're talking about
about diffusion and adoption and GDP
growth are all part of that. What do you
think the people in San Francisco
leading the AI companies here get wrong
about the political economy of AI?
>> I I mean I wouldn't say they're wrong
about the political economy of AI, but I
do think
when I look back at the you know there's
a very cool book I read I think in
December. It's I
I may have the name wrong, but it's
written by Joel Mokyr and a couple of a
co-authors on it's I think it's called
Parallel Paths to Prosperity. They
describe a little bit of how the last
thousand years in the you know the West
grew and what was what was happening in
China. So it is a thousand year history.
Um but the fundamental thing when I take
from that book and and in general when I
read history is
the West in particular got three things
into a virtual cycle, right? They got uh
technological revolutions
mark and markets
and democracy. All both acting as a
check on the other.
Uh that's why there is no such thing as
an economy. It's a political economy. A
democracy controls ultimately what
happens in a market and then technology
sort of tries to disrupt the two and
then you keep sort of the checks and
balances. That's magical. It's one of
the most unbelievable social constructs
ever to emerge in the world, right?
Think about sort of you know that it
became the model.
And we now need that same model
to be redefined for this age, but it
will work because it worked the last
time. And so therefore I think us
reminding ourselves that the balance the
checks and
uh that each one has on the other is
what I think we have a we have to aspire
for whether it's in San Francisco,
whether it's in Washington D.C. or quite
frankly anywhere else.
>> Mhm.
Maybe just as a last question, I'm still
trying to like hone in on what I think
Kevin might call how AGI pilled you are.
Like there's a sense in the in Silicon
Valley that that it really is different
this time and that the jagged frontier
is going to keep advancing forever, and
all of a sudden the little tasks that AI
can automate today it are going to
convert into full jobs. How much do you
buy that story?
>> Look, I I buy that anything
where the loops can be closed.
Right? Like coding.
In fact, AI research
is sort of possible to close. I think we
have now got sufficient um I'd say
evidence uh of that.
But is that enough? I don't think so.
Um in in and when I think about
you know, people talk about how
verifiable is this task. And in the
messy real world of even knowledge work,
uh just say I'm going to look at the
traces of human activity
uh is enough to close the loop. I don't
think so. That I think is the the
challenge, which is when I am in a
meeting,
I say things, I note things, um I may
observe things, but what I do with it is
not a trace today that I can orally my
way in, right? And that to me is where
we're selling short what is um I would
say unverifiable part of the human
capital. And so to me, that's where So,
I believe the advances keep happening.
I still am in the more in the world of
hey, this is platforms tools. Very
powerful, very disruptive. I have a lot
of sort of I'd say, you know, uh
humility to say a lot of things will
change, but at the end of the day, so
was electricity, so were a lot of other,
you know, steam when it first came out
and what have you. And so I'm not sort
of sitting there and thinking this is
the last technology we ever will invent.
I I buy that. I I I kind of feel like
yeah, this is in the pantheon of all
technologies a big step up. Uh but I do
think that it you know, there will be
more to come.
>> Very good.
>> Well, Satya Nadella, thanks so much for
joining us. Please give Satya Nadella a
hand.
>> Thank you.
>> Thank you so much.
>> Thank you so much. Thank you.
>> [music]
[music]