TBPN - Diet TBPN: October 28, 2025

Episode Date: October 29, 2025

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Our first guest of the show, Sautenadella, the serial 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. It's an important moment and the story continues. Sure. But the story actually got started, even the Open AI 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. That's right. When Open AI got started. In 2019, Sam came and talked about, sort of, hey, we're going to really, we think the 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, about a hundred bagger?

And I mean, that's not like what was going through our head. We kind of had a little bit of high risk tolerance. It keeps coming back to this moment when AGI will be declared. First step to me is even to get to broad intelligence, 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?

So if you asked 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 in an e-val 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, if you have anything like general intelligence. How are you thinking about the interplay between Open AI, what you do internally at Microsoft? I have 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 run Sequozoor. Yeah.

Do you love Postgres? Apple. Jotnet, Java. Hey, I'm happy with OpenAI. I would love to have Anthropic, MAI, to Rock. Anyone, if Google wants to put Gemini on Azure, please do so. What is that like culturally? Like, what does it mean for the next thought to Nadella?

Somebody who's working their way up in Microsoft, do they need to be, be, okay, I'm building something internally, but my company isn't going to favor me? I need to fight it out with all my competitors across. We all grew up in that culture where it doesn't mean because it's always we're going to bring our pieces together. As a platform company, you kind of want to support everything. Office was born on the mat before Windows was here. Yeah, if you don't, if you don't get people choice, developers here, like, will churn, right? They'll find other platforms, right? If you- Concepts Bill had when he started Microsoft was, hey, we have 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 our stuff together so that they come together to solve bigger and greater problems. If somebody's pursuing a career in tech is becoming a great deals guy or a deal maker, like an important path now. Yeah, you have this great investment and it has great return. and no carry all the valuable to my shareholders, that's awesome. Maybe we should start a venture for. 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 them. Yeah. In order to get more efficient on it, you've got to 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 architect. Then the next

barrier is going to be, man, can we generate energy faster? Can we build faster? Do you think you're more ROI focused than others that are throwing around big numbers? I'm always focused on long-term return. Well, and we're at a time right now where there's people that have come out and effectively said, I don't actually care about ROI. I just care about winning. If you always have someone else willing to give you the billion dollars or the $10 billion, you can always be about I'm out winning. Sure.

Yeah. There are a ton. 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 we put the billion. And the reality is we put the 10 billion.

That's right. Or the 13 and a half was fully committed. Yeah, before it became a thing. Right. And remember that was all done before Chad GPD became a thing. It 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 Open AI investment and the original partnership? it seems like you've had at least really good like six-year foresight ability to sort of invest

against like a six-year time horizon. But how are you thinking about managing over, you know, the next decade? You know, one of the things about tech is as a percentage of GDP, get around four or five percent. Yeah. If you ask me five years from now, ten 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 taken? 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 it. 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 its sort of continual march of 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. I was talking to Eric Limon at Ramp, who makes the show possible, of course. And he had a question about how you, like, what advice you would give to someone running a decoorn, thousand plus employees in this age of spiky intelligence where there 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 up 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? 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, just not like cards of the SaaS world, but true marginal. cause. And three, the way you produce your artifact, your software, is changing. Yeah. 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 a peacetime

CEO now. We're a peacetime CEO. The war is over. But take me through the evolution of the, of the, of the business model shift on the gaming side of the business. It's one of the most interesting pieces of Microsoft. Remember, the biggest gaming business is the Windows business. To us, gaming on Windows. And of course, Steam has built a massive marketplace on top of it and done a very successful job. 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're 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 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, parallel. 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, the gaming's competition is not other gaming. Gaming's competition is short-form video. It feels like the entire world's competition is short-fidia. Is there some sort of advantage of being a hyper-skiller at $4 trillion company that you can go and retool a piece of the business over here, change the business model, and have almost the privilege

of not having shareholders come to you and beat you down about a slight shift in a business model in a subdivision? 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 if you don't reinvent yourself. So I think what happens in tech, unfortunately, 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've 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. Oh, N.B.SIPR. Yeah. Because that's when everybody knew.

Hyper-scale 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. It's super profitable. Yeah. Except it was one-tenth the size, but I look at it compared to Azure. 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 the cloud consumption model is going to V in terms of people being able to sort of. It's kind of the Gemm's paradox that sort of really played out in a massive way. But we would line this gone. And if you have it on my head for, uh,

27%. Good hit. It's a very strong hit. It's as big as possible. Oh, there we go. That is a fantastic signature. Thank you so much. Thank you for coming on.

Thanks you for having it. That's a really great. We know.