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…customer service is also inside sales. And so intuitively that makes sense and definitely in the agentic world you can stitch these things together so that the seams are not like what they are today. Maybe what we're describing is a bunch of swim lanes have been established by random accidents of software and org charts and everything like that. “You do customer service when people come with a query of a non-commercial nature. You are an SDR. You do whatever…” And all those distinctions are probably going to get going. We're talking a lot about the AI apps that people use and Copilot and ChatGPT and Gemini and all these kinds of things. There's a debate about how much model quality matters and is it the case that people pick a brand and they've been drinking Coke for the longest time and even if Coke… I mean Coke's a bad example, because there was a revolt about the change in the formula, but even if they change the formula people, they still have a preferred brand. I use o3, my wife uses GPT 5. I'm almost horrified because I’m like, “You deserve more intelligence than that and you can take o3 from my cold dead hands.” Where do you stand on the debate of do people have loyalty to—and there was also the revolt when they tried to take away 4.0, was it? And people were really attached to that model. Do people have loyalty to a model or do they have loyalty to an AI brand and how does this affect your business strategy? I think that in consumer products, this was the first time we saw that when you changed models, they're not sort of uniform changes and they impact people differently. And personality is one such thing or style or what have you. And so it just sort of is a new dimension. So in other words, it's also an argument that, oh wow, this is a new dimension of perhaps differentiation. There's the IQ side of it, there's the EQ side of it, and then there is all these style points and maybe that's kind of one of the things that people will steer things towards. Will everyone’s preference not just be for more intelligence? I'll go into the picker and manually select o3 for “Where should I go get ice cream” query. I always want the most— That's habit, don't you think? Maybe, but it's also an important considered decision. But it is true. I mean it's very hard for any of us to take our—that's why defaults matter and we love our defaults. We don't love the cheese to be moved. Even the model selection stuff, it's kind of like, “Wow, if you now took away the model selection, it's a problem” and so therefore you got to be careful. But I do think in the long run, if I can trust, that's another one, which is if I can trust something to always do something for me while it's making a selection that somehow is delightful, then that's when I'll hand off. And so you think that's what you need to get to is me trusting that you'll pick an appropriate model? Exactly. while it's making a selection that somehow is delightful, then that's when I'll hand off. And so you think that's what you need to get to is me trusting that you'll pick an appropriate model? Exactly. Yeah. And then I mean my mental model of Microsoft is that you just play at every part of the stack in that there’s the—you have Copilot, you have your stake and OpenAI, you have… Well, we can get to vertical applications in AI, you have the Azure layer, you have chips, everything leaving out a whole bunch of stuff. Are some more important to you than others? What is the must win? Will you do verticals? Yeah. Well, at the core, the way I kind of conceptualize it is our infrastructure business. We have to be fantastic at building what I'll call the token factory. This is the tokens per dollar per watt, really being super efficient at that. Then I'll say we have another layer of it, which is the agent factory and the difference between the token factory and the agent factory is use the tokens most efficiently to drive a business outcome or a consumer preference outcome, which is— That's about the value per token or something, The value per token and as evaluated by the specific domain that people care about. And that is to your point, it has tooling around it. It has a whole, it's kind of the new app tier or the app server. Every new platform has always had, there was the web and there was a web server. This is the AI server in some sense or the AI cloud. Then we will definitely want to build our own, I'll call it systems of intelligence or AI systems that is the family of Copilot. Whether it's for information work, that's kind of what we've done for coding or software development. That's the GitHub Copilot, security’s another domain where we are absolutely going to be a primary. Those would be the three horizontal. We will also have business applications. The other one is we are doing a lot in health and science. As a platform company, you always have decisions around when should you try and bundle products together? When should you try and staple them and mandate they be used together and when should you not? And I think the classic example for some reason that everyone talks about despite it being quite minor, is the fact that Apple originally only, let's use an iPod with a Mac and tried to use it to drive Mac sales, and then gave up and shipped out iTunes for Windows. And my understanding reading the Apple in China book is it was a totally random decision that someone just made one day, but it's often held up as one of these examples. Obviously Microsoft, the entire history is full of these interesting examples. I don't think people realize how open Microsoft was in the early days where in 1985 most of Microsoft's revenue was from Macintosh applications and then for the Microsoft operating systems, most of the applications were third party like Lotus 1, 2, 3 and things like this. ere in 1985 most of Microsoft's revenue was from Macintosh applications and then for the Microsoft operating systems, most of the applications were third party like Lotus 1, 2, 3 and things like this. So the way—a reason about it is I think we overstate many times how many of these battles are “zero sum.” So at some level, one of the pieces of analysis that I think that you want to be sharp at is, what are by definition going to be multiplayer? Like cloud is a classic example, which is, I remember even back in the day when I got started, and obviously Azure got started much later than AWS. People would tell me, “Oh God isn't AWS so far ahead? Is there even room for a second cloud?” And having competed against Oracle and IBM on all the middle tier servers and so on, I felt like no. These enterprise customers and commercial customers by and large are going to demand a sort of multiple. And so that was the structural understanding that drove us to even just be at it and the rest is history. So a little bit of, to me, if you over package things, you might in fact sort reduce your TAM and not compete. For example, Azure was called Windows Azure. Oh wow. That's a problem because Azure makes no sense just for Windows. It's sort of got to support Linux as first class. It's got to support MySQL and Postgres as first class. And so that's what allowed us to make sure that you have to actually have to do a great job with SQL Server. Isn't there always a debate between if we have Linux and Azure, we'll sell more Azure, but the Windows people say, “Yeah, but you're hamstringing Windows’ server.” And there are some places like you're describing where Microsoft's open, there are other places, Microsoft Flight Simulator is not available on the PlayStation, it's available on the Xbox, and that makes sense. It feels kind of natural to be integrated that way. I don’t know, this might be a bit of a stretch, but Teams Chat and Teams Video are not sold separately. They're just part of one thing and that makes sense. It makes the bundle more compelling. And so don't you always end up in these debates as to whether the bundling cost outweighs the bundling benefits? Yeah, and I think some of those, for example, the Teams thing, is a classic one, which is Teams was born as a product that brought those four things, like Outlook. There was a PIM before there was an email client and a calendar was separate, and Outlook was the first scaffolding that said, “Hey, we bring these three things to get a job done.” And same thing with Teams. We brought chat and channels and video and what have you into one. This impression I have is that when you took over Microsoft, you shifted the culture from a highly bundled, you'll buy your Windows machines and they're running Microsoft Access and there are SQL Server and everything is neatly packaged together in this Microsoft life, to moving towards more of an open and interoperable strategy.…

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