Speaker unverified: belief

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…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. 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. I think that the way I would say is my thing was to go back even to the Microsoft of the eighties perhaps., Because most of what happened was really in the nineties there was Microsoft and there was pretty much nothing else, and so there was sort of a lot more of our things coming together, whether it was on the client or on the server. The eighties, to your point, we built Office on the Mac. Windows came later. In fact, the concept that Bill had when he started Microsoft was it's a software factory, I'm not in love with any one category, I'm just going to build the best software factory and it's going to churn out whatever problem. Flight i sim. You want a basic interpreter, no problem. We have one. You want an operating system? We have one too. So in some sense, that was the idea and at what point we got into a lock between four or five parts of that that became the Windows and Windows NT and client server and what have you. So I sort of realized that when I became CEO, and even when I was running our cloud business that hey, this is a time where the market's going to be a lot bigger and got different, and we didn't have the mobile platform at that time. And so therefore we really needed to make sure we would stay relevant in the largest markets that we could address by bringing our products together in configurations that made sense. S I would say if it was not in the core DNA of the company, I don't think just because I showed up as a CEO and I said, “I want to do this,” we would've executed well. It was in the core DNA of the company that we can in fact take our software to every platform. Yes. Speaking of the core DNA of the company, the famous cartoon of Microsoft with all the guns pointing at each other. How much cultural tweaking did you have to do and how do you actually do that? When you get down to brass tacks, you can see all the nice things, the all hands and things like that, but ultimately culture comes down to what you will and won’t tolerate and how decisions are made and things like that. Yeah, I would say there are two things that I learned from that entire episode. Because I always say, look, I'm a consummate insider. Anything good and bad about Microsoft for the last 35 years, I lived through them all and I'm part of it, so I can't deny any of it. The thing that I felt was a little bit of that was we lost our own belief because we lost the narrative. That cartoon is a great example of someone else defining what became the cultural narrative more so than reality. People started to identify with the cartoon.…

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