According to news on November 27, on the 17th of this month, the artificial intelligence startup OpenAI fell into the most chaotic weekend in the history of Silicon Valley. As the company’s largest investor, Microsoft CEO Satya Nadella should have been focused on saving the company’s fortunes. However, Nadella’s thoughts were still on cricket.
However, Nadella could not concentrate on India’s Cricket World Cup final against Australia as he found himself embroiled in another match that required more action from him. Still, amid the frenzy of negotiations, Nadella kept checking scores and reporting live scores of his favorite sport to less-enthusiastic colleagues. While the Indian team he supports is in trouble, there is hope for his company – Microsoft.
The best outcome for Microsoft: Altman returns to OpenAI as CEO
Satya Nadella only learned the news that the OpenAI board of directors was about to fire Sam Altman a few minutes in advance. This was the craziest weekend since he took office. The company behind ChatGPT has been pursuing a valuation of $90 billion. Rarely has a board decision threatened so much value in such a short period of time.
Although Microsoft spent more than $10 billion to acquire a 49% stake in OpenAI and use its technology to develop a new generation of software that promises to revolutionize the way work is done, the investment leaves Microsoft alone at the forefront of the artificial intelligence revolution. But Microsoft didn’t have a board seat, and almost immediately Nadella and others discovered that their investment was suddenly going awry.
When the board pointed the finger at Altman, he immediately turned to Nadella for help. Hours after the boardroom coup, they discussed the possibility of Altman returning to OpenAI or joining Microsoft by phone. If Altman is unable to return to OpenAI, the former CEO of the artificial intelligence company will become a Microsoft employee.
At the end of a wild weekend, Altman agreed to create a new artificial intelligence division at Microsoft so that he could continue to work with Nadella and tap into Microsoft’s computing resources. Soon, it became clear that hundreds of researchers were preparing to join Ultraman at Microsoft. Microsoft has prepared all office facilities for these engineers, including LinkedIn’s entire office building, abundant cloud computing resources, and Apple laptops. Microsoft employees assured their future colleagues that they wouldn’t even have to use Teams, Microsoft’s proprietary productivity software.
However, the ideal outcome for Microsoft would be for Altman to return to OpenAI as CEO, according to people familiar with Nadella’s thinking. By opening Microsoft’s doors to the OpenAI team, Nadella increased Altman’s leverage, allowing him to regain his position at a time when OpenAI was facing the departure of a majority of its board members. After five days of intense negotiations, Ultraman was successfully reinstated and got what he wanted. Altman specifically cited Nadella’s support in a post confirming his return.
The key to Microsoft becoming a big winner: Nadella’s strong relationship with Altman
After OpenAI, Silicon Valley’s hottest start-up, fell into chaos, how did Microsoft retain its huge investment and even become an unexpected big winner?
The answer has a lot to do with Nadella’s management and leadership style and his trust in Kevin Scott. Scott is Microsoft’s chief technology officer and the architect of the company’s artificial intelligence strategy. The two figures helped restore Altman to his position at OpenAI, protect Microsoft’s $13 billion investment, and extricate Microsoft from trouble.
The unconventional partnership between Microsoft and OpenAI has occasionally been awkward. However, Nadella’s masterstroke was to forge a strong relationship with Altman, a strategic move on Nadella’s part that made him an indispensable partner.
Nadella, 56, was born and raised in Hyderabad, India. As an ordinary student, his biggest wish was to attend a third-rate university, play cricket, and work in a bank. After failing the entrance exam to India’s most prestigious university, Nadella majored in electrical engineering at Manipal Institute of Technology. According to his 2017 memoir “Hit Refresh,” he has been fascinated with computers and software since he wrote his first line of code as a teenager.
However, he had no intention of leaving India, at least not particularly. In fact, when he applied to U.S. graduate schools, Nadella hoped they would reject him. However, he eventually came to the United States to pursue a master’s degree in computer science at the University of Wisconsin-Milwaukee. In 1990, he got an offer from Sun Microsystems, moved to California for two years, and then got a call from Microsoft in Redmond, Wash., that changed his life. He’s going to work at Microsoft.
However, in his book, he mentions that during an interview process in which he was put through a series of engineering tests and coding scenarios, one simple question confused him: If you saw a crying baby on the street, what will you do? The answer seems obvious: call 911. Yet the interviewer told Nadella: “You need some compassion, man! If a baby is lying on the street crying, pick him up.”
Nadella has remembered this lesson since he became a Microsoft employee. One of the first people he met was Steve Ballmer, who welcomed his future CEO successor with a “very expressive high-five.” In his first few years at the company, Nadella took Compaq computers across the country to visit customers every week, and would fly to the University of Chicago on weekends for further studies.
As he rose through the company, Nadella was responsible for several important businesses in the Microsoft empire, such as cloud computing business Azure and search engine Bing. Azure is now an engine for the company’s overall growth, and even Microsoft’s stock performance is closely tied to it. During Nadella’s tenure, Microsoft has returned more than 1,100%, while the S&P 500 has returned 215%. Despite Bing’s mediocre performance, it helped Microsoft earn $12 billion in advertising revenue last fiscal year.
When Nadella became the third CEO in Microsoft’s history in February 2014, his image was completely different from the previous two CEOs. Where Bill Gates was a grumpy, yelling man, Ballmer was more of a star who elicited public cheers. Nadella, on the other hand, likes to conduct business in a gentle and drizzle way.
He landed the CEO job by writing a 10-page memo over the Thanksgiving holiday answering the board’s questions about his vision. Nadella explained that his first priority is to repair the company’s internal culture. He told executives in a meeting that he felt simply releasing new products was no reason to celebrate and that Microsoft had to measure their success based on whether people actually liked them. “We need to develop a deeper empathy for our customers and their unexpressed, unmet needs,” he writes in the book.
Family life helped Nadella develop a deeper sense of empathy. His eldest son, Zain, was born with severe cerebral palsy and required special care. Zane passed away last year at the age of 26. “Being the father of a son with special needs was a turning point in my life and shaped who I am today,” Nadella said. He praised En as “the joy of our family, whose strength and warmth inspire me to keep pushing the boundaries of technology.” limit”.
Nadella has been Microsoft CEO for nearly a decade, and employees know what to expect from him.
He is a leader who recognizes his own limitations and is willing to delegate authority to those he trusts. As an executive, he could be friendly and approachable but also cut costs when necessary. A former executive said Nadella threatened to fire employees who performed poorly. Another former executive recalled snarkyly telling a grandstanding employee to “sit down.” He rarely cursed, but in one meeting with Microsoft executives, he told them it wasn’t their job to complain.
Nadella himself has always worked tirelessly. An employee once accompanied Nadella to China. When he endured the pain of jet lag and walked into the hotel gym to exercise at 3 a.m., he found that Nadella had already started working and was ready to face a new day.
Nadella is also not afraid to take losses and kill projects that aren’t working. He vetoed efforts to bring Bing to the Apple Watch, calling it a waste of time. “Nadella has a unique ability to reduce a task to its most important issues without alienating anyone in the room,” said a former Microsoft executive who reported to Nadella.
Without a board seat, Microsoft’s OpenAI bet is vulnerable to two scenarios
What separates Nadella from his predecessors is more than just their words and deeds. Gates is a technical genius, Ballmer is also very good at business models, and Nadella is an engineer. However, during his tenure as CEO, Nadella completed several huge deals. For example, he acquired the professional social network LinkedIn for US$26 billion, and then spent US$75 billion to acquire the game developer Activision Blizzard. By contrast, he was more open to the idea of collaboration. While Ballmer snatched an iPhone from an employee and pretended to step on it, Nadella reached out to a rival, launching an iPad version of Microsoft’s Office suite at his first major product launch.
He has since struck a deal with Amazon, reached a delicate settlement with Google, and publicly stated that Microsoft is open to startups, including one like OpenAI.
Nadella and Altman’s bromance began with a chance meeting at an Allen & Co. conference in Sun Valley, Idaho, in 2018. Nadella was very interested in Ultraman, and Ultraman was also deeply impressed by Nadella. Altman left the meeting convinced that Microsoft was the only company with the capital, computing power and clear understanding of artificial intelligence to partner with his startup.
However, despite investing $13 billion, Microsoft did not win a seat on OpenAI’s board of directors, nor did it play a big role in OpenAI’s governance, because Microsoft was worried that excessive influence would attract the attention of increasingly strict regulatory agencies. . This leaves Microsoft exposed to the risk of OpenAI’s strange structure.
Altman’s company was originally a non-profit organization, and the main responsibility of its board of directors is not to maximize shareholder value, but to develop safe artificial intelligence to benefit all mankind. Without a board seat, Microsoft was caught off guard by the upheaval at OpenAI. The company is also vulnerable to two scenarios: one in which Altman leaves to start a business and takes most of his employees with him, or one in which OpenAI’s board fires Altman without consulting its largest investors. The second scenario seemed unlikely, but suddenly it became a reality.
Gates was initially not optimistic about investing in OpenAI and suggested a complete acquisition
Even before the OpenAI crisis broke out, Microsoft’s investment was not generally optimistic. According to people familiar with the matter, Bill Gates himself told executives that there was no point in supporting OpenAI if Microsoft did not fully acquire the company. Although Gates later changed his mind, his concerns were not unfounded. Microsoft must strike a delicate balance in OpenAI: protecting its investment while keeping its stake below 50% to avoid regulatory pitfalls.
Although Ultraman returned to OpenAI, Microsoft’s problem has not been solved. Former U.S. Treasury Secretary Larry Summers won a seat on the restructured OpenAI board, but Microsoft did not. It’s unclear how Nadella will ensure this never happens again.
To understand Microsoft’s bet on the future, you need to understand Nadella’s past. Nadella’s parents hung posters of Karl Marx and Hindu goddesses of wealth and prosperity in his bedroom, but the poster Nadella most wanted to hang was of his favorite cricketer. He was so obsessed with cricket that in high school, while his father was working abroad, he stayed home and continued playing. When he applied for a job at Microsoft, he even mentioned cricket on his resume. While other executives used baseball analogies, he used cricket.
Nadella’s experiences on the court shaped his executive mentality. He once played in one memorable game against a team so good that Nadella and his friends were intimidated. Their coach would not allow them to do this, instead encouraging them by saying, “Don’t just watch from a distance, go play!” Nadella can still hear that voice echoing in his head, and he wrote: “This tells Me, you have to respect your competitors, but don’t be in awe. Go compete!”
He did. Microsoft has invested $3 billion in OpenAI since 2019. At the end of 2022, the startup released ChatGPT, the most popular product in the history of technology, and Nadella personally used it to translate a poem. In early 2023, he made another $10 billion bet, which helped Microsoft reach a market value of $1 trillion this year and grow faster than most companies.
Of course, growth often comes with growing pains. Artificial intelligence technology is extremely expensive to develop, and as Microsoft builds out the necessary computing infrastructure, the company’s spending is expected to soar. It’s unclear when or if the company will be able to recoup those upfront costs by adding new revenue. There is some evidence that individuals and businesses are willing to pay top dollar for AI assistants like GitHub Copilot. However, AI tools for larger software products, such as Microsoft’s office suite Microsoft 365, are still in their early stages and businesses pay $30 a month. Many of Microsoft’s current and new customers will need to pay for this bet.
Nadella is banking on OpenAI’s independence to bring about innovation that benefits both Microsoft and humanity. However, the OpenAI uncertainty shows that even as one of the world’s most valuable companies, there are risks involved in outsourcing your future to a startup that you don’t have complete control over.
“I’m not going to pretend this is a perfect relationship,” Altman said last month. But he views Nadella as a friend, not a foe, and said they are “super aligned” on top AI issues. When they appeared together at OpenAI’s first developer conference earlier this month, Nadella was introduced smoothly to the stage by Altman.
Altman asked at the time: “What does Microsoft think of this partnership?” Nadella responded: “We love you!” Neither of them expected at the time that the next thing would bring them closer.
As for the cricket match that coincided with the OpenAI turmoil, Nadella’s company had a better day than the team he supported: India lost at home. He congratulated the Australian team on their victory and then got back to work, looking for his own victory.
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