Yesterday Microsoft CEO Satya Nadella published a fascinating essay that reads as both a rebuke to frontier AI model companies like Anthropic and OpenAI, as well as a call to arms to the entire business community.
Nadella is worried that OpenAI and Anthropic are about to eat everyone’s lunch – Microsoft included. “I’ve been thinking a lot about the future of the firm in an AI-driven economy,” he opines. “The last thing any of us want is a world where every company across every sector is ceding value to a few models that eat everything they see.”
Nadella builds to a full-throated remonstration: “If all the value is accrued by only a few models, the political economy will simply not tolerate it. There is no societal permission for an AI future that hollows out entire industries.”
He then proposes a new architecture for how businesses create value in the world – one that, conveniently, will require that all firms lean on companies like Microsoft to help them create what he calls “hill climbing machines,” continual learning loops that combine human insights with AI capabilities independent of any particular AI platform. It is not a coincidence that Microsoft announced its own enterprise-grade AI models just last week. Their moniker? Hill climbing machines.
Intentional or not, Nadella’s “eat everything they see” phrasing echoes Marc Andreessen’s famous “software eats the world” essay back in 2011. As the SaaS-driven Web 2.0 era took center stage in a post dot-com crash world, Andreessen argued that “software companies are poised to take over large swathes of the economy.” His prediction proved largely accurate: Software-driven companies like Google, Microsoft, Apple, and Amazon became the most valuable firms in the world. Fifteen years later, Nadella is arguing that AI companies are poised to eat the software industry. And for the CEO of a trillion dollar software company, that’s an existential problem.
But is it a problem for his customers? If Anthropic and OpenAI do a better job of provisioning AI for large corporate customers, that’s just progress, isn’t it?
Nadella has an answer to that question, and it turns on the agency a firm has over its intellectual property, which he defines in terms of both data and governance. That IP should be the core asset of every firm, and securing it “requires a new architectural approach where every business is able to build agentic systems that improve over time, while still retaining control over their IP,” Nadella writes. “Companies need to turn their workflows, domain knowledge, and accumulated judgment into AI systems that improve with each use.”
To get there, Nadella evokes the Gates Line – the idea that a true platform creates more value in the world than it extracts. “The ethos I’ve grown up with [is one] where platforms enable more value on top than is captured inside, and where every company can continuously innovate and build value of its own,” he writes.
If your eyes are glazing over at this moment, let me bring all this corporate speak into a more personal frame. Nadella is advising all companies to retain control and agency over their intellectual property – defined as the expertise and insights of humans who work at the firm. That expertise is captured as data – and that data must be governed by the firm, not an outside AI platform.
Well bravo, Nadella! That’s what I’ve been arguing for decades, only with one change in language: Change “the firm” to “the individual,” and we’re in perfect sync.
Nadella’s essay is a declaration of AI independence for companies around the world. If only we’d extend that thinking to the individual, we’d have a real revolution on our hands.
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