Microsoft’s CEO Has a Message: Don’t Let AI Eat the Economy

0:05Ryan Knutson:If there's one thing that's defined the economy this year, it's this. AI increasingly doing work that used to be done by humans. You might just call it the year of the AI layoff. Somewhere between 30 and 50 percent of his company's workload is now being handled by AI. Employees knew it was coming, but they didn't know who was going to be laid off this morning. They got the email, 8 ,000 of them. Bots instead of people. And for a long time, the messages coming from AI leaders have felt kind of dark. I think people are right to be anxious. I understand it. That's Sam Altman, CEO and co-founder of OpenAI.

0:46Ryan Knutson:This is not even a technological shift that happens every generation. This is one of the big ones. It's hard to imagine that there won't be some significant job impact there. And that's Dario Amadei, CEO and co-founder of Anthropic. And my worry is that it'll be broad and it'll be faster than what we've seen with previous technology. Dario Amadei predicted, you know, a while ago that like half of all entry-level jobs could be affected by 2030, you know. And that's like a massive, tectonic, very difficult thing to swallow for a lot of people. That's our colleague Brad Olson, a tech editor in San Francisco.

1:30Like, wow, if I have a kid who starts in college, which I do, I have a son who's starting in college, it means that his potential opportunity will be severely limited by AI.

1:41Ryan Knutson:Altman and Amadei have since walked back these ominous predictions. And Altman is now saying that a job's apocalypse is unlikely. But one powerful tech CEO still thinks there's a problem and says the industry needs to figure out a path forward that is more beneficial to everyone, not just the biggest AI companies. Satya Nadella, the CEO of Microsoft, posted an essay on X a few weeks ago. It reads a little like a manifesto. He wrote, quote, there is no societal permission for an AI future that hollows out entire industries. How would you describe Nadella's post? When I read it, I was like, oh, this is kind of a big thing here.

2:26Microsoft is kind of taking on OpenAI and Anthropic directly here. They're sort of endorsing a view of the future in which OpenAI and Anthropic are less dominant.

2:38Ryan Knutson:I mean, Microsoft has been a big player in AI. Yes. But now he's kind of calling people out in the industry. Absolutely. Very directly calling them out. When I read it, I thought, this is kind of a declaration of war. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Wednesday, July 1st.

3:05Ryan Knutson:Coming up on the show, did Microsoft CEO just declare war on big AI?

3:22This episode is brought to you by Optum. Healthcare doesn't always work great. If you ever waited on a refill or couldn't schedule an appointment, you get it. That's what Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated. That means cheaper prescriptions that are easier to get and care that looks at the whole person, how you need it. Optum is making healthcare work as one for everyone. Learn more at business.optim.com.

3:58Ryan Knutson:Satya Nadella has been intimately involved in developing the AI industry for years. Microsoft was an early investor in open AI. And right now, it holds a more than 25 % stake in the company. So Nadella's essay criticizing the industry raised eyebrows. To better understand what Nadella was thinking when he wrote it, Our colleague Brad got on a video call with him. Great to see you too. I didn't expect you to be standing. He was standing up. There was a shelf behind him that looked like it had pictures of his family on it. I asked if it was real or if it was fake. Not an AI background. Is that a background or is it the real office?

4:36Because I have an AI background because I never want any bosses to know if I'm in the office or not. Right. So I just made a little joke to him and then he was like, no, it's real. It's real. It's sort of a challenge, right? Yeah, it's sort of a real thing.

4:51Ryan Knutson:No, he wasn't playing along. He doesn't understand the game that people play with their bosses down here on the lower levels of corporate America.

5:03Ryan Knutson:Nadella told Brad that the way AI executives have been talking about their technology is irresponsible. You can't go in and say, hey, look, this is about everybody is living on UBI and there's no dignity of labor. There's no human agency. And then there's just a few great falls. I mean, that's I just don't see how that can be the outcome. I think Satya is saying that's a worst case scenario because everyone's job that isn't at an AI company would be affected. Literally, you know, hundreds of millions of people in the United States, almost everyone. Satya Nadella has been CEO of Microsoft for 12 years, and he's considered an elder statesman in the tech world.

5:45Ryan Knutson:He definitely isn't known for taking swings at rivals. For the longest time, Nadella has sort of been like, we can all win. He sent a very positive message. He's partnered with everyone. So he's sort of been like almost like a diplomat, someone who is a cheerleader for success and prosperity. Here's Brad on that video call with Nadella. The discourse around your essay was sort of like Satya's nice guy era for AI is over. I wanted to give you a chance to respond to that because it does seem very directionally challenging at the status quo. Yeah, I think that's right. One big swing that Nadella, no more Mr.

6:25Ryan Knutson:Nice Guy, takes is at corporate America writ large. He takes issue with how AI is being used as a tool to reduce headcount. There's a pattern of some companies where they announce a massive layoff, they attribute it to AI, and the stock goes up, you know. And I think he didn't call that particularly out, but I think that's the notion of, like, problematic thinking is that all I have to do is cut jobs and say we're using AI, and then I get rewarded by the market. It's kind of simple-minded and problematic if you want to avoid disruption. And self-defeating almost, because if you're sort of like, hey, look at this great technology, look at all the jobs that I can get rid of at my business.

7:05Ryan Knutson:It's like, that's going to lead to a political backlash that may not be good for the tech industry. Exactly. Nadella says there's another political problem here. Soon, pretty much every company will be using AI. And if there's only two or three giants that dominate the AI industry, those companies will be too powerful. If the most capable model can do literally everything, can do all knowledge work that exists in the economy, then what happens is you have a bunch of companies that do certain things that aren't going to be worth anything. If it's all about one or two or three models and firms sort of basically doing all of the learning for the world, I just don't see how the political economy tolerates that and it's not going to be stable.

7:57Ryan Knutson:Already, we're seeing signs of that instability.

8:03Ryan Knutson:Like, a few weeks ago, graduating college students across the country booed commencement speakers when they mentioned AI. Here's the former Google CEO Eric Schmidt in Arizona. If you don't care about science, that's okay, because AI is going to touch everything else as well. Whatever path you choose, AI will become part of how work is done. When college students are booing, conventional speakers who are talking about AI, that's a tell on, hey, it's just, they're anxious. It's not just young people who are booing. Backlash is also growing over data center construction. According to a recent Gallup poll, about 70 % of Americans oppose constructing AI data centers in their local area.

8:46Ryan Knutson:And the opposition spans the political spectrum. I mean, you have Steve Bannon with some anti-AI messaging or cautious AI messaging, as well as Bernie Sanders. Not a lot of issues that those two are aligned on. And so the question is, how is one not being anxious? They say, well, I'm in control. I have human agency. I have human ambition. I have economic opportunity. And there are folks that want to hire me. Like, we've got to create that necessary condition. In his essay, Nadella seems to suggest that one way to head off this criticism is for AI leaders to literally change the narrative. Stop predicting these doomsday scenarios.

9:26It's fair to say, you know, the message, at least from some players, is sort of something that could almost be described as fear for your lives. You know, we're coming for you. Do you feel like it's incumbent on you and leaders in tech and AI to kind of help map out a new message and a new way of thinking for people about that? 100%. I think that's correct. You can't, as you described it well, because you can't say, hey, all white-collar jobs are gone, and this could even be a weapon, and we will use all the power to real data centers. It's just not something that society needs.

10:08Ryan Knutson:In his essay on X, Nadella drew a comparison between the present moment and the last major upheaval on the labor market, the huge loss of manufacturing jobs due to free trade agreements signed in the 1990s and early 2000s. Nadella wrote, quote, Think about what happened in the first phase of globalization, where entire industrial economies were hollowed out by outsourcing. The GDP numbers looked fine on the surface, but the displacement was real, and the consequences are still being felt. As Satya said in the essay, a lot of economists would say NAFTA, you know, and free trade has been a net benefit to the United States.

10:47But for those whose work was displaced or whose lives were forever changed, I don't think we can pretend that it was easy for those people. And I think all he seems to be pointing to is like, I don't think the right course is just to kind of throw our hands up and just kind of be like, hope for the best. you know, we can do a little better than that.

11:10Ryan Knutson:In his essay, Nadella is mostly identifying problems. He doesn't really offer specific solutions. And while he hits a chord that might resonate with some AI opponents, there may also be a business reason for why Nadella is speaking up now. That's next.

11:31So good, so good, so good. New summer arrivals are at Nordstrom Rack stores now. Get ready to save big with up to 60 % off brands like Rag & Bone, Levi's, Adidas, and Free People. Join the Nordi Club to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite rack store for free. Great brands, great prices. That's why you rack. Uncovered windows can make your home feel up to 20 degrees hotter. Stay cool and save up to 50 % off custom window treatments during the 4th of July mega sale at blinds.com. From outdoor shades to room darkening blinds, finding the perfect fit is easy.

12:12Get free samples, expert design help, and professional measure and install services. Or DIY with confidence and support every step of the way. Shop up to 50 % off site-wide plus huge savings on doorbusters right now during the 4th of July mega sale at blinds.com.

12:33Ryan Knutson:Satya Nadella isn't just firing off a philosophical missive. He's also running a business. Microsoft has tried to build its own frontier AI model, one that could compete with Claude, ChatGPT, or Google's Gemini. But progress has been slow. In fact, his company has lost roughly a trillion dollars in stock market valuation since its peak in October 2025. Now it's worth$2.8 trillion, so still pretty big. Microsoft found a lot of the same struggles that a lot of really, really large technology companies have found. To kind of get to the point where you're at the very, very top has been difficult for Meta and Amazon and Microsoft and Apple.

13:16All of them have tried to kind of do it in-house, and all of them have really struggled. How big of a problem is that for Microsoft? You know, if you're depending on another company and capabilities you don't own, then there's that risk that you will be sort of made unnecessary eventually.

13:33Ryan Knutson:In other words, this is where Nadella's message in the essay aligns with his business interests. Nadella is calling out the AI giants, possibly because he isn't an AI giant himself.

13:47Ryan Knutson:Microsoft had a strong partnership with OpenAI. The tech giant was one of its biggest benefactors starting back in 2019, pouring billions of dollars into OpenAI and helping it become the behemoth it is today. In their partnership, OpenAI built the AI model, and Microsoft provided the cloud computing. In the beginning, they were one of OpenAI's earliest partners. I think they helped build OpenAI into what it is with funding and backing and also kind of bringing OpenAI to Microsoft's customers, you know, to people who are using Microsoft. But in recent years, the partnership became strained, as both companies realized that their positions in the industry were very different.

14:33Open AI wanted to kind of find other partners for computing resources. So, you know, I think they saw that maybe demand would be astronomical for the kind of computing that is needed to kind of process incoming questions and queries and requests for AI systems. It's so expensive, and they need so much computing to do it. And so I think they wanted, they struck deals with multiple partners, and it seemed like a lot of them were aimed at kind of spreading OpenAI's connections across tech and even across the economy. Which is theoretically bad for Microsoft because that means that OpenAI may not need them, and they could be replaceable.

15:19Exactly. I mean, it's this weird contest between, like, who becomes the less valuable thing in this race. Is it incumbents like Microsoft who, you know, the upstarts say, hey, we can write all the software. We can make Microsoft 365. We can do Teams. We can do any of this stuff that you guys do. Or does Microsoft say we have all the relationships and the models won't matter as much, you know? So that's like, it's like this contest. Right.

15:46Ryan Knutson:You have the models compete against each other, and you, Microsoft, are the one that's selling it to the customer on your cloud infrastructure. Exactly. Microsoft and OpenAI still work together, with Microsoft providing cloud-competing resources to OpenAI. They've said they remain on good terms.

16:05Ryan Knutson:Right now, the AI models that exist are incredibly powerful, but they're also really expensive for the businesses that use them. One of the things you're seeing a lot in AI is like a lot of people are trying out the best models and they're amazed at the things they can do. And then they kind of get the bill and, you know, they're kind of reckoning with the cost. After first encouraging employees to use AI to speed up their work, a host of companies are now getting hit with eye-watering bills and telling employees to dial it back. Like Uber, for example, blew through its entire 2026 annual budget for AI agents in just three months.

16:45I mean, one of the best examples somebody gave me is that there was like a large financial institution. And a bunch of people at this institution were asking very basic questions to like the very best model. Like, hey, how are you? What's your day like? So basically, questions of absolutely useless value. And you're asking, yeah, you're like taking a Ferrari to drop off your kid at high school.

17:10Ryan Knutson:It's a Ferrari when you need a golf cart. Yes, yes. That's a perfect metaphor. Ferrari when you need a golf cart. And it was hundreds of thousands of dollars. Nadella sees this as a business opportunity. And Microsoft has started launching models that aren't quite as powerful, but are much cheaper. What you could think of is the AI equivalent of a golf cart. Or maybe a Toyota Corolla. Very recently, they rolled out a pair of models that they said would be very, very capable in coding, but for very low, low costs.

17:49Ryan Knutson:Nadella titled his essay, A Frontier Without an Ecosystem is Not Stable. He wrote, quote, In my view, our priority has to be building a frontier ecosystem, not just a frontier model. So value flows broadly across every company, every industry, and every country. In other words, Nadella is saying that this can't be a winner-take-all race. More companies and workers need to be able to benefit from it, including Microsoft, of course. I think in the end, it's definitely clear that this new position that Nadella has or the direction that he wants Microsoft to move in will benefit Microsoft if it works.

18:31It's not just he wants AI to be good for everyone. He also wants it to be good for Microsoft, too.

18:42Ryan Knutson:So what is your takeaway from what Nadella is doing here and in his message? I think he's definitely playing toward Microsoft's strengths. I think he is being earnest in terms of earning the social permission. And I think that's, with Microsoft, a recognition of what works. In the end, if businesses are anything, they're practical. It also kind of seems like this is, in some ways, one of the first really powerful tech leaders who is recognizing and articulating the fears that all of us plebeians have about what AI might bring to all of our lives. Yes, I absolutely think that's true. Microsoft very much wants to be part of a reset, help people think about AI in a new way.

19:32I think that Microsoft can recognize that pro-AI companies, institutions, voices have really lost, you know, they've lost the public.

19:57Ryan Knutson:That's all for today. Wednesday, July 1st. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Keech Hagee, Berber Jin, and Tina Lee. Thanks for listening. See you tomorrow.