Exclusive | Interview: Microsoft CEO Satya Nadella outlines next-generation AI solutions vision

Satya Nadella, CEO of Microsoft, shares insights on the artificial intelligence (AI) revolution during an interview with CNBC-TV18. From its impact on economic productivity to navigating workforce dynamics, Nadella highlights AI's transformative potential. He underscores Microsoft's commitment to investing in India's AI ecosystem, aiming to foster innovation and empower businesses across various sectors.

A: You are right; I mean, a lot has happened since last year. I was very excited about the prospect of what AI could mean. I was stunned even at that point, seeing how some of the leading model work we had done was diffusing in India and even in something like the public sector. That is the first time I saw Bhashini's demo, coupled with GPT-4, and I was like, really, it was a drop-the-mic moment for me, and to come back a year after. And we are no longer just talking about AI. I mean, some of the use cases I talked about this morning, I saw from customers, commercial customers, and non-profit organisations. I think this is the fastest rate of diffusion of anything new I have ever seen.

And to your point, why is this excitement? Because I think it's tangibly changing economic productivity. Now, whether it's for software development or frontline work in retail and healthcare, whether it's access for a citizen or rural, say a new immigrant into the urban area, in India to be able to access services I have not seen a general-purpose technology like this that can have that type of broad impact and that's where I think the excitement comes from.

A: First of all, at the core level, we should sort of go back to the lump-of-labour fallacy. I think labour markets are a lot more dynamic than we give them credit for. But at the same time, we should be clear-eyed about any displacement. So a couple of things that we can do are: One good thing about this generation of AI is that it reduces the learning curve, not increases it. So even for somebody displaced mid-career, you can pick up new skills faster or easier, so that's sort of one.

The second thing it does is, if the previous era was about information at your fingertips, I think of the AI era as expertise at your fingertips. So you can take somebody who's on the front line, whether it's in retail or whether it is in healthcare, and perhaps it will even improve the wages because they are now able to give more expert health advice or more expert work is being done by non-experts. They may have domain expertise, but they may not have all the knowledge. And so, therefore, I think that there could even be better wage support in new jobs.

One of the coolest examples I saw is right here in India. In fact, it was sort of incubated at MSR, and after that, the founder of Karya took it and created Karya, which is about taking AI jobs. These are new jobs that didn't exist around labelling data, and what have you, that are now being essentially syndicated out to rural India, where women are mostly able to find wage support, better wages, 20x wages, compared to what is the general wage, for doing AI jobs.

So I think we will have new jobs, our ability to go up the learning curve will be faster and better, and even better wage support for some of the things that are on the front line.

A: I think that is what is happening. Some of it is just an adjustment. I think this is where, as I say, labour markets adjust. If you take software development, the reality is that there is a need for more software developers all over the economy, not just in the tech sector. So that's where I think if there is one sector that's getting "more efficient," some of the labour force in that sector will disperse more broadly. So I think that yes, I am not at all saying that there is not going to be displacement, like with any new technology we have seen. But I am also very optimistic that we have both the policy tools and the actual tools to help us manage this transition in a net positive way for even a country like India.

A: We are obviously very excited by what we are seeing in India. At the end of the day, we are putting in our capital, but we are building out our own data centres. We have four regions, and we will keep expanding that. We are investing in our own people here, both in India as a source of human capital that's producing products for us all over the world and also in the US helping customers, the IT services companies that serve the world from here, equipping them with the latest and greatest. So that's what I think I would call the core of what we do.

But beyond that, I would say the investment here is that if you have a new general-purpose technology, India has a tremendous opportunity to use it in a broad sectoral way, in the public and private sectors across every industry, including healthcare, retail and energy. We want to make sure that we are there. I like to tell you that we talk a lot about Co-Pilot, and I want us to be the Co-Pilot for India, as it takes advantage of AI, creating in fact, its own AI products across all of these sectors and exporting them to the world.

A: The economic data I have seen is, if the Indian economy is going to be like, say, $5 trillion, the AI-driven part of it could be something like maybe 10% of it, maybe $500 billion of it. So what we are going to do is, and all of that being powered by things like cloud computing with these frontier models, open source models, small language models, and so on. And so our capital investment and human capital investment will really fit into that.

So the way I think about it is, if Microsoft has X revenue inside a country, that means there needs to be 99% more revenue created because of the output of computers, and so that's kind of how we will invest.

A: First of all, I have grown up in a company that has always created lots of enterprise value by partnering and partnering well. I grew up in a company that's where Microsoft and Intel really brought together the advances that Intel made and what we did with Windows; the same thing happened with SAP. In fact, I built our database business by partnering deeply with SAP. So at some level, this is core to us, and the latest example of that is what Open AI and Microsoft have been able to do. So we are very comfortable with the partnership and what it has achieved to date.

Of course, we want stability in OpenAI. We are very excited about the new board. We have an observer seat. We were comfortable before and we are comfortable now. And at the end of the day, we want to be good partners where OpenAI can succeed with us and we can succeed with OpenAI. But more importantly, at the end of the day, it's our customers and partners who rely on the two of us. Just like how the PC revolution was created by Intel and Microsoft, we hope the OpenAI-Microsoft relationship creates the AI revolution.

A: It's going to come from everywhere. I think that all of our big tech peers have done faster work on all of this. It's fantastic. I mean, therefore, one of the things that I think is understated is competition among big tech players. I think it's very healthy when you have all of the folks competing with each other, which means it's creating a real opportunity for the world to benefit. New entrants, whenever anyone gets excited about the existing incumbents, you have to watch out for new entrants, and Open AI is a great example, after all. OpenAI wouldn't have existed without our support early on, but they are a very credible company today. And we are excited to be able to sort of really play our part in it.

A: It's a great point; in fact, the way I count my time is that this is my 32nd year at Microsoft and my fourth big platform shift. I was lucky enough to be part of the PC client-server, the Web Internet, the mobile cloud and now AI, and this is year two of AI. If anything, I am going back in time to your point of learning from what it was like when year two of the PC revolution, year two of the browser, year two of, say, the cloud, and the lesson I learned is you got to really take the new tech, lean in completely, democratise it, and have innovation. Because, at the end of the day, there is no franchise value in our business. What matters is, long before conventional wisdom, can you make it to the other side and then really create that platform. And that's what I am excited about.