The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:09:02 · Satya Nadella
[00:09:02] S0: you think? It's a great question. I I, I think it depends on what the frontier looks like, which is I think most things seem to get saturated. And when it gets saturated, open weights or even just cheaper models of even closed weights seems to work. Because especially one of the things is if you can train on your own traces, then you really don't need the latest model to be able to solve that same problem if the problem has not changed. So if you have an eval that you want to continuously keep moving forward, then you may want to pay. But even there, by the way, I'm very thrilled about this Hydro Fusion stuff we now have in GitHub where... I just saw this. Yeah, because the cool thing there is it's a learned model. Anyway, we are now going into these agent swarms and multiple sub agents. So I can call a lot of sub agents that even happen to be local models. And so I think my suspicion is that there will always be a market for Frontier. There will always be some new thing. Science may be the next thing that Frontier is being set at. But I think predominantly token usage will be commodity token usage. Does that mean it's open source predominantly? It be open rates. Or as I said, it can also be cheap to close rates, right? Because there will be lots of price competition, let me put it that way. Because if you look at my own usage inside of Copilot, we use a lot of closed source, cheaper models along with open rate models.
00:10:28 · Harry Stebbings
[00:10:28] S1: You said about kind of the importance of owning your own intelligence for some of your amazing customers that you have. You were talking about some in The UK. Is that the model environment that we have moving forward, intelligence for companies with their own data?
00:10:40 · Satya Nadella
[00:10:40] S0: Yeah. So I think this is, to me, one of the most important things, which is what's the future of a firm in an era of intelligence? Because if you go back even to Hayek, his fundamental description of an economy is local intelligence. Tacit knowledge is distributed throughout the economy. Without that, there can't be only one firm and it can't be one intelligence. And so, that's sort of the foundational thing. In fact, capitalism works because of that. Price discovery works because of that. Or pricing mechanism works because of that. So, therefore, I think it'll be important for every firm to be able to accumulate knowledge at increasing scales using AI versus leak. That's why I called it the reverse information paradox, right, which is Kenneth Arrow kind of described this paradox of information where if you're a seller and you disclose the secret without a patent or a trade secret protection or copyright protection, you leak the value. Now, for the first time, the buyer needs the protection because the buyer, even most people think of it as, Oh, my data. It's even my exhaust of using it, right? Thumbs up, thumbs down signal. You're creating value for the model company versus capturing that value for yourself. So I think one of the things that at least I ascribe is that we need to have, for this to be stable, more of that surplus that gets created by use of intelligence to remain at the firm. And by the way, it doesn't need to be only by embedding your knowledge in weight. It can be in context. It can be in your evals, right? You may have a benchmark. In fact, one of the things that I'm very gung ho about is we all become, every firm will have a private eval benchmark, which is their core IP, and every model comes in and tries to sort of hill climb on that eval. And that, to
00:12:31 · Harry Stebbings, Satya Nadella
[00:12:31] S1: me, is how a firm works. I love this private eval's benchmarks for each company. This is for a rarified air of companies, so it would seem. Your Harvey's or your Lagoras or the kind of very forward thinking AI companies. Will that disperse to every company in the world you mentioned? [00:12:47] S0: It happens. Yeah. It happens, Harry, always. Right? Which is, you know, there were... There was a day when remember in the late '80s and the early '90s that the few companies that had deployed PCs and were doing forecasting, which felt magical, they were able to put it in Excel, spreadsheets, send it in email, and avoid the fax machine and interoffice memos. And it felt like, Oh, wow, when will this happen? And it took ten years maybe, and it spread all throughout. This time around, what is considered, Oh, I'm an AI native company and I do this, I think five years from now, it'll be pretty passe, I would imagine. And then that's kind of what... I mean, these tech cycles always start like that, right? Which is even cloud. Remember in the beginning of cloud, it was like the big deal was, oh, who's cloud native and who's not? And you know, if you're not cloud native... And now everybody is. Right? Even Lloyd's, you know, which is, what, 500 years old, is cloud native. And so it happens. Do we move into
00:12:47 · Satya Nadella, Harry Stebbings
[00:12:47] S0: It happens. Yeah. It happens, Harry, always. Right? Which is, you know, there were... There was a day when remember in the late '80s and the early '90s that the few companies that had deployed PCs and were doing forecasting, which felt magical, they were able to put it in Excel, spreadsheets, send it in email, and avoid the fax machine and interoffice memos. And it felt like, Oh, wow, when will this happen? And it took ten years maybe, and it spread all throughout. This time around, what is considered, Oh, I'm an AI native company and I do this, I think five years from now, it'll be pretty passe, I would imagine. And then that's kind of what... I mean, these tech cycles always start like that, right? Which is even cloud. Remember in the beginning of cloud, it was like the big deal was, oh, who's cloud native and who's not? And you know, if you're not cloud native... And now everybody is. Right? Even Lloyd's, you know, which is, what, 500 years old, is cloud native. And so it happens. Do we move into [00:13:40] S1: an implementation economy then? Because when we think about these customers, say, as you said, some of you are very big customers, they will need heavy FTE support much more so than they have done in traditional years or in the last ten years. Will we have a very heavy implementation economy to transition existing customers into this?
00:13:40 · Harry Stebbings, Satya Nadella
[00:13:40] S1: an implementation economy then? Because when we think about these customers, say, as you said, some of you are very big customers, they will need heavy FTE support much more so than they have done in traditional years or in the last ten years. Will we have a very heavy implementation economy to transition existing customers into this? [00:13:58] S0: It's interesting, right? The implementation economy, like systems integrators have always existed, right? We've depended on implementation economy for lots of other technology diffusion. So this one, I think, has different contours, right? Because- do [00:14:13] S1: think is different about this one?