Good morning,
On last Thursday’s Sharp Tech we covered a big week in AI — and that was before the Microsoft announcements, which I’m writing about below (and which we covered in the episode that will come out later today). We also discussed Meta’s latest round of layoffs and the “Year of Efficiency.”
Over on Sharp China Andrew and Bill discussed China’s involvement in the reestablishment of relations between Saudi Arabia and Iran, Australia’s submarines, and Xi Jinping’s father.
You can listen to these episodes at the above links, or add both podcasts to your podcast player using the links at the bottom of this email.
On to the update:
Microsoft Office AI
From Bloomberg:
Microsoft Corp.’s effort to overhaul its entire lineup with OpenAI technology has spread to one of the company’s oldest and best-known products: its Office apps. The software, including Excel, PowerPoint, Outlook and Word, will begin using OpenAI’s new GPT-4 artificial intelligence platform, Microsoft said on Thursday. AI-powered assistants called Copilots will be able to generate whole documents, emails and slide decks from knowledge the software has gained scanning corporate files and listening to conference calls. The technology will debut in the coming months, and Microsoft is already testing it with 20 companies, including eight in the Fortune 500 that it declined to name.
You can watch the Microsoft event — which came in at a tidy 36 minutes — over on YouTube (the event itself was streamed on LinkedIn — strategy taxes for the win!). I thought it was very compelling — and the grandiosity of Satya Nadella’s introduction was striking.
We are here today to talk about something that’s very fundamental to the human experience, the way we work. Most specifically, the way we work with computers. In fact, we’ve been on this continuous journey towards human-computer symbiosis for several decades. Starting with Vannevar Bush’s vision that he outlined in his seminal 1945 essay, As We May Think. Bush envisioned of futuristic device called Memex that would collect knowledge, make it easy for humans to retrieve that knowledge with exceeding speed and flexibility. It’s fascinating to see that someone postulated even back then so vividly what an intuitive relationship between humans and computing could be.
Since then, there have been several moments that have brought us closer to that vision. In 1968, Douglas Englebart, Mother of All Demos, showed the remarkable potential of graphical user interface, including things like multiple windows, pointing and clicking with the mouse, word processing that is full screen, hypertext, video conferencing to just name a few. Later, the team at Xerox PARC made computing personal and practical with Alto that ushered in the personal computing era. Then, of course, came the web, the browser, and then the iPhone. Each of these seminal moments has brought us one step closer to a more symbiotic relationship between humans and computing.
It is certainly an attestation of Microsoft’s confidence and Nadella’s overhaul of company culture that he has no problem citing the iPhone as a momentous moment in computing history; the iPhone angle that was more striking to me, though, was how Nadella’s framing reminded me of Jobs’ framing of the iPhone. Jobs, you may recall, talked about the introduction of the Macintosh and how it changed the computer industry, and the iPod, and how it just didn’t change how people listened to music, but changed the music industry; only then did he announce that Apple was introducing three new products of that class, which were, of course, three different ways to describe the iPhone (a touchscreen iPod, a revolutionary mobile phone, and a breakthrough Internet communications device). The point was to underlie the historical significance of what Apple was announcing — and needless to say, Jobs was right.
Still, this is mere Office software. Doesn’t this all seem overwrought?
Copilot and Tech’s Two Philosophies
A few years ago I wrote about Tech’s Two Philosophies. The context was Google’s 2018 I/O keynote, which was focused on AI. I wrote in the introduction:
In Google’s view, computers help you get things done — and save you time — by doing things for you. Duplex was the most impressive example — a computer talking on the phone for you — but the general concept applied to many of Google’s other demonstrations, particularly those predicated on AI: Google Photos will not only sort and tag your photos, but now propose specific edits; Google News will find your news for you, and Maps will find you new restaurants and shops in your neighborhood. And, appropriately enough, the keynote closed with a presentation from Waymo, which will drive you.
I set this view of AI, espoused by Google and Facebook, in contrast to the vision of computing espoused by Microsoft and Apple; here my anchor was Microsoft’s 2018 Build keynote:
Earlier this week, while delivering Microsoft’s Build conference keynote, CEO Satya Nadella struck a very different tone; after describing how computing was becoming invisible, because it is everywhere, Nadella said:
That’s the opportunity that we have. It’s in some sense endless, but we also have responsibility. We have the responsibility to ensure that these technologies are empowering everyone, these technologies are creating equitable growth by ensuring that every industry is able to grow and create employment. But we also have a responsibility as a tech industry to build trust in technology.
In fact Hans Jonas was a philosopher who worked in the 50s, 60s, and he wrote a paper on technology and responsibility…he talks about act so that the effects of your action are compatible with permanence or genuine life. That’s something that we need to reflect on, because he was talking about the power of technology being such that it far outstrips our ability to completely control it, especially its impact even on future generations. And so we need to develop a set of principles that guide the choices we make because the choices we make is what’s going to define the future…
This opportunity and responsibility is what grounds us in our mission to empower every person and every organization on the planet to achieve more. We’re focused on building technology so that we can empower others to build more technology. We’ve aligned our mission, the products we build, our business model, so that your success is what leads to our success. There’s got to be complete alignment.
This is technology’s second philosophy, and it is orthogonal to the other: the expectation is not that the computer does your work for you, but rather that the computer enables you to do your work better and more efficiently. And, with this philosophy, comes a different take on responsibility. Pichai, in the opening of Google’s keynote, acknowledged that “we feel a deep sense of responsibility to get this right”, but inherent in that statement is the centrality of Google generally and the direct culpability of its managers. Nadella, on the other hand, insists that responsibility lies with the tech industry collectively, and all of us who seek to leverage it individually.
This is exactly how Nadella framed Microsoft’s new Copilots, the excellent brand name they extended from GitHub Copilot:
Today we are at the start of a new era of computing and another step on this journey. Over the past few months, powerful new foundation models together with accessible natural language interface has ushered in an exciting new face of AI. This next generation of AI is fundamentally different from the AI that we’ve grown accustomed to around us. For years, AI has in fact powered online experiences ranging from search to social media, working behind the scenes to serve up recommendations for us or about us. From what we watched to what websites we visit to what we buy, that version of AI has become so second nature in our digital lives that we often don’t even realize or recognize it.
You could say we’ve been using AI on autopilot, and now this next generation of AI, we’re moving from autopilot to copilot. We’re already starting to see what these new copilots can unlock for software developers, for business processes like sales, marketing, and customer service, and for millions of people synthesizing information in powerful new ways through multi-turn conversational search. As we build this next generation of AI, we made a conscious design choice to put human agency both at a premium and at the center of the product. For the first time we have the access to AI that is as empowering as it is powerful.
All of the demos throughout the presentation reinforced this point: the copilots were there to help, not to do — even if they were in fact doing a whole bunch of the work. Still, I think the framing was effective: it made it very clear why these copilots would be beneficial, demonstrated that Microsoft’s implementation would be additive not distracting, and, critically, gave Microsoft an opening to emphasize the necessity of reviewing and editing. In fact, one of the most clever demos was Microsoft showing the AI making a mistake and the person doing the demo catching and fixing the mistake while reviewing the work.
Still, were Office apps worth the grandiosity of the introduction? I think yes; in fact, I would go further and argue that this was the most impressive AI demo to-date precisely because the application space was so obvious. Every single knowledge worker has had to write out a report or an email or a speech from a list of bullet points, or generate a presentation from a report, or do scenario modeling in Excel. It’s not complicated stuff, but it does take time, and is busywork; now that busywork can be done by the world’s most attentive intern, available with simply the click of a button and a natural language prompt.
To put it another way, there wasn’t anything surprising or special here — beyond, of course, the incredible capability of GPT-4. That, though, is why the demo was so compelling: this was a tangible example of how AI can make a difference in a billion people’s lives this year (or whenever it officially ships). And, by extension, there is an obvious alignment with Microsoft’s business model: these actions cost money — some of the work was done on smaller, more efficient models, and larger more expensive models were only triggered by a further command asking for more refinement or concision — but Office is already available as part of a subscription, with different pricing plans and add-ons; it probably makes sense for Copilot to be an add-on, both covering the marginal cost of providing the service and increasing Microsoft 365’s ARPU.
Business Chat and Appropriate Fear
The final feature Microsoft unveiled was Business Chat; from The Verge:
One of the new Copilot AI features coming to Microsoft 365 apps and services is dubbed Business Chat. It’s a chatbot experience that’s able to summarize information pulled from meeting transcripts, recent contacts with customers, entries in your calendar, and more that you can plug into emails for the team or as slides in a presentation. According to Microsoft, by using grounding to focus the AI on your business’ trove of data, it can create relevant, accurate responses to natural language prompts, like “Did anything happen yesterday with [customer X]?” The bot is accessible from Microsoft365.com, Bing when signed in with a work account, or via Microsoft Teams.
Back in the 1990s Silicon Valley was terrified of Microsoft; then, over the intervening years, that fear faded, and Microsoft became yesterday’s news at best, and the punchline of jokes at worse. Obviously the company has completely turned around its fortunes over the last decade, but even then the primary source of growth has been Microsoft’s ability to bring its pre-existing customer base to the cloud.
There have been other intrusions into Silicon Valley consciousness, of course, particularly when a seemingly unstoppable startup ran into the Microsoft distribution advantage wall, but few people in Silicon Valley use Microsoft products, and that’s that. Indeed, the response of several folks I talked to after Microsoft’s demo was “what demo?”
I think this is a massive mistake: Silicon Valley needs to rediscover its Microsoft fear, and Business Chat gets at why. Make no mistake, the Copilots are impressive, although it is reasonable to expect that Google Workspace’s implementation will be at least comparable. The problem with the Workspace + vertical SaaS app stack, though, is that none of it is designed to work together. I’ve been arguing for years this is an underrated reasons why Teams beat Slack; from 2020:
This is where Teams thrives: if you fully commit to the Microsoft ecosystem, one app combines your contacts, conversations, phone calls, access to files, 3rd-party applications, in a way that “just works”…This is what Slack — and Silicon Valley, generally — failed to understand about Microsoft’s competitive advantage: the company doesn’t win just because it bundles, or because it has a superior ground game. By virtue of doing everything, even if mediocrely, the company is providing a whole that is greater than the sum of its parts, particularly for the non-tech workers that are in fact most of the market. Slack may have infused its chat client with love, but chatting is a means to an end, and Microsoft often seems like the only enterprise company that understands that.
Business Chat takes this integration advantage and combines it with a far more compelling UI: you can simply ask for information about any project or customer or whatever else you can think of, and Business Chat can find whatever is relevant and give you an answer (with citations) — as long as the content in question is in the so-called “Microsoft Graph”. That right there is the threat: it’s easy to see how this demo will impress CIO’s eager to save money both in terms of productivity and also software; now Microsoft can emphasize that the results will be that much better the more Microsoft tools you use, from CRM to note-taking to communications (and to the extent that they open up Business Chat, it will be the responsibility of any vertical SaaS company to fit into the box Microsoft provides them).
In short, Microsoft has always had the vision for integration of business software; only over the last few years has it actually had an implementation that made sense in the cloud. Now, though, Microsoft has an actual reason-to-switch that is very tangible and that no one, other than Google, can potentially compete with — and even if Google actually ships something, the last decade of neglect in terms of building an alternative to the Microsoft Graph concept means that any competitor to Business Chat will be significantly behind.
More broadly, it continues to be striking how quickly Microsoft is moving: of course these features have been under development for a long time, but a lot of people in Silicon Valley thought that Microsoft would bail after the initial Bing Chat controversies and inaccuracies. In fact, Microsoft has doubled down — Bing Chat is now available to everyone — and has learned from the Bing launch, including by leaning into how large language models can get things wrong.
This, in turn, takes me back to Nadella’s opening: Microsoft believes they are changing the world, and is operating accordingly, and only old people like me seem to remember what that means for anyone in their path.
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