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Microsoft CEO Satya Nadella on the business of Windows

Microsoft wants to make Windows 11 more flexible and open

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Satya Nadella CEO Microsoft
Photo Illustration by Grayson Blackmon / The Verge

We’ve got a special episode of Decoder today — I’m talking to Satya Nadella, the CEO and chairman of Microsoft. Satya’s always been one of my favorite tech execs to talk to, and Microsoft has some big news for us to discuss: it announced Windows 11 yesterday, which comes with an all-new design, a bunch of new features, and the ability to run Android apps.

That’s all wrapped up in some big changes to how apps are distributed on Windows: Microsoft is opening up the Windows app store, allowing developers to put more kinds of apps in the store, and it’s allowing developers to bypass the fees in the store if they want to use their own payment systems.

If you’ve been listening to Decoder, you know there’s a lot of controversy about Apple’s App Store fees and the control it has over developers on its platforms. There are lawsuits, there are bills in Congress, and there are unhappy Europeans. Nadella and Microsoft are explicitly positioning Windows as the opposite, saying it’s more open and that the goal of Windows is to allow other companies to build big businesses and platforms of their own without Microsoft getting in the way. 

If you think that sounds like a pretty intense role reversal for Apple and Microsoft, well, you’re not wrong. Twenty years ago, Microsoft was facing down regulators while the Mac was the more open platform. But I was curious how Nadella felt about it, how he thinks about Windows as a platform and what Microsoft’s responsibilities are, and how he thinks the various antitrust bills in Congress will affect Microsoft’s plans for the future. And I definitely wanted to know about the decision to run Android apps on Windows.

A couple notes: Satya talks about Azure and “the edge” a lot. Azure is one of Microsoft’s cloud computing platforms that competes with Amazon’s AWS and one of its biggest and most important lines of business. And if cloud computing is about computers far away from you in data centers, the edge is about the computers closest to you — like Windows PCs.

Nadella also mentions “aggregators” in the context of the Windows store. He’s talking about places in the user interface where lots of people show up and are directed to the other apps and services they need. This is a reference to Ben Thompson’s aggregation theory, which actually comes up on Decoder all the time.

Other things you’ll hear him say:

  • NUI, which stands for natural user interface, like voice and gestures
  • POSIX, which is a set of operating system standards
  • WSL, which is the part of Windows that lets you run Linux
  • PWAs, which are progressive web apps
  • UWPs, which are Universal Windows Platform apps
  • HoloLens, which is Microsoft’s augmented reality headset
  • Pat, who is Pat Gelsinger, CEO of Intel

This one’s deep. I think you’re going to like it.

The following transcript has been edited for clarity.

Microsoft announced Windows 11 today. There is a lot to talk about, but I want to start with some personal news, as they say. You only recently became the chairman as well as the CEO of Microsoft. What does that actually mean to be the chairman?

The reality is — as you know — when it comes to corporate governance in the United States at least, it’s really the lead independent director who has full authority over all of the people who are part of the management, including me and my compensation and my performan.

Basically they hire and fire me. The independent directors are the folks who have the governance. If anything, the way I interpret any change here is fundamentally how do we bring the management team and the board together around what is Microsoft’s purpose [and] strategy? How do we hold ourselves accountable as a team?

So orchestrating it, as somebody best described it to me — maybe I should attend more meetings, or more committee meetings. But I think of this as just a natural outgrowth of what I’ve been doing for the last seven years. There’s no real change, quite frankly, around the rigor of corporate governance and who has truly got the hire and fire authority on the CEO. And that’s the independent directors of the Microsoft board.

You led right into my next question, which is — who’s your boss? To whom are you most accountable?

To the board of directors and the lead independent director in some sense, if you think about it. If your boss is defined as the person who ultimately can hold you accountable, it’s the independent directors of the Microsoft board.

I ask every executive who comes on Decoder this question: what is your decision-making framework? Microsoft is a vast business. You have multiple lines of business, multiple billion-plus-dollar lines of business. How do you make decisions?

I try to simplify this. Maybe you and I’ve talked about this in the past — I’ve had this framework which I’ve been consistent with ever since I became CEO.

It starts with mission, it ends with culture, and in between [there is] what’s our worldview, what’s our strategy. I think of the things that are constant as that sense of purpose and mission and culture, and the things that are temporal are worldviews and strategies.

To your point about the decision-making framework: anything we do has to be aligned with that first question, which is: is this something that makes sense given who we are as a company? And more importantly, if we go about doing that, does it add unique value in the world? Is that something that both differentiates us competitively and is that something that’s useful for people? That’s, to me, the most helpful way to [run] the businesses we are in.

When we say “what does the CEO do?” They have to pick and choose which businesses you’re in. Then they have to set standards on what cultural values are expressed internally as experienced in the lived experience. And so those are the two things I try to go back to all the time.

Let’s talk about a big decision. Several years ago, you and I were talking and you said, “Windows, we could just rename it Azure Edge, if people would let us. It’s just an extension of our big business, which is Azure. We’re in a mobile-first, cloud-first world.”

In 2019, I think you had said to Wired, “The operating system is no longer the most important layer for us.” But today, Windows 11 was announced. I listened to you and Panos Panay, who’s the chief product officer at Microsoft, discuss how the pandemic really refocused your attention on Windows and what it could be.

Tell me about that process, because it does feel like a big shift.

All of those statements that you said I’ve made earlier are all still true because Windows doesn’t live in isolation. Windows lives in a world where there is a lot of cloud computing.

There are multiple cloud providers and a lot of cloud computing. So anything that is a client operating system ultimately does rendezvous with cloud computing. In that sense, technically and business-model-wise and usage and experience-wise, it’s the cloud and the edge.

The billion-plus users of Windows, for sure, we think of from a distributed computing architecture perspective as the edge of Azure. And you could even say the Windows folks would look at Azure as the cloud for Windows. So that’s, I think, absolutely right.

The other point is it also lives in an ecosystem. Let’s say Windows has a billion users. So does Android. So does iOS. In fact, Android and iOS will have more than a billion users perhaps, or maybe Android has 2 billion, [and] maybe iOS is similar to Windows size or what have you. But the reality is any Windows user — we have to start with the assumption that they have a phone and that phone may be Android and iOS and we have to design for it.

I do think that operating systems are important, but they’re important in so far as they compose with everything else that’s part of my life, whether it’s other devices with other operating systems, [or] whether it is clouds that I use, which are powering some of the applications and experiences.

It’s a practical reality, really. Let’s meet Windows users where they are, and meet their current needs and unmet, unarticulated needs.

You don’t think that the pandemic pushed Windows in a different direction? That was very much the sense that I got. Everyone is working from home, everyone is staring at a Windows laptop for many more hours of a day than they might have been previously.

Absolutely. There is no question about that.

What happened in the pandemic, even for me — I didn’t have a home office. Suddenly, I found myself [saying], “Oh my God, not only do I need a home office. I have all my girls home and they need all their own independent PCs.” Without the PC, we wouldn’t be able to do remote education, remote work, telemedicine visits. It became mission critical.

All screens in life matter. So that realization that larger screens on which Windows runs are super important, because not all tasks can be done on a mobile device, became abundantly clear. We came out of the pandemic with — I would say — a renewed sense of why we need to do some of our very best work in serving [the] customers we have today.

That’s why I think about improvements to Windows Update. I want to celebrate that as much as any feature because it’s important. It matters to our users. They tell me in my inbox loud and clear every day about what all I should be doing with Windows Update, and I take that seriously now.

I like the idea that you were at home and your family was at home and suddenly Windows Update got real for you, too. My team is always telling me that whenever it’s about me, it becomes much more important. Was there any of that going on?

Oh, for sure. Although I’ll have to admit that the people inside the company are a lot more responsible than waiting for a CEO to have a personal experience. We have better systems, better accountability [than that].

But that said, if I go back to your decision-making framework [question], I think I have a better appreciation coming out of this pandemic about Windows’ role in the world. As an ecosystem, as an operating system — what should we do so that we are serving the current customers and their expectations? Windows Update being one [example]. And also, what should its innovation vector be given where the world is going?

That brings me to some of the big changes in Windows, which are fundamentally about what kind of operating system Windows is going to be and what kind of businesses you can run on it and what kind of business will that be for Microsoft.

There is a new user interface. The Start button is in the center of the screen. There’s cosmetic differences. But you’re also allowing Android apps to run on Windows. You are integrating the Amazon Android app store. You’ve made some changes to the store economics. You’ve reduced Microsoft’s cut to 15 percent. That’s in comparison to the very controversial 30 percent that Apple charges.

Then you’re saying to developers, “You can be in our store and you can not pay us a cut at all if you want to use your own payment model.” How much of that is opportunistic changes — you’re seeing all the controversy and you sense a market opportunity? And how much of it is this being the correct way to shift your business?

I think it’s driven by competition. What I mean by that is – what should Microsoft do to manage the platform and the platform rules such that we can thrive in that role?

The way I’ve interpreted what platforms do is: they have to create opportunity for people who build on the platform.

That’s the way to keep a platform relevant. If you’re creating a great opportunity for others to be born on your platform and scale on your platform — that’s the Microsoft I grew up in. That’s the Windows I grew up with. Whether it is the Adobe folks creating their Creative Cloud or SAP building their ERP [enterprise resource planning] business. Or in today’s world, whether it’s Discord building their community for gamers on Windows or any other business.

To me, how do we make Windows more vibrant going forward?

Platforms and aggregators don’t need to be governed by the same rules

I sense a real opportunity, because the other two ecosystems that are at scale, for their own internally consistent set of reasons, have conflated — at least in my mind — the platform and the aggregation layer with one set of rules. There’s no reason why there should be one set of rules. They can be disaggregated.

After all, we do have a store. We do have commerce. You can use it all or you can bring your own. That’s [a] practical thing for Microsoft to do.

I’m not even trying to make some value statement that Microsoft is virtuous here and others are not. Others have chosen it for whatever reasons they have. This is a design choice and a business model choice. I want to make our own set of design and business model choices so that creators find more choice.

That’s competition. I go back and say, “It’s time to compete.”

You mentioned the other two platforms at scale. That’s obviously iOS and Android. Then you mentioned the internally consistent reasons for their decisions. Apple has been pretty clear about its internally consistent reasons for saying the store extends across its entire platform. The loudest reason is that this is how Apple pays for giving the software away for free. Everybody gets iOS updates for free over the life of their phone, [and] the phones last a long time. To pay for all of that innovation, and software, and security updates, and all those things, Apples takes a cut of what happens in the store. That’s Apple’s business model.

You also give Windows away. If I have a newer PC, I’m just going to be able to update to Windows 11 for free. How do you pay for those updates if you’re not going to take a cut of everything?

We have different business models. In many cases, we have subscriptions. We also have OEM royalties. Apple obviously has device gross margin. I think everyone ultimately has to have a business model that allows [them] to pay for what they do. I think it’s just a question of, where are you monetizing and what are then the rules on which fundamentally others can monetize? They have to be long-term stable.

In our case at Microsoft, I’ve always felt that, at least the definition of a platform is: if something bigger than the platform can’t be born, then it’s not a platform.

The web, it grew up on Windows. Think about it. If we said, “All of commerce is only mediated through us,” Amazon couldn’t exist, if we had somehow said, “We’re going to have our own commerce model.”

Flexibility could be Microsoft’s competitive advantage

Therefore I think each company has to choose and see what aggregation layer, what platform layer, [and] what rules work for them and their ecosystem. But, in our case, it’s very clear to us that we do want to solve for the same security issues, [and] discoverability issues, because that’s one of the reasons why we’re emphasizing the store.

At the same time, the store can be used at different levels by different creators. We want to have that flexibility be a competitive differentiation.

You mentioned rules. Let’s say I’m VP of The Verge at Microsoft. My goal for the year is to increase Verge signups by 30 percent. The easiest way for me to do that is to go to the Windows team and say, “Every time you open Windows, show people The Verge. Push them towards a signup to The Verge.” This is a pressure that every operating system feels. Windows has certainly felt this push and pull. The Edge team wants Edge to be the default browser in Windows.

How do you balance that internal pressure against wanting to be an open platform where competitors can succeed against Microsoft’s own products?

There are two different things. One, you curating a set of experiences that work well with each other, and then allowing for someone else to curate an experience that perhaps is a substitute to something. [Do] you allow that only through your store or other rules, or is that something that can happen independent of you?

Take the browser, which is at this point pretty foundational. We, of course, have a browser. It is default. But you don’t need to go to Microsoft. You can go to Google and download their browser, or you can go to Firefox and download their browser. In some sense, [that’s the] ability to have both agency as a consumer to directly choose, and at the same time, preserving our right to curate and, quite frankly, the right of others to curate as well.

We want to be a platform for platform creators, not just a platform for other people’s apps. That’s the subtle difference we want to call up, which is: I want us to do a great job of being a platform. That means all the things platforms do. We’ll have a store. We’ll have our own defaults. We will curate stuff. But if somebody else can come in and create lots of value on our platform and use it as the base infrastructure, [at the] OS level, so be it — including the store.

By the way, that’s how we run our cloud. It’s not like this is that different to us. We have layers in the cloud from the applications all the way to infrastructure. Different application vendors and companies use it in different ways.

It’s funny that you brought up browsers. Microsoft famously fought an antitrust battle about bundling the browser with Windows and setting it as the default. It feels like the rules of the road there are a little bit clearer. There is a lot of history about browser defaults in Windows. What about places where it’s less clear? Do you have internal rules? Do you have a culture that says, “Okay. We can set a default, but the Windows team needs to build the hooks for other platforms and other services to be defaults”?

Absolutely. There is no question. But, first of all, whatever we learned out of our case in the ‘90s means that you just need to be an open platform. There are certain things that are built into the operating system. If there are things that are independent of the operating system, then others can absolutely substitute without compromising the integrity of the system.

Even communications — whether it’s Slack, or Zoom, or anything else — [they] can be first class on Windows. In some sense, we don’t have that restriction that other people’s software in its full glory cannot be available on Windows. We do have distribution advantages, but that doesn’t mean that other people don’t have their own distribution advantages. For me, whenever I visit some Google site, they’re very clear about their distribution advantage, even on a Windows PC. There is just no way to escape that, and that’s okay.

How many Google sites do you visit in a day?

Probably YouTube, I think, is the one that most often comes up on my Bing search.

Speaking of Google — you are bringing Windows closer to Android. That’s been going on for some time. One of the biggest announcements of Windows 11 is that Android apps will run directly on Windows. What were the pros and cons of that decision?

Interestingly enough, the Windows architecture’s always had this. You can have multiple personalities in Windows. In fact, I remember when I first started at Microsoft, I was evangelizing the POSIX interface on top of Windows NT. And now one of the favorite features of Windows for me is WSL. I love it. The new terminal, and the fact that now we even support the full Linux UI on Windows. Linux is now first class on Windows, and Android is just another subsystem. Now we can support these multiple personalities.

The decision for us was — what’s the best way to both allow for more applications to be available to our users? How can we add value to the 1.3 billion [Windows] users who may want more applications? That’s one side of it.

The other side of it is to create more opportunity for people who have built Android apps by exposing them to this billion-plus user base. I think that both sides benefit from this, and it was a fairly straightforward decision to go enable that. And now it’s going to be driven by what is the adoption, what are the use cases, what apps do they want to use that are Android on Windows versus PWAs versus UWPs and what have you. We are going to take that approach, where we welcome all apps.

What was the best argument you heard against it?

I think always the argument will be, “do we have to have a consistent app model?”

Because if you think about innovation — is there is some kind of NUI or even an AI chip that we want to light up? How can the APIs of that be lit up in such a way that this application can take advantage of it? When you have multiple subsystems and multiple app models, can you surface your platform system-level innovation such that all apps light up?

Thatis going to be the fundamental challenge in such a world, but we feel that there are ways. One of the ways I look at this is you can light an Android app or a PWA app or a UWP app on Windows in the future, or even today, for some of the new AI APIs.

At Microsoft we build for iOS, we build for Android, we build for Windows. That’s one of [our] fundamental challenges. We’re trying to make sure that as developers, we can leverage as much of the common code base, as much of the cloud, but at the same time, be native on each platform.

Android apps now run on Android, they run on Chrome OS, they’re going to run on Windows. Do you see them becoming sort of the lowest common denominator application environment for a developer that just wants to hit everything, without some of those opportunities that native development brings?

I think whether it is the web or Android, [it] gets you to multiple places faster, and then you optimize on those platforms based on what your users tell you, because the last thing anybody wants is an app that’s there, but nobody’s using, or nobody’s liking. Therefore, ultimately, it has to be competitive.

We’ve covered [Android apps on ChromeOS] a lot. It’s not great. What’s going to make this great?

I’m mostly interested in seeing what app developers start doing once they have traction on Windows with an Android app. Are they then going to extend it to take advantage of some native capability? Is just the system-level work we have done, with all of the things that it inherits, going to make it possible?

How do I get, let’s say, The New York Times app or The Wall Street Journal app , and then see it alongside, say, some PWA app? [With] all of the windowing work, it works beautifully. Now the question is, what is the experience for the users? And they’ll vote with their clicks.

You’re a partner with Amazon to distribute Amazon apps. You said at the event other Android app stores are welcome to participate in delivering to Windows. The Amazon Appstore right now is pretty focused on Amazon’s own Fire tablets and products.

It’s... fine. I would not call it great. It certainly doesn’t have the volume that the Google Play Store has for Android apps. Are you expecting that it’s going to get better? Do you think it’s good enough now? Tell me about that partnership.

I think it’s a good place for us to start, and I hope that more developers even look at Amazon Appstore as a way to go reach more users. I’m hoping that benefits them and us. And as I said, if this works, I would hope that even Google will take a look at it, right? If they feel like this is a way that they can increase the usage of Android apps, we’ll welcome any other app store.

And, of course, there are parts of the world where already there are many substitutes to the Android app store, which [are] even bigger than the Google app store. And so we’ll see what happens in that dynamic as well.

You’re passing through Amazon’s app terms. You’re not getting in the way of that relationship. It’s their store. If Google shows up, they would have their store and their own economics. Would you then expect the terms there to be competitive? Are they going to fight for developers?

That’s actually a fascinating question. That’s the thing, right? The world has not seen that — other than perhaps on Windows, where you have Steam and now you have Epic. You have our store. There are multiple marketplaces and there should be competition in marketplaces.

It’s kind of like there are multiple operating systems, and on any given operating system, if there are multiple marketplaces that are all vibrant and competing, how will it look? You’ve seen it in gaming on Windows. I’m hoping now we’ll see it at scale on all categories.

You’re taking Microsoft’s app store cut down to 15 percent. It’s 85 / 15. What do you provide developers for that 15 percent? What’s your argument that developers should pay Microsoft the money and not roll their own [payment systems]?

It’s the discovery. It’s the app verification. It’s all of the things that one expects in an app store today that gives you the peace of mind that somebody is going to curate the apps, look at the security of the apps, and then make it easy for you to find the apps you want. Then, of course, the commerce capabilities. And there’s real costs associated with all of that.

We don’t think of the app store as an independent business. It’s sort of a utility that increases the value of the operating system at this point. App stores very much need to be part of operating systems at this point. We don’t at all disagree with that. It’s just a question of — should there be competition and flexibility? And even there, we just have our rules. Other platforms may have other rules, and users will choose.

As you and I are talking, there are antitrust bills in Congress being debated right now about digital marketplaces. Some of them are very targeted toward the Apple and Google ecosystems. Others are targeting other parts of the tech stack. Do you think Microsoft is going to come under fire for the things it does with Azure or the things it does in Windows?

Whatever rules they come up with will apply to everybody who is an industry participant. So very much so, Microsoft will be part and parcel.

The question is what ultimately passes into law. And then, we look at where Microsoft is in relation to all of that. I think that if you step all the way back, digital technology comes in these two flavors. There is this flavor — I’ll call it a factor of production, that it’s an input to somebody else’s creation. And there’s another flavor where I’ll call it factor of distribution, for lack of a better word, where it’s about matching supply and demand.

An operating system is actually an input to somebody else’s creation. An app store is more a distribution capability. You blend the two and set up rules that then have their own second-order effects around what’s happening with the competitive ecosystems around you. So I think that’s where people are going to look at it from a legislative perspective and say, “Hey, what set of rules allow for the most amount of surplus to get created in the broader economy?” And that’s a good thing.

I think competition has always been the best thing that helps capitalism move forward, and we will be subject to the same set of rules that everybody else will be.

You mentioned ecosystems, and I want to ask you about the broader ecosystem that Microsoft plays in. Most people do not experience Windows on Microsoft hardware. The Surface products are great, but most people experience Windows on other companies’ laptops with other companies’ chips in them. Some parts of that ecosystem are doing great. Some parts are lagging behind.

I’m curious where you see the Intel relationship and their roadmap versus all of the things you might want to do with custom AI hardware and the other features you’ve discussed.

First of all, to us, the Intel relationship is pretty critical, and we’re excited about Pat [Gelsinger, Intel’s new CEO] and his team and their innovation roadmap, and we will definitely deeply be partnered with them, and so will we with AMD and Qualcomm.

One example: the PC has always stood for that very broad design surface area in terms of what could one do, whether it’s silicon innovation, board-level innovation, ASICs, the way they can get assembled, what Nvidia has done with GPUs. That is what led us to build amazing gaming PCs, amazing laptops, desktops, what have you.

I think in the next 10 years, when we look at it — what is the system on package that Pat likes to talk about? I’m very excited about it. What is going to be the level of innovation that’s going to come about that will allow us to rethink the operating system, lighting up on that, and then there to be vibrant competition and innovation? I look at Intel innovating, Qualcomm innovating, AMB innovating, and Nvidia innovating, and say, “I want to do a great job of bringing all that innovation to life through Windows, and then surfacing it to developers.” You bring your UWP, you bring your PWA, you bring your Android app, use Windows to light up on that silicon innovation.

That’s the opportunity I see. And our OEMs at Dell and HP and Lenovo are excited about that.

Last question. You currently make one Android phone, the Surface Duo. Are you going to make more?

I want to build out experiences that are always pushing the form function. I like the way you said it directly. [laughs]

I don’t think of [Surface Duo] as a substitute to the phone. Even though sometimes I dream about it as a phone, it’s not a phone. It does have phone functionality, but we wouldn’t have built it if what we were trying to do was a phone. We were trying to see what’s next.

I love it because it absolutely is my notebook. It’s that Moleskine that I carry around with me everywhere. I do use it as a phone, but that’s unique. That’s not the use case. But my god, do I love reading Kindle on one screen and taking OneNote notes. That’s kind of my killer app. We built it for that. And I want to keep innovating on that. Whether it’s HoloLens and what happens in the future there, or Duo and what happens in the future, I want us to take shots on goal, on changes in form and function.

Decoder with Nilay Patel /

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