With 5 Words, Microsoft CEO Satya Nadella Made a Stunning Admission. It’s a Lesson in Leadership

On Monday, Microsoft CEO Satya Nadella took the stand in the ongoing Justice Department antitrust case against Google. In more than three-and-a-half hours of questioning, Nadella explained in detail how and why Google Search has an insurmountable advantage over Bing and other competing search engines–and why it’s actually better.

He did something CEOs almost never do: He acknowledged weaknesses in his company’s products, and strengths in his competitors’. Over and over, when Google’s lawyer John Schmidtlein argued that Microsoft’s products were just not as good as Google’s, Nadella resisted what must have been a powerful impulse to fight back and defend Microsoft’s offerings. Instead, he mostly responded “Correct,” or “Sounds right,” when Schmidtlein described the many product mistakes Microsoft had made over the years. 

Schmidtlein pointed out that Google Chrome is the dominant browser on Windows computers–even though they come with Microsoft’s browser preinstalled. “Microsoft was caught sleeping when Google introduced Chrome, which was a far superior browser,” Schmidtlein said. Nadella seemed to nod, according to reporters who were there. “Google did a good job of innovating in the browser,” he said.

Google did a good job. How many times have you heard a CEO, never mind one who leads a huge and influential company, admit that a competitor did a good job with one of its products–a better job than his own company did?

A lesson in leadership and emotional intelligence

Nadella’s testimony is a lesson in leadership, emotional intelligence, and self-control. By refusing to use up time and the judge’s attention defending the quality of Microsoft products, he kept the focus on the question at hand: Whether Google’s agreements with mobile providers to be the default search engine on their devices create an unfair advantage no competitor can overcome–the allegation that the Justice Department is trying to prove against Google. (It’s a delicious irony, because in its last major tech antitrust suit, back in the 1990s, the government made a similar argument about Microsoft preinstalling its own browser on Windows computers.)

To support the government’s argument, Nadella acknowledged not only that Bing has a tiny market share–at about 3 percent, it’s Google’s closest competitor–but also that Google Search truly is a better product, because its dominance in search is basically self-reinforcing. The more searches go through a search engine, the more data that search engine has, and the better it becomes at guessing what searchers are looking for and what results will interest them most. “It’s a vicious cycle,” Nadella said.

Nadella’s flawless self-discipline in his answers to the lawyer’s questions is partly a reflection that the stakes for Microsoft are very, very high. He’s likely right that without legal intervention, neither Microsoft, nor any other competitor, will be able to make serious inroads against Google Search.

What about artificial intelligence, which many experts believe is changing the very nature of search? Microsoft’s partnership with ChatGPT creator Open.ai reportedly struck fear into the heart of Google CEO Sundar Pichai and other top executives. It prompted Google to release its own A.I., named Bard. 

Microsoft has reason to fear because, Nadella claims, Google is using similar tactics to secure dominance in A.I. to those it’s used to assure its dominance in search: private agreements with specific providers. Facing creators’ and publishers’ ongoing concerns about A.I. scraping data and using it to train large language models such as ChatGPT, Nadella says Google is solving the problem by signing exclusive deals with publishers for the right to use that material. “When I am meeting with publishers now, they are saying, ‘Google’s going to write this check to us, and it’s going to be exclusive, and you have to match it,'” he reportedly said.

Now he worries: “Is this going to be even more of a nightmare to make progress in search?” For Microsoft and Open.ai, a lot depends on the answer, which is to say a lot depends on the outcome of this lawsuit. For now, Nadella has done the best he can to make sure his company thrives in an A.I.-dominated future.