New York: Microsoft CEO Satya Nadella has put out a blunt warning that most businesses using AI tools are unknowingly giving away something far more valuable than money.
In a blog post published Sunday, Nadella said companies are paying for AI in two ways. The first is the obvious cost of using the technology. The second is the data they feed into it, which includes internal knowledge, workflows and business logic that competitors could never buy.
“You essentially pay for intelligence twice, once with money, and again with something even more valuable: the proprietary knowledge you must reveal to make that intelligence useful. The better you want the model to perform, the more of that knowledge you have to feed it!” he wrote.
Nadella’s bigger concern is that AI models quietly learn from everything users do with them. Every prompt, every correction, every interaction trains the model further.
“Models learn from ‘exhaust,’ the prompts people write, the tools agents use, and especially the corrections people make when the model is wrong. Every correction is distilled into institutional know-how,” he wrote.
This, he argues, is “the kind of knowledge a competitor could never buy,” yet businesses are handing it over freely.
Nadella also called out what he sees as a double standard. AI companies train their models on public internet data but then restrict others from doing the same to their models.
“While the great innovation that comes from model providers having fair use rights to train models on public data is needed, I find it ironic that the status quo is to then turn around and impose restrictive terms on distillation,” he wrote.
His advice to businesses is to take back control. He wants companies to own their data, build private learning environments and use tools that let them switch between AI providers without getting locked into one.
The shift is already happening on the ground. Some large enterprises are moving toward open source AI models they can run on their own servers, keeping their data entirely in-house. Industry experts say this trend is picking up fast.
Nadella summed it up simply: “In consuming intelligence, you are creating intelligence. And what you create should belong to you.”
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