Microsoft has a problem: lack of demand for its AI products

Microsoft has a problem that they hire the middle block of talent in the market. They do not chase the top 20% most expensive nor the bottom 20% least expensive.

But this also means they end up with average products. They don't have the talent to do something exceptional.

This has worked well for them when they can just come in and copy something (say AWS in Azure) and not pay the innovation cost, but AI seems different for some reason, perhaps in the same way search was. You need the top 20% in order to really be successful.

The only time they copied something successfully and did not rely on major tie-ins with their existing monopoly was Xbox and that division lost money hand over fist for a long time.

this is just not true. Building great products with average talent is a sign of great management, and it's been done before in both business and sports. moneyball is about this idea at some level.

Plenty of SV is building below average products with exceptional talent.

That’s exactly what happened. For the past decade, the crème de la crème went to Google and Meta, which offered nearly double what Microsoft paid new graduates. Microsoft hired the next tier, after the top talent had already been skimmed off by Google and Meta.

> Building great products

This is where they are failing.

> Plenty of SV is building below average products with exceptional talent.

Yes, you can hire exceptional talent and give them poor directions, resulting in poor products.

But to hire mediocre talent and still produce competitive products you must have an unfair advantage of some sort. The Windows and Office monopolies gave Microsoft that unfair advantage. But it is becoming clear that this unfair advantage does not extend to AI.

> Microsoft has a problem that they hire the middle block of talent in the market. They do not chase the top 20% most expensive nor the bottom 20% least expensive.

That's only if you're only looking at the top 10% or w/e of the market in the first place. New grad software engineer salaries at MS are higher than the median software engineer salary in the US.