The Federal Reserve can’t stimulate the economy, but Microsoft can

Microsoft invested $1 billion in the former OpenAI startup when “no one else was willing.” This is how CEO Satya Nadella described his commitment for 2019.

Even better, Microsoft didn’t stop there. In addition to the funds, Microsoft gave OpenAI critical access to its data centers in which it could build and train its AI models. It’s a beautiful story that economists and policymakers would do well to internalize.

To see why, consider what economists have in mind as they propose divine ways to boost economic growth. They always look to the Federal Reserve, a major employer of economists. Their minds wander. And not in a fruitful direction.

What powers growth is fearless investment, and the latter is something the US central bank cannot facilitate. This brings us back to Microsoft.

Implicit in its initial $1 billion investment in OpenAI at a time when “nobody else was willing” is that Nadella and other Microsoft executives were well aware that they could lose every cent of their billion-dollar investment. Which is the critical point. Microsoft had $1 billion to lose.

It is one that policymakers would do well to internalize. The biggest driver of the biggest economic jumps is surprise. Thank God for Microsoft, Nvidia, Amazon, Google, Elon Musk, Sam Altman, and countless other companies and individuals with the wealth they are capable of losing.

He recalls what excites venture capitalist Vinod Khosla. He likes impossible ideas. Yes, the ones that are so weird they almost defy description.

Which hopefully brings to life what Nadella meant by Microsoft’s initial investment in OpenAI at a time when “no one else was willing.” Microsoft invested in the impossible.

If readers are in doubt, they should consider the difference between 2019, when the investment was made, and 2026. To say that 2019 was another century in the technological sense is not insightful. Imagine being inspired in that moment to an idea that could answer any question with knowledge, write any paper with expertise, and capture all the world’s knowledge in ways that would allow machines to think for us in the way machines long have made for us.

Thinking through the lens of 2019, is it any surprise that the funding available to OpenAI has been rather small? Hopefully the question answers itself.

More importantly, we hope that by answering for themselves readers can see the folly of modern economic thinking. The Fed employs more economists than any other entity in the world, but to what end? A small—at least by Microsoft standards—investment has put OpenAI on the path to transforming work and thinking as we know it, and in ways that will dramatically enhance human productivity now and in the future. What does the Fed have to do with this amazing progress that personifies growth?

As for policymakers, they have spent decades writing a completely incomprehensible tax code designed to extract more and more wealth from the private sector. The invisibility of past truth is tragic to contemplate. To develop a sense of why, consider the myriad other “impossible,” “no one else was willing” to fund ideas that never succeeded precisely because they were never meant to fail.

For now, Microsoft’s past and present achievements have fueled the capital formation that, among other things, has made OpenAI’s remarkable, world-changing leaps possible. That’s economic growth for you, just to get readers to consider how much more growth there would be if there were significantly less taxation so that leaner ideas could be matched with capital.