Satya Nadella, CEO of Microsoft, says artificial intelligence is not just transforming technology—it’s fundamentally rewriting how companies operate. Speaking at GitHub Universe, Nadella described AI as a force that is “ripping and replacing” traditional ways of building, selling, and organizing work across industries. He emphasized that the AI revolution demands more than a simple tech upgrade. It requires a simultaneous shift in technology, business models, and the very process of creating products—especially software. “This one is interestingly enough both a tech shift, a business model shift… and three, the way you produce your artifact—your software—is changing,” Nadella said. “The product development process is completely getting ripped and replaced.” For Nadella, the key to success in this new era lies in mastering the “new production function”—the way work gets done when intelligent systems can generate code, designs, and content with minimal human input. “The key is learning the new production function,” he said. “It's kind of like rewiring yourself—unlearning is the hardest part. Learning is easy. Sometimes if you have to unlearn and learn, it's much harder.” Microsoft has undergone major transformations over the past decades, from the internet boom to the cloud transition. But Nadella argues that AI is different because it introduces the concept of true marginal cost software—where each additional unit of output, whether it’s a line of code or a piece of content, can be created almost at no extra cost. “This is the first time you have marginal cost software—not just like the cogs of the SaaS world, but true marginal cost,” he said. He drew parallels to Microsoft’s own painful pivot from its highly profitable server business to cloud computing in the 2000s. “We've also navigated tough business model shifts,” Nadella recalled. “When you suddenly have a 98-99% gross-margin server business and you move to the cloud and you don't even know, ‘Man, is there a margin here?’ And yet you have to make the shift and figure it out.” He warned that clinging to profitable but outdated models will lead to irreversible decline. “Given the binary nature, you've got to make it to the other side,” he said. Companies that delay, waiting to see how the economics settle, will find their margins eroding faster than they expect. Nadella stressed that leadership in the AI age must include the ability to unlearn. He pointed to a new generation of developers who have grown up using tools like GitHub Copilot as a standard part of their workflow. “It's the first cohort of developers who grew up with GitHub Copilot as standard issue,” he said. In essence, Nadella’s message is both a warning and a guide: the future belongs to organizations that are willing to rebuild their thinking about production, cost, and talent from the ground up—because the rules of work have changed for good.