Core Insights - Microsoft is rethinking its business model for the AI era, with CEO Satya Nadella appointing Rolf Harms as an adviser on AI economics to guide this transformation [1][3][6] - Harms previously coauthored the influential white paper "Economics of the Cloud" in 2010, which significantly impacted Microsoft's cloud strategy [2][5] - The company is focusing on building a new AI infrastructure and a family of AI tools to enhance usage across its platforms, similar to its previous cloud strategy [3][4][6] Company Strategy - Nadella emphasized the need for a rapid rethinking of AI economics across Microsoft, akin to the cultural shift experienced during the cloud transition [3][4] - The company has recently increased its investments in AI, including major deals with OpenAI and Anthropic, despite earlier hesitations regarding infrastructure spending [3][4] - Harms' role will expand to advise on the transformation of existing categories and the creation of new ones in the AI landscape [6][8] Historical Context - The early cloud era saw significant investments in data centers despite uncertain returns, paralleling current concerns in the AI sector [4][5] - The 2010 white paper helped justify Microsoft's cloud investments by demonstrating the long-term cost savings for customers, despite initial skepticism [5][6] - Harms' approach during the cloud transition was to help Microsoft recognize existing market trends, a mindset that is now being applied to AI [6]