Exclusive: Bill Gates, ousted for misconduct, is still pulling the strings at Microsoft

In 2017, just before Microsoft forged a partnership with a then relatively unknown startup called OpenAI, Bill Gates shared a memo with CEO Satya Nadella and a small group of the company’s top executives. A new world order, Gates predicted, would soon be brought on by what he called “AI agents” — digital personal assistants that could anticipate our every want and need. These agents would be far more powerful than Siri and Alexa, with godlike knowledge and supernatural intuition.

“Agents are not only going to change how everyone interacts with computers,” Gates wrote. “They’re also going to upend the software industry, bringing about the biggest revolution in computing since we went from typing commands to tapping on icons.”

At the time, the memo struck those who read it as far-fetched. “It seemed super futuristic,” a Microsoft executive who spoke on the condition of anonymity said. Microsoft had been widely mocked for its previous attempts at creating personal “agents,” from its failed Office assistant Clippy to its racist chatbot, Tay. Few at the time would have believed a new generation of these agents would transform Microsoft.

Today, though, it’s clear that Gates’ secret correspondence anticipated Copilot, the artificial-intelligence tool that has helped propel Microsoft to become the world’s most valuable public company. Powered by a version of OpenAI’s GPT large language model, Copilot debuted last year as a tool within Microsoft products to help users with tasks such as preparing presentations and summarizing meetings. “Copilot now sounds exactly like what he wrote,” the executive said.

That’s not by accident.

Publicly, Gates has been almost entirely out of the picture at Microsoft since 2021, following allegations that he had behaved inappropriately toward female employees. In fact, Business Insider has learned, Gates has been quietly orchestrating much of Microsoft’s AI revolution from behind the scenes. Current and former executives say Gates remains intimately involved in the company’s operations — advising on strategy, reviewing products, recruiting high-level executives, and nurturing Microsoft’s crucial relationship with Sam Altman, the cofounder and CEO of OpenAI. In early 2023, when Microsoft debuted a version of its search engine Bing turbocharged by the same technology as ChatGPT, throwing down the gauntlet against competitors like Google, Gates, executives said, was pivotal in setting the plan in motion. While Nadella might be the public face of the company’s AI success — the Oz who built the yellow-brick road to a $3 trillion juggernaut — Gates has been the man behind the curtain.

“What you read is not what’s happening in reality,” another Microsoft executive said. “Satya and the entire senior leadership team lean on Gates very significantly. His opinion is sought every time we make a major change.”

When Nadella took over the reins from Steve Ballmer a decade ago, Microsoft was seen as a dinosaur of the computer age it had helped pioneer. Peter Thiel bashed the company as “a bet against technological innovation.” So Nadella, who had worked at Microsoft since 1992, turned to his former boss for help. On the day Nadella became CEO, he asked Gates to spend 30% of his time as a technical advisor, in part to help motivate his staff. “When I say, ‘Hey, I want you to go run this by Bill,’ I know they’re going to do their best job prepping for it,” he told Wired at the time.

In 2020, when Gates stepped down as chair of Microsoft’s board, Nadella showered him with praise. The company, Nadella promised, would “continue to benefit from Bill’s ongoing technical passion and advice to drive our products and services forward.”

But a year later, Nadella’s embrace of Gates appeared to change — at least publicly. In 2021, as Gates and his wife, Melinda, were divorcing, The Wall Street Journal reported that Gates had been forced to step down as the company investigated him for having an affair with an employee. As news of Gates’ misconduct went viral, the squeaky-clean reputation he and his public-relations team had meticulously crafted over the years unraveled. Several female employees came forward with stories of Gates asking them out, and his meetings with Jeffrey Epstein, including a flight on Epstein’s private jet, came under renewed scrutiny. Suddenly, Nadella’s mentor had become his greatest liability, and he and Microsoft quickly distanced themselves from Gates.

“The Microsoft of 2021 is very different from the Microsoft of 2000,” Nadella said at the time. “The power dynamic in the workplace is not something that can be abused in any form.” The company’s greatest responsibility, he later added, is “cultivating a culture where everyone is empowered to do meaningful work.”

But among the people whom Nadella secretly empowered to do meaningful work, BI has learned, was Gates himself. Rather than banishing him from the company, Nadella continued to draw on his advice and expertise — making Gates a key player in Microsoft’s efforts to vie for dominance in AI.

The common lore about Microsoft’s marriage with OpenAI is that it was brokered by Kevin Scott, the company’s chief technology officer. Scott had known Altman for years, and in summer 2018, he arranged a meeting between Altman and Nadella. Later that year, the three men hammered out an initial deal, and the rest is history.

According to two executives, Gates’ memo treated as gospel, sparking Microsoft’s push to take the lead in the AI arms race.

But lost in that origin story is that Gates had been regularly meeting with OpenAI since 2016. Ever since he published “The Road Ahead” in 1995, Gates had been dreaming of a world in which everyone would navigate the internet using software that would “have a personality you’ll be able to talk to in one form or another” and that would “learn about your requirements and preferences in much the way that a human assistant does.” Under Gates’ leadership, Microsoft had launched several primitive and widely ridiculed versions of agents — from Rover, a cartoon dog that guided you through Windows 95, to Clippy, the most hated paperclip of all time. Now, it seemed, OpenAI might offer Microsoft a way to help forge the AI future that Gates had long envisioned. After the two companies formed their partnership, OpenAI’s leaders conducted regular presentations for Gates at his 66,000-square-foot mansion in Washington, keeping him apprised of critical benchmarks and significant obstacles.

It was Gates, in fact, who played a pivotal role in turning OpenAI and Microsoft into a power couple. In mid-2022 — two years after he was ousted from the board — he privately challenged Altman and OpenAI to create a model capable of passing an Advanced Placement biology exam. Gates didn’t think it could be done. Altman and OpenAI debuted GPT-4 for the first time outside the company at Gates’ house in August 2022 during a dinner; Nadella was among the guests. When it aced the test, Gates was shocked, calling it “the most stunning demo I’ve ever seen in my life.”

The demo prompted Gates to write another memo — what one former executive referred to as “the memo” — spelling out how Microsoft should use GPT-4. Gates stressed that the large language model, trained on the entirety of the public internet, could finally usher in the era of personal agents. “Think of it as a digital personal assistant,” he wrote in a version of that memo later posted on his blog. “It will see your latest emails, know about the meetings you attend, read what you read, and read the things you don’t want to bother with.”

According to two executives, Gates’ words were treated as gospel, helping spark Microsoft’s push to take the lead in the AI arms race. Soon after Gates’ dinner, Nadella hosted a meeting on Microsoft’s campus, where he challenged the teams to incorporate AI into search, cybersecurity, and its Microsoft 365 suite of business applications, which includes Word and Outlook.

Early the following year, Microsoft introduced a new version of its beleaguered search engine, Bing — now turbocharged with a GPT-enabled agent that would later be named Copilot. Almost overnight, thanks to Gates’ maneuvering, Microsoft had transformed Bing from a search engine on life support to an AI-powered tool that had a chance to give Google a run for its money.

In February 2023, Microsoft held an event at its headquarters similar to a Steve Jobs iPhone launch. Nadella, beaming, declared war on Google. Gates did not appear to be in attendance.

Today, Gates remains close with Altman, who visits his home a few times a year, and OpenAI seeks his counsel on developments. There’s a “tight coupling” between Gates and OpenAI, a person familiar with the relationship said. “Sam and Bill are good friends. OpenAI takes his opinion and consult overall seriously.” OpenAI spokesperson Kayla Wood confirmed OpenAI continues to meet with Gates.

Last fall, Nadella and Microsoft scrambled to quell the chaos when OpenAI’s board abruptly fired Altman. Frank Shaw, a Microsoft spokesperson, told BI that if Gates was speaking with Altman, it was not on behalf of the company. “Bill is not at Microsoft and not involved here,” Shaw told BI at the time.

During the five-day fracas that followed, Gates — with his own recent experience with an ouster — reached out to Altman to offer support as he negotiated a return to the leadership of OpenAI.

Today, insiders say Gates’ sway at Microsoft extends far beyond OpenAI.

Executives from across the company — including its business-applications boss, Charles Lamanna; its chief scientist, Jaime Teevan; its Teams chat-app boss, Jeff Teper; and its head of cybersecurity, Charlie Bell — meet regularly with Gates to review products. He’s also personally involved in recruiting and retaining important executives for Microsoft. “Gates is very involved with product reviews and one-on-ones with executives,” a former executive said. Last year, Gates told Forbes he spent about 10% of his time in Redmond, Washington, advising Microsoft on product road maps.

Gates over years has also pushed Microsoft to be more consumer-focused, despite many consumer technology failures. In March, many observers were shocked when the company announced it was hiring Mustafa Suleyman, who cofounded DeepMind and spent many years at Google, to lead a new consumer-AI organization. “Bill G. thinks the major opportunity is consumers,” one insider said. “If you look at the new consumer-AI organization, that looks like Bill’s influence on Satya.” Shaw said Gates was not involved in hiring Suleyman.

All this is a far cry from the perception that Gates has been kept at a distance ever since he was ousted from the board. Gates, who has continued to keep a low profile, has emerged from the scandal largely unscathed; today, the allegations of his misconduct aren’t even mentioned in his Wikipedia entry. The Microsoft of 2024, it appears, is not as different from the Microsoft of 2021 as Nadella would have everyone believe. Gates is not gone, but his checkered past has been largely forgotten.

Shaw said there hadn’t been any substantial changes in Gates’ role as a technical advisor since he left the board in 2020. Gates declined an interview request and his representative did not respond to a request for comment.

Near the end of “The Road Ahead,” Gates got existential. “It’s a little scary that as computer technology has moved ahead, there’s never been a leader from one era who was also a leader in the next,” he lamented at the ripe age of 39. “So from a historical perspective, I guess Microsoft is disqualified from leading in the highway era of the Information Age.”

Then the middle-aged Gates revealed his true ambition: “I want to defy historical tradition.”

Now approaching 70, Gates is still defying history — this time from behind the scenes. And if the revived fortunes of Microsoft are any indication, he appears to be winning.

Ashley Stewart is a chief technology correspondent at Business Insider. She reports on enterprise technology companies including Microsoft and Amazon Web Services from Seattle.

Are you a Microsoft employee or someone else with insight to share? Contact Ashley Stewart via email (astewart@businessinsider.com), or send a secure message from a nonwork device via Signal (+1-425-344-8242).