SAN FRANCISCO, CALIFORNIA - NOVEMBER 06: Microsoft CEO Satya Nadella (R) speaks as OpenAI CEO Sam Altman (L) looks on during the OpenAI DevDay event on November 06, 2023 in San Francisco, California. Altman delivered the keynote address at the first ever Open AI DevDay conference. (Photo by Justin Sullivan/Getty Images)

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Microsoft invested $1 billion in formerly fledgling OpenAI when “no one else was willing” to. That’s how CEO Satya Nadella described its 2019 capital committment.

Better yet, Microsoft didn’t stop there. In addition to funds, Microsoft provided OpenAI with crucial access to its data centers on which to build and train its AI models. It’s a beautiful story that economists and policymakers would do well to internalize.

To see why, contemplate what’s on the mind of economists as they divine ways to enhance economic growth. They invariably look to the Federal Reserve, a size employer of economists. Their minds are wandering. And not in a fruitful direction.

What powers growth is intrepid investment, and the latter is something the U.S. central bank cannot facilitate. Which brings us back to Microsoft.

Implied in its initial $1 billion investment in OpenAI at a time when “no one else was willing to” is that Nadella and other Microsoft executives were well aware that they could lose every cent of their billion dollar investment. Which is the crucial point. Microsoft had $1 billion to lose.

It’s what policymakers would do well to internalize. The biggest driver of the biggest economics leaps is surprise. Thank goodness then, for Microsoft, Nvidia, Amazon, Google, Elon Musk, Sam Altman, and countless other corporations and individuals possessing the kind of wealth they’re capable of losing.

It recalls what excites venture capitalist Vinod Khosla. He likes impossible ideas. Yes, the ones so outlandish as to almost defy description.

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

If readers are doubtful, they must contemplate the difference between 2019 when the investment was made, and 2026. To say 2019 was another century in the technological sense is no insight. Imagine being pitched at the time on a concept that could answer any question knowledgeably, write any paper expertly, and tesselate all the world’s knowledge in ways that would enable machines to think for us in the way that machines have long done for us.

Thinking about it through a 2019 prism, is it any surprise that funding available to OpenAI was rather slight? Hopefully the question answers itself.

Much more importantly, hopefully in answering itself readers can see the folly of modern economic thought. The Fed employs more economists than any other entity in the world, but to what end? A small - at least by Microsoft standards – investment put OpenAI on the path toward transforming work and thought as we know it, and in ways that will powerfully boost human productivity now and in the future. What does the Fed have to do with this stupendous progress that personifies growth?

As for policymakers, they’ve spent decades writing a totally incomprehensible tax code meant to extract ever more wealth from the private sector. The unseen of the previous truth is tragic to contemplate. To develop a sense for why, consider the myriad other “impossible,” “no one else was willing to” fund ideas that never got to succeed precisely because they never got to fail.

For now, Microsoft’s past and present achievements have powered capital formation that, among other things, made OpenAI’s remarkable, world-changing leaps possible. That’s economic growth for you, only for readers to hopefully contemplate how much more growth there would be if there were substantially less taxation so that more impossible ideas could be matched with capital.