Nadella Blasts AI Industry's Double Standard: Allowed to Scrape Data, Yet Restricts Others from Distilling Models

Microsoft CEO Satya Nadella published a lengthy essay on X titled "The Reverse Information Paradox," sharply criticizing major AI model providers like OpenAI and Anthropic for a glaring double standard: they leverage public data and user interactions to train their own models while imposing restrictive terms that prevent other companies from distilling capabilities from those models.

He warned that if the learning process flows only one way—toward model providers—economic value will increasingly concentrate among the handful of firms controlling AI infrastructure. The debate intensified as Palantir CEO Alex Karp delivered an even more blistering critique on CNBC, claiming enterprise clients are "furious" over token-based pricing models.

Former White House AI czar David Sacks also joined the fray, accusing Anthropic of an "observe-copy-expand" pattern that erodes application-layer businesses. While critics note that both Nadella and Karp have their own commercial motives, the issues they raise—ballooning token costs and one-way knowledge flows—have become central anxieties in corporate AI strategy.

> Claude Mythos Preview was trained on a proprietary mix of publicly available information from the internet, public and private datasets, and synthetic data generated by other models.’

'synthetic data generated by other models.’ is it distillation ?