The AI boom is forcing a reckoning about what makes a good leader, and Microsoft (MSFT) CEO Satya Nadella thinks the answer isn't what most people expect. Intelligence matters, sure. But without emotional intelligence to back it up, all that brainpower might as well be sitting idle.

"Intelligence quotient has a place, but it's not the only thing that is needed in the world," Nadella said during a conversation on the "MD Meets" podcast with Axel Springer CEO Mathias Döpfner. "And I've always felt at least as leaders, if you just have IQ without emotional intelligence, it's just a waste of IQ."

Why Context Beats Raw Smarts

Nadella's point is that emotional intelligence helps people read situations in ways AI systems still can't. Humans pick up on social cues and emotional signals that shape how work actually gets done. He told Döpfner that AI hasn't mastered what he calls "context engineering," the ability to pull together different pieces of information the way people naturally do.

That human edge becomes especially important when different teams need to work together. Nadella emphasized that in-person collaboration creates learning opportunities that remote setups often miss. He called the physical workplace "the best collaboration tool," noting that humans absorb knowledge from each other through subtle interactions that video calls simply don't capture. This matters most when product teams, scientists, and infrastructure groups need to coordinate closely.

Learning Faster Than AI Changes Things

Nadella told Döpfner that staying relevant in the AI era requires constant curiosity and a willingness to unlearn what used to work. He described Microsoft's culture as focused on being "learn-it-alls" rather than "know-it-alls," acknowledging that habits and strategies that succeeded in the past might need to be abandoned as AI transforms operations.

He pays particular attention to how smaller companies build products, noting that their tight coordination across disciplines lets them move faster than large organizations typically can. That speed advantage comes from the kind of seamless collaboration that requires both technical skill and the emotional intelligence to work effectively across boundaries.

Building Your Own AI Factory

Nadella outlined what he sees as a fundamental shift for companies in the AI age. Organizations will need to create their own AI "factories" that reflect their specific knowledge and internal processes. Each company will require a model unique to what it knows and how it operates, which Nadella described as the new form of sovereignty in an AI-driven world.

This approach gives companies more control by developing systems grounded in their own data rather than depending entirely on external models. It's about maintaining autonomy over the intelligence that powers your business rather than renting it all from someone else.

The New Human-AI Workflow

Looking ahead, Nadella expects AI will handle more routine tasks while still relying on people to provide direction and judgment. He described a workflow where autonomous agents complete assignments and then return when they hit obstacles or need guidance. These agents will report what they finished, where they got stuck, and what requires human input, essentially creating a new kind of inbox for reviewing progress and making decisions about next steps.

This pattern keeps humans in the loop because the agents will always reach points where they need direction or encounter limits they can't resolve on their own. And navigating those handoffs successfully? That's where emotional intelligence comes back into play, helping leaders understand not just what the AI accomplished, but what it means and where to go from there.