Why does Microsoft prohibit employee personal open source projects?

Not sure where you got that but it is not true. MS employees are free to make non competing open source projects in their own time on their own hardware.

MS is too big for any one person to know what businesses they're in, have been in, have rights obligations around, or will be in in the future. It's quite possible that any side hustle project will, in fact, be competing with Microsoft now or in the future. Your project might also unintentionally contain Microsoft IP or things where they have rights obligations to others. It's not worth the risk to them.

Same as most companies that have the "all IP you produce belongs to us" clause:

There's no (financial) upside to them doing this, and it runs the risk of you open-sourcing something which someone else in the company is trying to be protectionist about. Or is actually Microsoft IP.

It's annoying, but sometimes you can negotiate exceptions.

Previous MSFT employee of about 7 years (left about 3 years ago) - this was totally not true. In fact, we were encouraged to make non-competing contributions and I worked with several peers that had very successful open source projects.

Can you provide some context? Do you mean MS employees are prohibited from doing open source even outside work hours?

Can we address the "if" question before asking the "why" question?

I'm no Microsoft employee, but I really like to see specific policy wording and understand the context before looking at any comment. Honestly I don't understand why we have such a blanket "ask HN" in the first place.

Microsoft under Ballmer, and Microsoft under Nadella is a night and day difference.

They removed the moonlighting line in hiring contract AFAIK. I.e you can make hour own open source project in your non-employment hours with your hardware without any company IP.

MS VScode or .NET core would never be OS under Ballmer.

Completely not true. Apple, on the other hand, does have a policy somewhat like that (source: it was one of the reasons I didn’t leave Microsoft for Apple a few years back, although it was a negotiable matter to a degree)

While this may be true, i can do you one better. Personally know of someone who has multiple commercial side endeavors of varying successes, while working there, so it is doable...

I didn’t know that, and quite likely I’m not in the minority! The irony is Microsoft owns the biggest open source platform GitHub, and sells products and services such as code pilot which thrives on open source prior art. This deserves more publicity! At the same time Microsoft hires people that are main shepherds of open source projects, such as GvR do not sure how that arrangement works.

It's really hard to not compete with any big company like Microsoft.

Not true.