Who is Michael Jackson talking about in she's out of my life?

He didn't write it, he was just one of the many artists who covered it, Tom Bahler wrote it, it's about his ex Karen Carpenter.

It is certainly not uncommon for people to assume "She's Out of My Life" was written by Michael Jackson since he wrote or co-wrote nearly all of the many songs in his catalog.

Bahler's song became famous as a result of Michael's emotional rendition of the song which was first released in his Off the Wall album in 1979, then released as a single the following year. In the years that followed, Michael included it in many of his stage performances, always with an emotional ending that highlights "life."