I have experienced this issue of being unable to add an Office 365 account to Outlook 2016 numerous times. This is one of those times that I wanted to make sure I remembered the trick.
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What that does is basically lower the security for the connection to Microsoft. This is usually a Windows 7 machine that this happens to but it is annoying. I thought I had this info saved but I couldn’t find it and I wasted 5 full minutes trying to find it using a Google search.
Updated 10/15/21: I don’t know what is going to happen come the end of the month. Microsoft is going to start disabling old authentication methods. I am afraid this work-around will not work then. I guess we will find out the hard way.