Massachusetts Institute of Technology Distinguished Lecture Series 1996
Bill Gates Keynote Address
Wednesday May 30th, 1996

MR. GATES: Good afternoon. I'm going to talk a little bit about is how the world of computing has arrived on the communications scene, and is going to have a pretty broad impact because of that, and talk about some of the research areas for software that are very exciting and at the same time very difficult. And then I'll leave as much time as I can for questions at the end.

Well, it was said that I got into this thing by dropping out of school. And I'm not recommending that. But if the thing you're passionate about, you think, "Boy, there's only a critical time window to get involved," sometimes it does work. And for me, that was the kit computer on the cover of Popular Electronics in January 1975.

My friend Paul Allen and I had been working in software and we thought, "We want to be there early on and try and contribute some software." And that was based on Paul's educating me about Moore's law, that these machines would become immensely powerful, more powerful than even the most expensive computers of the day. And so we started off on that course really believing that software was quite distinct from hardware and that, if you wanted to have a company doing state-of-the-art software, it ought to be very neutral to various hardware providers and really optimize hiring and training around the software because it is quite different.

The PC has come a long way in the little bit over 20 years since then -- not only the power, as Moore's Law has done its work, but also the overall experience, the use of graphics, the communications in and out of the machine. It's easy to look at the machines we have today and say, "How did we ever use the machines of four or five years ago?" But certainly four or five years from now, we'll be saying the same thing. We'll be saying, you know, why didn't we have a better user interface? Why didn't we have motion video, 3-D graphics built in?

I think it's not being too presumptuous now to say that the PC, as it's connected to the Internet, will be as important as any major advance in communications. People talk about this being the information age. Well, what the heck does it mean, information age? Very strange terms. It means that in the same way we take electricity or running water completely for granted now, it's part of our regular experience, we'll take for granted the idea of using a variety of information appliances connected up to the Internet as our way of getting information, of staying up-to-date, of transacting business, of finding people with common interests.

Unlike those previous advances, however, this one, in the period of a decade, will become pervasive. People have a tendency to over-estimate what can happen in two years and to under-estimate what can happen in ten. Certainly with the Internet, we're seeing a lot of that right now. People who debunk it and say it will never be mainstream, they're just wrong. At least, we're betting in a big way that they're wrong. But people who think acceptance will come in two or three or four years time, I think they're under-estimating. It does take time for these things to be adopted.

Even today when I go to read the newspaper, I look at The Wall Street Journal online and I look at the trade magazines online. But I always find myself picking up the real Wall Street Journal and scanning it. Now, partly it has to do with the resolution of computer screens. It partly has to do with familiarity. But I know very few people who moved altogether to rely on the Internet for all the information they get. It will take some time. And yet, if you compare it to these previous advances, it's far more rapid than any one of those. In fact, these advances took place over at least one generation. So somebody who was around and working when the invention came through didn't really have to care about it. It was only people who were growing up, the next generation, who had to think how to make it part of their everyday activity.

As this is all happening, of course, the machines -- and I use the term PC very broadly -- will be improving quite dramatically. Larger storage is important so that we can start to do caching at many levels. All those pages that you like to go out and see on a regular basis, they're just going to be there. The faster processor is important to create a 3-D virtual environment, to do the kind of recognition and imprints that you want to have in these environments. I think voice input is absolutely necessary to get into the mainstream.

I think people under-estimate the importance of screen technology It's wonderful to see there are literally dozens of approaches for getting low-cost, much higher dot-per-inch type screens available very broadly. Eventually, I think we'll talk about computer devices, primarily by what the size and the resolution of the screen are, all the way from the pocket-size device to the desktop device to the wall-size device to the stadium device. That will be the one unique distinguishing characteristic.

The Internet phenomenon is an incredible thing, and although for many, many years we were optimistic about online services, that people would dial up a 1200 baud and find something cool there, it was disappointing. It just never caught on. It never got enough people for it to make sense to build a community or to invest in publishing or to think about advertising as a meaningful thing there. It certainly was a surprise to me that in '93 and '94, a lot of things that had been around for some time, TCP/IP and some newer protocols, particularly HTTP/HTML, actually got electronic communication to critical mass. I started to get a glimpse of it when one of the people who worked for me went back to his university, Cornell, and said that it wasn't just computer scientists out there on the Web; it was everybody in the university. And that was '93.

By '94, the phenomenon was in full force and a phenomenon with a lot more attention being paid to it than any that I've ever seen before. When the PC industry was getting going, they were a lonely group of people, a few people who believed. And we'd get together in these small little industry shows and say, "We know and IBM doesn't know." Well, later we had to invite IBM in to help make it happen, but that's a long story. It was a group of pioneers working on their own.

With this revolution in electronic communications, it's so mainstream you can't get away from it even if you wanted to. You can't turn on your TV set without seeing lots and lots of URLs. You can't read magazines without encountering that. And there's almost a gold rush type phenomena that we're seeing here. That's a fantastic thing because it means the level of investments are very high; the innovation is quite rapid.

So we've got all this excitement, the biggest gold rush of all times taking place. What's going to hold us back? Well, there's social adoption, getting used to using this to gather information and buy things. But we also have a technology barrier. There's one element in this picture that doesn't proceed as a sort of Moore's Law type race, and that's the local loop connecting up, primarily homes, but also businesses.

Here we can look at three generations of capability. We have today's POTS phone network where we can use 28.8 modems and dial up. Text is very fast and pictures are just barely okay. It takes anywhere from 2 to 10 seconds to get a Web page down that has fairly high resolution images. Now, across POTS, people think they might be able to squeeze out another factor of two, particularly if they go asymmetric in use of it. But that's going to be about it. Yet, for quite some time, that will be how a high percentage of households are connected up.

Originally, there was a view -- well, five years ago, there was a view that the companies would skip over any sort of mid-band approach and go right to broad-band. In fact, there was a view that they'd skip over the PC and they'd connect up TVs for video-on-demand. Cable and phone companies were trying to out-do each other with big promises of how many millions of people they would have hooked up by now. Well, if you go out there and look at how many people are hooked up, it's a few thousand. It's a number that rounds to zero. (Laughter.) Something happened.

As they were making those promises, they weren't really thinking about what the revenue opportunity was. You get 75 percent of the revenue of the true video-on-demand system from pay-per-view, where you do only, say, the top 10 or 20 movies.. So your extra money to fund a true ATM fiber network is very modest indeed. And new application, whether for medical or travel, there was no way to bootstrap them. Wwithout users, there weren't the applications; without the applications, there weren't the users. Time-Warner made a valiant effort with their Orlando trial, putting $20,000 machines into people's homes to just try it out. But it didn't spark into something important.

Throughout all this, clearly the PC was getting stronger, particularly in terms of the home market, and then the Internet came along and woke everybody up to the fact that there's an evolutionary path. We can keep increasing the bandwidth, get better audio support, get better video support, and move to have higher and higher bandwidths that eventually will reach every home. Some of those intermediate steps are grouped under what I call mid-bands here. ISDN, PC cable modems, ADSL, any of these approaches let the still images come in incredibly good speeds and let you start playing with video. None of them are good enough that you'd sit and watch a two-hour movie through a mid-band connection, so that awaits sort of the ultimate holy grail, which is the broad band. And broad band will happen.

We were spending a lot of time developing software for interactive TV, and a lot of that work we're now applying to the Internet.. A lot of the new user interface work we have comes out of that interactive TV work. In fact, the idea of being able to partition media servers so you can deliver audio and video using low-cost technology, you don't have to have essentially a super computer server to do that. That all comes out of that interactive TV work and it's directly applicable to the Internet.

So, now, the world at large has a more realistic view of how bandwidth rolls out. To be honest, I think for a lot of households, as long as it's narrow band, it's just not fast enough or compelling enough. The information they need they can get from the newspaper or calling someone up. It's only when we get into the realm of rich interaction that it will start to be as pervasive as we want it to be.

There will be quite a few physical device types hooked up -- the PC, and we'll see more and more differentiation between desktop and portable, and certainly there will be a way of using your TV to connect to the Web. Pages are not authored to work with that type of display today. That's fairly straight-forward. We need to have a well-defined subset of broad HTML, in particular in terms of what kind of add-on capabilities, what varieties of media objects we're going to support, so that if we have to ROM that software or make one in a finite amount of RAM, that this can work.

So set-top boxes, building the electronics in the TV, or using game machines which are out there and you can plug in a modem and a browser, those will be how the TV gets pulled in. Certainly a voice handset makes sense. Connected up, it's a great trade-off in terms of the size of the device and simplicity, and that's often what you want. And it would sure be nice to have the connectivity for voice with the way that things are tariffed there.

We are also big believers in a machine that you carry around in your pocket that connects through digital wireless. In a sense, these personal digital assistants, things like the Newton or the Sharp machines or Psion, are sort of progenitors of this class. But I think there's a radical change in how you think about it when you have the digital connectivity, when you can just walk through a hotel lobby and check out by having the wireless connection, where you can board an airplane without physical tickets and select a seat through using that digital connection; when the GPS feature is cheap enough that you're seeing maps and it's populated with all the nearby things that you might be interested in. And certainly there are many, many other locations where we'll see PCs, including in the automobile.

There's a lot of industry competition, and it's part of what makes our industry so much fun. There are multiple companies with operating systems. There are multiple companies with browsers. Microsoft is a distant, distant number two in that competition, having entered it fairly recently. There's a lot of competition over defining what is openness. Openness to me means that anything can be cloned. There are no patents, there's no intellectual property that stands in the way of somebody creating something that's compatible but better. And the beauty of that is that it forces you to keep prices extremely low and listen to the customer feedback about how you can do better versions.

All the popular products that Microsoft has ever done -- DOS, Windows -- they've been cloned. But we have been able to move fast enough to stay ahead. We've been on the other side of the coin in businesses like spreadsheets and word processing. We started with very low market share, but the companies involved - they not only didn't have anything proprietary that they could protect, but they didn't move their application along So whether it's 1-2-3 or Word Perfect, their market share fell over time. Perhaps Netware is in a similar situation, and if we do extremely well, then we'd add browsers to the list of such competition.

Part of that is a vision of integration we have, of actually having the local information we access on the PC be as easy to get to as remote information. In fact things like help files. Why shouldn't those just be Web pages? There's no reason you should have to think about help any differently from any other text that comes up on the screen. Likewise directories themselves you should be able to annotate. You can think of today's directories as just a case of a Web page. It is a Web page where each file is essentially a link, which harkens back to the kind of Gopher approach. We want to let you put arbitrary HTML, including active controls, into those pages so that it's easy to find your way around.

There's PCs versus expensive computers. As the chip technology in PCs has gotten better and better, as the software has gotten richer, it's taken over more and more of the computer marketplace. It's fair to say that within the next two or three years that performance and capabilities will be such that you can reach up virtually to the top of the computing hierarchy. And this is greatly reinforced by the positive feedback phenomenon of the more applications you get, the more volume you get; the more volume you get, the more attractive it is to build those applications.

More recently some people have taken a tack of not trying to sell a more expensive computer, but selling something less. And we don't know what that is yet. When this so-called network computer exists, we'll be able to see the trade-offs involved. If you're talking about a high-quality screen that you are going to sit close to, and something that runs a browser, it's tough to eliminate much that's in a PC, because a browser is the most demanding PC application. It uses more RAM, it grows faster than anything, including word processing and spreadsheets. All the classic things that tend to push the limit are out the window. It's the browser. And browser growth, if you just take Netscape as an example, is doubling in size every nine months. At some point there has got to be a limit there in terms of what can be done. But still it's very relevant additions that are being put in; it's certainly not going to stop any time soon.

There is so much software involved in making the Web fulfill this dream of information at your fingertips. There are programming tools. But I'd be the first to say that most people who create Web pages won't be programming. Even if they want to put in little animations and buttons and rich interactive behavior, they'll just have a palette of controls. If they say, "Okay, I want my users to vote on this," they'll drag in a voting control and it will automatically be connected up to the right database capability

The actual programming tools, where Java has now come in as a first-class language, that's going to be a choice just as much as C has ever been or COBOL or Basic or any of the other popular languages. But there's another dimension of helping people manage large Webs of content. When you get thousands and thousands of links, it's very hard to make sure they're all correct. And when you start to reorder your taxonomy, how do you make sure links that people are still holding, get redirected to the right place. You also have tricky issues of versioning. If I want to do some work preparing a new Web site, I don't want to duplicate everything I have today; essentially I just want a version off of that.

Versioning also comes up in terms of preservation. One thing about written material is usually we can go back and dig around and find a historical record of what a product brochure looked like or what a company was offering. With the Web, there's a tendency now to just completely wipe out the historical electronic presence, and that certainly won't do over time. We have to have an approach that allows for archiving so that you can always go back and see what was being said at any point in time. Managing this type of content brings in some new issues.

If we go back to the people who are in a sense the conceptual pioneers of hypertext, people like Doug Engelbart at Stanford Research, or Ted Nelson with his Xanadu project, they had a much richer concept of what hypertext would be all about, in terms of annotation and tracking, and even commercial mechanisms that might make sense there than we have been able to implement to date. Lots of work has to go on in an integrated fashion.

One problem that corporations have is administering all this software, where you have database software, mail software, Web software, file-sharing software -- you have all these things. They have different interfaces, different administration, different security. That's a real mess. We have got to really pull it together and take public key encryption and these X-509 certificates, and make that the foundation for a directory that can be used across the different applications. That not only simplifies the cost within a corporate network, but allow these inner enterprise applications to work, because the trust hierarchies can be set up so that information moves where it should and doesn't move where it shouldn't.

The Internet is today viewed as sort of an environment where government's not involved. And it would be nice if we could leave it that way. But I have to say I think it's very unlikely that institutions like the Securities and Exchange Commission are going to let people do offerings on the Internet without looking at the honesty of the material that's being promoted It is unlikely the Federal Trade Commission will let people scam buyers without looking into that. Laws related to libel or copyright and those things probably will have to be accommodated. But it's a very difficult accommodation, because we haven't really defined modes of behavior, and we haven't dealt with the fact that this is a global network. It's going to be a terrible problem if there are overly restrictive laws that really prevent people from taking advantage of it.

Certainly the telecommunications deregulation bill went too far in terms of trying to limit indecency on the Internet. There's now a court suit that Microsoft and a bunch of other people are involved in, suing the federal government to get that overturned, which I am very optimistic about.

If this thing is as important as we would like to think it is, there are major issues of making sure it's pervasively available, sort of duplicating the creation of the public library system, which took a period of over 100 years to make sure anybody could get to books. That's got to be done, and investments in communications infrastructure has to be there.

One of the hot issues right now that I am going to go down to Washington, DC, for another round of lobbying on, is that this country has restrictive export laws on encryption technology. And today they only let us export 40-bit encryption, which of course can be broken by many people in this audience, and it doesn't take you more than say a day to do it!

It's a pretty ludicrous situation, because it's not as though there is some U.S. monopoly on understanding encryption technology. And the problem is that software vendors outside the U.S. are now starting to provide packages that have very good encryption. Organizations like the National Security Agency justify their budget on their being able to tap into people. If mass market software has very, very good encryption, then it just makes their job dramatically harder. Most of the work they're able to do benefits from sloppiness. And by having it built into these electronic systems, you'll get rid of a lot of that sloppiness. So it's a tough issue. Believe me, it's very hard to lobby against these intelligence organizations, but we'll see what can be done there.

So definitely a lot of issues come up. I was always very proud of the fact that, for the first 10 years of Microsoft history we didn't have to think about governments and lobbying, or anything like that. But now, as a major company in the industry, there are a broad set of issues - such as, making sure immigration laws don't get overly restrictive, that we have to spend time on and get involved in.

I want to quickly talk about some research areas. You'll see as I talk about these areas that there's great work going on all over the world. Microsoft has a research group with about, 120 people nowadays that work on some of these. They're all predicated on computing costs and communications costs declining, so that we can think of them as almost free over time. One of things I think that is wonderful about software is, unlike a lot of companies where research tends to get very decoupled from the mainline company and can be almost partitioned off, as though it wasn't part of the same company, in the software world, the ability to take great research ideas and, when they work out, put them in products and take advantage of them is quite incredible. Even though when we started the research group we didn't expect that, we're only three years into it, and we're already seeing things like our word processor ship with work that the natural language group has done.

On the topic of where the frontiers are, one of the big ones that we see is parallelism. It's been kind of a holy grail in computer science for a long time. As long as unit processor performance and memory subsystems scaled up where most programs could run on a single computer, it wasn't that important. You'd have to say that progress has been fairly limited. But now that we're looking at database problems that are absolutely gigantic, deep analysis problems, we clearly need to be a lot stronger in partitioning, distributing problems across different computers. There's huge commercial payback for being able to take sort of arbitrary SQL, seeing what the patterns of usage are and being able to design a system that sets up the data the right way.

Testing is another area where I have to say I'm a little bit disappointed in the lack of progress At Microsoft, in a typical development group, there are many more testers than there are engineers writing code. Yet engineers spends well over a third of their time doing testing type work. You could say that we spend more time testing than we do writing code. And if you go back through the history of large-scale systems, that's the way they've been. But, you know, what kind of new techniques are there in terms of analyzing where those things come from and having constructs that do automatic testing? Very, very little. So if you know a researcher out there who wants to work on that problem, boy, we'd love to put a group together.

Certainly security is a tough problem. You've probably all been reading about two companies in Japan that just lost over $100 million because the encryption on pachinko electronic cards was cracked. Before they noticed ,somebody actually fed into the marketplace $100 million worth of little pachinko credit slips. It just shows you how much pachinko gets played in Japan. But the idea of limiting good security and, yet, being able to change those systems if they're broken, and having the amount of damage that can be done during a period when your private key has been accidentally released, that's a very tough problem.

Today we have all sorts of storage systems. We've got files. We've got pages. We've got documents. We've got records. We've got messages. All of those are stored in different ways. And I really believe that there's some sort of super file system that has the replication, security, rich properties and indexing; that can actually unify a lot of those together. Certainly the experience of using a computer would be dramatically better as a result of that.

Some of the great frontiers have to do with sensory things, generating real video-type images, the most advanced graphics work, being able to do more and more of that in real time. There's a re-architecting of the graphics subsystem so you don't have the memory bandwidth bottleneck that the frame buffer is creating that we've been very involved in, investing in, and all sorts of high-level tools for synthesis. One of the companies that is now part of Microsoft is Softimage, whose software is used to create things like the dinosaurs in Jurassic Park. We want to take those tools and make them so they can be used by high school teachers to put neat things together.

Certainly video recognition is a great thing. As long as you're going to have a video conferencing camera, why can't it recognize when somebody sits down? Why doesn't it recognize when they want to scroll more of the document, to read more, if they want to throw the document away, or whatever other crazy gestures they want to make? The computer ought to use all those spare cycles to sit there and recognize that.

Speech, certainly, is the holy grail. Twenty years ago, people were optimistic. Today they're optimistic. I saw a wonderful demo of the work that Victor Hsu's group has done recently. I think over the next five to 10 years those things will be deployed and used in a powerful way. Text of speech, we've made a lot of progress recently where we can actually take a speaker and listen to him or her and then do speech synthesis that will really sound like the speaker. You know, it's amazing how bad speech synthesis has been. But it looks like that will improve just in the next few years. Certainly linguistics, being able to parse documents and gather knowledge from documents, is one that's very important.

I think software will also get involved in deep analysis, deep modeling analysis, whether it's using Bayesian imprints or some other type of engine underneath. As you browse the Web, you think, "Well, what should I do this weekend?" How can a computer help you with that? You shouldn't have to type in a bunch of URLs to go do that. It should synthesize for you that information, based on seeing your past behavior. That's a fairly deep set of analyses that we're just at the beginning of. And likewise, buying something, learning about something, modeling what you understand, what you don't, in which collaboration require techniques that are deep AI programs.

In terms of really rich learning, I was saying to a small group we were meeting with earlier, I'm surprised how little progress there's been in the last 20 years. Maybe it's just because I'm over-optimistic. When I left working in computer science, I thought the thing I was going to miss was that, within the next decade, computers would start to be able to learn in a meaningful sense, not just have a pattern that's preprogrammed, but really general-purpose learning. Eventually, if we don't figure this out, we'll sequence enough DNA and figure out how the brain does it so we won't have to figure it out. We'll just evolution solution. I think we've got maybe 20 or 30 years before that approach overtakes somebody who's trying to do it de novo.

I got into it this whole software area through serendipity. It's a fun area to work in. It's a fast-moving area. And by surprise, it's actually a great business. Looking ahead, there's a lot more room for breakthroughs and a lot of great value in doing these kind of products well.

Thank you.

Question & Answer

PROF MICHAEL DETROUZOS : Let's turn on the lights. We'll have five minutes of questions. Please, there are microphones. I don't think we'll be able to take more than about four people. So if you'd like to ask a question, come to one of the mikes. I think there's only one mike, which makes it easy.

Q Hi. I have a question. Today there's a great push in our school systems, especially the lower grades, to push kids into learning today's latest technology and mastering today's current computers and software and stuff. And I was just wondering, based on some of the things I've heard you say in the past and read about, is this a mistake that we're not focusing on the basics of learning versus today's technology and making good technicians of what is popular today? And welcome to Boston.

MR. GATES: Well, there's no need for kids to learn the specifics of technology. I mean, the computer is just a tool, and, I don't think understanding that is very valuable, because if there's anything that's going to change rapidly, it's the way that those systems are put together. I think learning a programming language at some point is valuable because it gives you a sense of what the computer can do and what the computer can't do. But I certainly don't see that as being necessary as part of a high school curriculum.

The biggest issue nowadays is just getting enough computers out there so that people can individually pursue what they're curious about, following all the great material that's out there on the Internet. And it's more of a resource problem than a pedagogical problem.

Q Alden Hiashi with Datamation Magazine. I was wondering if you could talk a little bit about research that you're doing specifically at Microsoft Labs in some of the areas that you talked about in your presentation.

MR. GATES: Well, there's a broad range of things going on. In the graphics area, if you go to SIGGRAPH, you'll see some of the things we're playing around with there, some fun progress. That's a great area. We've published a lot of papers about what we're doing in natural language. A few of the groups are more obscure. There's a group headed by Charles Simonyi that's looking at programming languages and can we express our intention in a higher-level form. S lot of people worked on this area and not made much progress. He calls it intentional programming. And it's fun to have risky things like that. Charles wouldn't like it if I characterized it that way, but that's certainly how I view it. And there's about nine different groups right now in the research group.

MR.HAYASHI: If you had to pick one, the top one, which one would you pick as your most promising?

MR. GATES: Well, voice and linguistics is the most central. It's just so natural, if you can use that word. And the progress is quite good, I mean, partly by brute force. We're just getting more immense to be able to do these things. We're understanding sort of blackboarding where you'd take context of different levels and bring that together. You can't solve the problem just by thinking of it as a low-level problem. You really have to have high-level knowledge or context in order to do it well.

Q Professor Patrick Wong from Northeastern University computer science. I have a question. While Internet is doing a lot of good things to us, we're also seeing a lot of ominous signs; for instance, too many children and students are playing Internet too many hours, without eating, sleeping -- (laughter) -- and too much crime, such as illegal cashing out from banking, porno information and so forth. So what do you think we should do to avoid disasters before it is too late, before it's out of control?

MR. GATES: Well, I think kids should eat. Seriously, I haven't heard that. But remember, the average American kid watches TV 30 hours a week. So, what if we cut into that a little bit? What if we cut into the time that they play video games a little bit? And we don't want to cut into the time they spend reading or playing with other kids or sleeping and eating, and so parents may have a role to play here. (Laughter, applause.)

In terms of crime on the Internet, the Internet will be no more lawless or less lawless -- I guess I should say lawful -- than any other domain. People who are criminals in real life will be criminals on the Internet. (Laughter.) It requires the police to get a little more sophisticated. As the Internet moves to the mainstream, all those things will show up. It's just part of the maturation of the medium.

PROF WONG: Except that the trans-border flows will cause governments to worry about each other. How do you handle that?

MR. GATES: That is a very tricky problem, because if you took a least-common-denominator approach -- you know, what does Saudi Arabia want to censor, what does Singapore want to censor -- you'd be down to almost nothing. (Laughter.) And censorship is going to be very tough in this world. We're working with W3C, which is heading an initiative to have ratings, so-called pick system, where you have either self-rating or third-party rating of pictures, of pages. Yeah, it's great. You could have a parent who says, "I'm only willing to let my kid see things that have been rated. If it's unrated and it's outside the country, say, I won't let them see it." Or more strict might be not letting them see things inside the country. But there are some very tough problems that have yet to be worked through about what kind of laws apply and how things work.

Q My name is Tim McDurney. I'm from Harlequin, Incorporated. I don't speak for my employer. Competition is good for innovation and market share is a big concern to people who are looking at Microsoft. Have you guys stopped to consider that you guys could have a very large effect on creating competition in the marketplace by some sort of action on your part? You spoke about openness earlier. But there are other people who are concerned that your operating systems and your standards, de facto standards, are cutting competition off. Do you have something to say about that? (Applause.)

MR. GATES: Well, there's a couple of things. First of all, there's lots of competition; I mean, you know, Scott McNealy and IBM and HP. There are several dozen people who could come up here and tell you about the great things they're doing in operating systems.

Another key thing to remember is that when we sell someone an operating system, they own it, and they can use it and do whatever they want with it forever. The only way that we get any additional income at all is to come up with a better version of that operating system that they might want to purchase. And so with the installed based of things that are out there, we're in some sense our own biggest competitor. If it's not a super improvement, if it's not super-inexpensive, then nobody's going to buy the new operating system. They're just going to continue to work with what they have. And particularly as PCs are getting to saturation levels where every work desktop has a PC, the replacement market is the biggest thing going on there.

You also have what I'll call the middle-ware phenomenon. Is Netscape an operating system competitor? Absolutely, even though what they sell today is not an operating system, it is going to be an operating system. And so the only question is, do we do a good job taking Internet features and put those into Windows so that it's integrated while they're building an operating system around their browser? And there's plenty of room for both companies to be very, very successful.

MR. McDurney: This is too close to not ask this question. Will the browser and Windows and all that good stuff merge and become one?

MR. GATES: Yes, they're just one thing. It's a feature of the operating system. That's my opinion, and that'll be played out in the marketplace. So that's right or wrong.

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Q Just to build on that exact same question, it's sort of a business strategy question. If you look at Microsoft and Netscape's home pages, from time to time it appears there's a bit of a hissing contest going back and forth. (Laughter.) My name is Bill Habib and I work for an Internet software company here in Cambridge. So I'm wondering if you could elaborate on which space you think Microsoft needs to sort of dominate in the Internet in order to succeed. Is it browser desktop? Is it server? Is it commerce? Which area do you think Microsoft really needs to dominate in terms of where the future will go? And where do you think that will leave Netscape?

MR. GATES: Well, in a sense, under the PC rules and Internet rules, anything is cloneable. Anything is cloneable. And so if the marketplace -- if buyers think that you're dominating any space, then somebody will come in and clone it, offer it at a lower price or offer it with better features. There's nothing that stops people coming in and building themselves a name. That's why the PC industry has been so successful, because people have been able to clone what IBM has done. And every product we've had has been cloned by many people. Now, we've been able to do new versions and keep the prices down enough to stay ahead, but it is a very risky business. Nobody has any guaranteed leadership.

Take an example like TCP/IP stacks. We decided to put that into the operating system. Did we dominate it? Anybody can offer those things, it turns out, volume-wise. People like it to be tested and built in. And when we put IPV-6 in there, they'll want that to be nicely integrated in as well. So it's an element of the system. Will browsers move that way? Well, it just depends. If we capture in the operating system everything that people want from the browser, then yes. To the degree we don't, people will either extend using our architecture or they'll build something up from scratch and do it that way.

It's not like a manufacturing business where you own a bunch of factories so nobody else can come and build factories. In this world, what's your factory? You just put the bits on the Internet and, boom, you can have 100 percent market share if you have a better product.

Q Hi. Will Clerman second year at the Sloan School, MIT. Question for you: Some of us are going to Netscape for the summer. What advice or message would you have us take with us? (Laughter.)

MR. GATES: Look, Netscape's a good company. No, I think going there for the summer would be a very exciting thing. Send me some e-mail after you're done. (Laughter.)

MR. CLERMAN : You know, Jim Clark was a distinguished lecturer here just a few weeks ago.

MR. GATES: They're doing good work. The pace of innovation on the Internet is really fantastic. And there are four or five companies that are part of that. And if you get to the content side, there are literally tens of thousands of companies doing great things. If you mention some other companies, I might say they're not on the cutting edge like Netscape is today. Well, we won't get into that.

Q Hi. I'm Vince Lupien I'm an acoustical engineer here at MIT. And my question is slightly personal. I'm wondering -- well, not that personal. (Laughter.) In your speech I heard several times the words "neat" and "fun." And as an engineer, I can certainly relate with that. But I also see some dangers with technocratic mentality sometimes, which can lead us to perhaps have too narrow a view on life. And I'm wondering, in your own -- obviously you've enjoyed a lot of success, but at this point in your career, how can you justify, say, getting up and working on neat and fun things every day, as opposed to perhaps, you know, given the reality that there are people starving.

PROF MICHAEL DETROUZOS: What do you want him to do, to go cry and work on boring things?

Q No, but this is a question that I've really wanted to ask you. And as I said, it is somewhat of a personal question. I'm putting you in a hard spot, but --

PROF MICHAEL DETROUZOS . : Social responsibility?

Q Yes.

MR. GATES: Well, I have a fun job. I get to work with smart people. I get to work on neat things. I wouldn't change a thing. So that's why I get up and do it. As I get older, and Microsoft is still successful, then I'll have resources to give away.

PROF MICHAEL DETROUZOS .: Bill, let's take a point here. Let's take the countries of the world that do not have many resources. And you spoke earlier of something like public libraries. Is Microsoft planning or thinking of maybe doing something, for example, to promote the Internetization, the computerization, getting this technology in the Third World, in the developing world, in Asia or so on?

Q Or even in the U.S., actually.

PROF MICHAEL DETROUZOS .: Or in the U.S., yes. That also works in the U.S. Thank you, sir.

MR. GATES: Well, there are a number of projects. There's a thing called Libraries Online where we take libraries and we fund staff and equipment and communications there, so that kids can come in and use the Internet. Today I was at the computer museum because they have an outreach called the Computer Clubhouse where they're going into some of the poorer neighborhoods in this community and making computers available in some of the housing groups. And Microsoft has funded that.

So there are things I do personally and there are things that the company does. I do believe that this technology is very empowering and that the inequality we have around the world today will be lessened, you know, as all the universities around the world get hooked up to this. Your ability to have the same access to knowledge would be much better than it ever was in the physical world. When you can electronically hook up to all the latest knowledge, it's easier to get to an equal footing than it is when you have to put together a library of millions of books and all the kind of equipment.

PROF MICHAEL DETROUZOS : I think, in terms of knowledge, I agree with you. But in terms of the information, helping those who already have a rich market basket and resources and not helping the ones that do not, might it not exert a counterforce? Left to its own devices, without people paying attention, might not information, information technology, help more of those who are rich get richer, both as countries and as individuals, and leave the other ones behind, thereby expanding the gap instead of closing it?

MR. GATES: You could certainly say that when books first came around, they accentuated the gap between the haves and the have-nots. The people who were literate could read, could do business. And it took a long time between then and when people said, "Hey, let's have libraries. Let's have everybody get out and use those things." Hopefully this time there's not nearly that same time lag between seeing a social imperative for it to be pervasive.

Q Hi. My name is Steve Yemchick. I'm a grad student here at MIT. I have a question about Internet and the future and how you see Microsoft in it. There's more and more information out on the Net. And because of Java, you're going to see things where the information on the Net is like programs. And in the future, do you see Microsoft more as an Internet provider of information, provider of programs, or an organization that collects software and ideas for -- and collecting content and redistributing it like your deal with NBC?

MR. GATES: The biggest businesses we're in is building productivity tools, like Microsoft Office and building the operating systems. And those will probably be our biggest businesses for a long, long time to come. We're also in the content business. You know, we did games starting 18 years ago. And we were at the E-3 show showing off some of the new things that we'd done and the stuff we'd done in a joint venture with Dream Works. And we are doing some content things. But that won't be the largest business at Microsoft. We just want to lead the way and show some examples of what can be done. But that will be a very diversified business. The biggest impact we'll have will still be in defining tools and helping to contribute to the platform.

PROF MICHAEL DETROUZOS : Bill, as a distinguished lecturer and past lecturer of LCS, I want to thank you. LCS is the home of the Web. We welcome Bill Gates, who is what Carnegie was to steel, Rockefeller is to oil, Bill Gates is to software. Best of luck. Best wishes.