MR. GATES: Good afternoon. It's a great honor to be here. The list of previous speakers is quite amazing. I've never followed a supreme court justice or a prime minister before, and it's possible I'm the first drop-out that's ever addressed this group.

(Laughter.)

MR. GATES: Walter and I share the same optimism about the impact of technology on the world. In 1992, he wrote that the world is not changing because computer operators have replaced clerk-typists, but because the human struggle to survive and prosper now depends on an entirely new source of wealth. It is information, knowledge applied to work to create value. In some ways, Microsoft and the Manhattan Institute are in the same business, harnessing the potential for the 21st Century and helping to create its new ideas. I read in the background material that the New York Times described the Manhattan Institute as turning intellect into influence. And your willingness to question assumptions and stereotypes are key to any successful enterprise going forward whether it's focused on software or statecraft.

As I look forward, I'm very optimistic about the things I see ahead. Although this is human nature, I think you'll find me more optimistic than most people. This really focuses on two key areas, incredible advances in information technology, and the incredible advances in medical technology. Being able to create the ultimate information device, being able to understand the genome and the world's diseases, all of those are within our grasp within the next two decades. It's interesting to consider that two decades ago, when people thought about the future, they had a very different view.

They saw the U.S. as falling behind. Everybody looked at the industrial model, particularly in Japan, and its willingness to invest very long term, and its larger innovations, and thought that these companies would lead the way in the computer industry. In fact, much the opposite took place. Today we can say without a doubt that the U.S. is at the center of the information technology and the medical technology that's really changing the world.

Now, why is this? Perhaps the humility that we had 20 years ago, and going back and reexamining how we did things was part of it. But I would say even more central was the attitude toward risk, and the attitude toward free markets. We see incredible levels of investment in this country in new and unproven things. And even though some of these Internet valuations will certainly be proven to be excessive, the basic idea of accelerating the investment into this new area is really a fantastic thing.

We're also seeing proof of the importance of collaboration between new businesses and existing businesses with the great universities in this country.

I believe that the world of information technology will continue to surprise people with its impact. There are several reasons for this. The first is that exponential improvement just is unknown in any other endeavor. Having something get twice as good again, again, and again moves it past absolute limits. The ability to have kids make animated movies and store them and edit them, which today would require a workstation worth hundreds of thousands of dollars, that will certainly be a standard feature of a computer that costs only a few hundred dollars. The ability to get video information to video-conference, to see the world's best lectures, all of that will be easily accessible in the home and in schools.

These improvements are not just numeric, talking about millions of instructions per second, or incredible amounts of storage, they're also changing the very way we look at the tool. The fact that computers will be able to understand speech; the fact that they'll be able to speak to you; the fact that you'll be able to handwrite on a tablet that has resolution as good as paper and those notes will be recorded and transmitted in the way that you want them to be - those things change how we relate to the device very, very dramatically. And every one of those things will happen within the next decade.

The other reason that people are still underestimating the impact is that as this device gets to critical mass, as it's broadly accepted, then we'll start to take even more advantage of it. It will become the medium for business and communication. For example, in schools today, textbooks are designed to be on paper. The investment that the textbook industry makes is totally assuming that form factor. But sometime in the next decade that will shift, and all the curriculum will be designed to help the teacher in a digital fashion, to help the student go out and explore knowledge in different ways, and things will be designed so that kids who learn in different ways can take different pathways to achieve the same result.

So, critical mass is very, very important here, and we're still short of that critical mass. Even though in the United States almost half the homes have personal computers, electronic mail is not the standard way that people communicate. And the world of business is still very, very paper-oriented. I want to introduce a new term, which is the web workstyle. This is the idea of a new style of work that's utterly dependent on using digital information. It's quite different than the way people work right now. Although they may use personal computers to create documents, edit documents, annotate documents, they may use electronic mail to stay in touch, most of the information they work with ends up on paper.

If they want to see a sales report, if they want to send a bill to another company, if they want to print out a product plan, if they want to go to a meeting and have something to hand out to people, that is done totally in paper. And what it means is that there's an incredible overhead. Just think of billing alone, and the cost and complexity of printing and sending those bits of paper around. If you get one of those bits of paper and you don't understand it, if you disagree with it, then you're calling up somebody who has to find somebody to look into that. If you want to take that information, say its your phone bill, and you want to relate it to various cost centers you have in the company, you have to reenter the data and classify the data.

Well, all of that will go away. It will simply be a series of bits that are transmitted, and then automatically categorized. And there will be rules that you set up that can trigger and say, is this unusually large? Is it different than what I would have expected? And notify somebody who will pay attention to that.

This ability to collaborate in a digital form will change more than the efficiency of business. The efficiency is an amazing thing, and it's not just companies that you think of as being in the information business. Even companies you think of as manufacturers devote more money to their information workers than they do to their factory workers. And those information workers are doing product design, they're doing marketing programs, they're doing demand analysis, pricing analysis, all things that will be dramatically better when done in a digital fashion.

This web workstyle will change the boundaries of business. The whole way that you think about what you should do inside your company versus outside the company will be quite different, because the ability to use the electronic marketplace to reach outside to find the best expertise, and then stay in touch with that expertise will allow you to do things that you would have done internally in the past. Technology is driving the trend for the average-sized organization to be much smaller.

In some ways, this is behind the reason that we always see these headlines, including today, about large organizations that are downsizing, and yet the total number of jobs in the economy has gone up very, very substantially. That trend is a very positive thing, because the new smaller organizations that are created will provide very satisfying jobs, and they'll provide the flexibility that the fast moving economy needs.

Now, this digital approach goes beyond just what goes on inside a business, or between business-to-business. We are starting to see reaching out to customers, whether it's for actual transactions or customer service, also being done in a digital form. There's almost a mania of investment in the companies that declare themselves as putting up a web site and offering products for sale.

There are some fantastic things already taking place there. This reinforces the personal nature of these devices. These devices are not about something at the center of the organization, which was what the mainframe was for. These devices are about a person and what they can do. It's a tool for your mind. In fact, over time we'll see the idea that publishing is only done by a few large media organizations, that concept will change dramatically, because everyone who has a PC will be able to get out and publish the material that they're interested in having other people see.

Now, this leads to what I call the web lifestyle. It's the lifestyle where you take the Internet and the PC for granted, where you'll use it a dozen times a day without marveling about what it does and that it actually worked without giving you a strange error message. Now, this is in front of us. We can get a glimpse of it in some university campuses today, where they've done away with the course catalogue, they've done away with handing in homework on paper. And these students, because they're willing to embrace the technology, because they have a high speed network, and everyone they want to work with is also using the same digital tools, we see them already wanting to do commerce in this new way.

The beginnings are already here. Take the venerable encyclopedia. When I grew up it was the World Book that sat on my parents' shelves, and if you wanted to read it, you started with A, and moved ahead alphabetically. Well, today the sales of print encyclopedias are down, and they're a fifth of what they were, and now electronic encyclopedias are selling five times as much as the print encyclopedia did at its peak. And this is an encyclopedia with timelines, with multimedia, with the ability to quiz you, the ability to stay up to date, and of course, it's dramatically less expensive than the print volumes it replaced.

Now, this has not taken place for most printed materials. And that's because reading off the screen is still vastly inferior to reading off of paper. Even I, who have these expensive screens, and fancy myself as a pioneer of this web lifestyle, when it comes to something over about four or five pages, I print it out and I like to have it to carry around with me, and to be able to annotate. And so it's quite a hurdle for technology to achieve, to match that level of usability. The batteries last forever, when you have information on paper. You never get any strange error messages whatsoever. So screen technology, software technology, all of those things have to improve very radically before all the things we work with on paper today we move over into digital form.

My belief is that this will happen, and happen a lot faster than people expect. We find today that people who want to make investments are using the web. They're getting the latest information. They're doing their own trading in some cases. They're belonging to new communities, if you're interested in the progress in some medical area, it's very easy to join a forum, share your ideas, hear from other people who are in a similar situation, and there's no way that could have happened before.

When we have people who move to the United States from other countries, which we often do in our engineering groups, they're able to stay in touch with their communities back home, by listening to the radio broadcasts across the Internet, seeing their newspapers. And so they can stay in touch, and be involved in a way that would have not been possible just a few years ago.

We can expect that a lot of products that have had physical form will now simply be available over the network. I've already said that printed material, like books and magazines will go this way, but even more rapidly, products like music or photographs will also move into digital. Instead of having to go out and buy a record or a CD that you have to place in the player, you'll just select from a group of songs that you've organized and that you're interested in. And wherever you go, those will be accessible to you, without carrying anything of any kind.

And so the web lifestyle is very different. And the people living the web lifestyle will demand that all the people they interact with, whether it's doctors they're scheduling appointments with, whether it's filing their tax returns, whether it's organizing a trip with their friends, they'll want all of them to connect in the same way. And so as you get more and more people adopting that approach, they will draw in their friends, and create a very dramatic increase in that lifestyle.

Now, this has major implications for all of our institutions, for schools and libraries: it means that they have to reach out and not only use the technology, but rethink their mission around that technology. In schools, it's amazing to see that already teachers are collaborating with each other, which has been very difficult to date. They haven't had the time or a medium where they could share their best practices. Well, as they create their material digitally, that kind of sharing is very, very easy.

Of course, kids are really incredible, in terms of how much they dive into this and just take it as a given. They'll be the ones who really bring the web lifestyle into the mainstream. But, already they're out there on the Internet, finding new things about topics, bringing that back to the classroom, and using it as something to preserve their incredible curiosity in a way that wouldn't have been possible before.

Everywhere I go, outside the United States people ask, how do they catch up? You know, they're quite worried about the fact that they see U.S. businesses adapting faster than the businesses in their countries. And that's legitimate. It really has been something we can be proud of. The fact that they're humble and they're worried about it, means that they will come up with plans to catch up, because they know that this has a major effect on the competitiveness of their businesses.

For government, there are many new challenges and opportunities created. You'll have more informed voters, they'll be able to go out and find the speeches or the votes of the people they're interested in. In fact, if they browse the news, just by knowing their zip code we can already append to any article that might be about a vote that was taken, we can append what the person they voted for, what their position was and what comments they may have made on the issue. And so it really is a tool for more involved democracy.

The government is an incredible printer of material. The government has lots of information, which belongs to all of us, but it's very hard to get to. Interacting with the government is very difficult, you often stand in line to fill out forms. Understanding which part of the government to interface with is very difficult. Let's say you just simply want to hire somebody to work in your household, the paperwork you have to fill out is probably the main reason for the lack of compliance rather than people simply trying to save the money.

There are great examples of governments who are already moving to do these things the right way. In Australia, if you want to hire somebody or move to a new address, you simply enter that in once to some public kiosks they have, and then all the government agencies that might have to know are informed. So you don't have to understand their structure, they simply respond to whatever information you are able to provide.

There will be challenges for government in terms of policies. The Internet affects the way taxation is done. It brings up issues of privacy, protecting kids, and many other issues that the sooner they're addressed, the better off we'll be. But I think there's one great challenge that rises out of this that's more important than any other. A generation ago, I might have said that was the challenge to spread democracy around the world, and there we've made incredible gains, propelled in part by this technology revolution where no Iron Curtain can lock out the power of ideas.

There at the start of the 21st Century, though, I think the new challenge is to spread the benefits of technology as widely as possible. There's an opportunity share our resources as well as our ideas. The creators of all this can also be major contributors. It's happening now with pioneers like George Soros and Ted Turner, bringing 20th Century breakthroughs to people around the globe. My family has started its participation in philanthropy with several foundations that we've created which are now endowed with somewhat over $2 billion.

Our focus here is access, access to technology and medicine, visions like making sure everyone who can reach a library can have access to all the information out on the Internet. And so, something more vast than what's available at the Library of Congress, and all the great interactivity that comes with that.

In the area of health, the access to the latest advances is not very widespread, and so things like vaccines that we have here are not out there in the third world, and yet by closing that gap, we'll be able to save millions of lives.

So, we're only at the beginning of what we have to do here. Never before in history has innovation offered promise of so much to so many in so short a time. We're changing the world with technology. Now we can work to make that technology literally the common wealth of the world. So, let's keep innovating. Let's retain the freedom that has made the United States the crucible of all this activity. Let's drive not just breakthroughs in new products, but new ways to give more and more people access to these inventions and their benefits.

This is a broad and important mission, and I believe we all have a part to play in it.

Thank you.

(Applause.)