Schroders Big Picture Conference

March 24, 1999

HERB SCHLOSSER: I want to get started, because we want to get into the next part of the program.

Sir David Frost has won all the major television awards, and his professional activities have been so diverse that he’s been referred to as a one-man conglomerate. He started out very young, and when he was in his twenties he was the host and co-creator of one of the most inventive programs the BBC ever had, called "That was the Week that was." We put it on NBC in the early ‘60s in an American version, and David was again the host. And that’s when I met him. It was irreverent. It was unafraid to make us laugh at issues of the day, and it was really the forerunner of Laugh-In and Saturday Night Live. So he accomplished a lot when he was young.

He’s gone on from there. He’s produced countless television programs. He’s the author of 17 books. He’s produced seven films. He’s a publisher, a lecturer, and an impresario. And he was one of the founders of two of the British broadcasting networks.

He’s going to interview today, and landmark interviews have always been the most prominent feature of Sir David’s remarkable career. Among the many world figures that he has interviewed are six of the most recent presidents of the United States, and five of the most recent Prime ministers of Britain. He’s interviewed almost all of the world’s leaders. I think he’s the greatest interviewer in the world, and today he’s going to be interviewing someone who is one of the most important people in the world. It is a great pleasure to introduce Sir David Frost.

(Applause.)

SIR DAVID: Thank you. Thank you very much indeed, Herb, for those very, very generous words. As we all know, computers have changed our lives. I just bought a new computer for the office, and I said to my assistant, "They say that this computer will cut your workload by 50 percent." And she said, "In that case, I’ll have two of them." (Laughter.)

Our great interviewee today is, of course, Bill Gates. This is the occasion, the actual day of the publication of Business @ the Speed of Thought, the follow-up book to The Road Ahead. A friend of Bill’s said the other day, "It’s not true that Bill wants to be President of the United States. He couldn’t stand the loss of power." (Laughter.) And it’s a pleasure to talk to him. I first interviewed him in 1995, and it was a memorable experience that I won’t readily forget. One of his friends describes him as one part Albert Einstein, one part John McEnroe, and one part General Patton. That reflects, I think, what a fascinating man he is, and what an privilege and a delight it is to welcome him now, the one and only -- that was meant for him -- so was a man who needs no introduction, here he is, Bill Gates.

(Applause.)

Bill, it’s great to see you again, it really is. I mentioned that quote from 1991 about you being one part Albert Einstein, one part John McEnroe and one part General Patton. Is there anyone else that you admire that you’d like to add to that list?

BILL GATES: Well, I think I’ve always admired scientists, people like Richard Feynman or scientists who made these incredible advances. A lot of the reading I do about history focuses on the great scientists.

SIR DAVID: Now, in the new book there are so many memorable quotes, but one, which is immediately relevant to everybody here, is "business is going to change more in the next ten years than in the past 50." Now, what does that mean to the business leaders that we’ve got gathered here today?

BILL GATES: Well, I think that in most industries, if you keep trying to do business the way you’ve done it in the past, that’s going to create a real problem, because you won’t be as responsive, you won’t be as efficient as the people who are embracing the new approaches. We’re seeing an incredible number of new start-ups coming into businesses, taking the Internet as a given, assuming that the information is there and they can reach out to their customers in this new way.

And so I have so many business leaders coming to me and saying, "What should we do to seize the opportunity? How can we do this in a very positive way? And who are the leaders, where are the examples?" And so I decided it would be worth going out and chronicling the great examples, and talking about some of the metrics people should have to say how far along are they in seizing this opportunity.

And it’s really quite revolutionary, the way information is moved inside businesses, the way it’s moved from business to business, business to consumer. All of that is going to be completely different in less than the next ten years.

SIR DAVID: And in terms of your phrase, the Digital Nervous System, you paint a marvelous picture of how we can all benefit from that. At the same time, there’s no such thing as a free digital lunch or whatever; are there drawbacks as well?

BILL GATES: Well, the digital approach is about empowerment. It’s about making information that you have, sales results or analysis or what’s going on with a customer that often you wouldn’t have easy access to that data, you certainly wouldn’t be able to look at it in rich ways, you wouldn’t be able to mail it around to other people and collaborate on that information, and so your creativity, your ability to help contribute is not being taken advantage of.

Why didn’t people do this in the past? Well, it would have been too expensive to take a mainframe-type approach and create that information flow. Now, with the PC and the Internet it’s very inexpensive. In fact, people have lots of PCs and it’s just a question of whether they step back and define their business properties to take advantage of the infrastructure that’s out there.

I don’t think there’s much in the way of drawbacks, because this is all about serving the customer. It’s all about taking advantage of the resources you have, about getting the news around the company that lets you act on things that are going on, and it’s a better way of doing business, and it’s more fun for the people involved at the same time.

SIR DAVID: And you were saying that, in fact, most companies get 20 percent of the value they should get out of these new developments, they’re wasting 80 percent, and that one of the ways that they’re wasting it is in not being a more paper-less company.

BILL GATES: Yes. If you just have the PCs in a company, and mainly what you’re doing is sharing some files and creating documents with them, and not running the fundamental information flow through those PCs, then the value you’re losing is greater than the value you’re receiving. It’s probably still a worthwhile investment, but with a bit more effort, when you get your culture to work around electronic mail, when you take your paper forms that you’re using for a variety of things and instead have rich screens on those PCs so that people never have to fill in the same information twice, where the form is confusing, they can have access to that whenever they want; if you do it that way, you’re going to free up a lot of time of your employees, and you’re going to show them that you really care about giving them that time to brainstorm and work with customers in a richer fashion.

SIR DAVID: And in terms of these ‘80s, you said were for quality, the ‘90s re-engineering and so on, and that the 2000s and 2010s it will be all about velocity. Now, does that apply more in technological terms or equally across the board?

BILL GATES: Well, I’d say this revolution will hit different industries at different times. Certainly, with the technology business we’ve been subject to these rules for more than a decade. If you don’t hear what your leading-edge customers are asking for, if you don’t respond very quickly to provide those things, there is some new company, somebody that nobody’s ever heard of, who’s going to focus on that and build an installed base around that and replace the leader. We saw that happen with IBM, with mainframes. We saw it happen with Wang, with word processing. We saw it happen with Digital, with mini-computers. So the history of the computer industry is about companies that didn’t see the new trends, and their leadership was replaced. It makes people in the business have to be very humble about, you know, when has my time come, how can I stay on top of things and get through all these changes. So we’ve always needed to be thinking ahead and be willing to obsolete our own products very, very rapidly.

Now, the next industry that I think gets affected by this is the world of financial services: brokerage, insurance, making loans; because on the Internet all the information can be there, and those services are just information-driven, those companies have always been big users of technology. And we’re already seeing that most people who want to buy stocks are now moving to the Internet. And if you want to get a mortgage you can go on to the Internet and compare different pricing and fees, and you have some people up there that won’t have much in the way of infrastructure costs, just coming in with attractive pricing. And so the leading edge companies are already saying, "Hey, the Internet is redefining how we need to do things."

Retailing will also be affected. You know, we’ve seen it in books, records and travel reservations now that you get a substantial amount of business. But there’s no doubt all kinds of purchases will be available on the Internet. And there’s a start-up, you know, anything you can think of: E-dog store. There’s an e-dogstore. It's got a valuation of $300 million, headed towards a billion. (Laughter.) And, people are out there with a lot of faith that something dramatic is happening here.

I have no doubt that in terms of the consumer benefits here, they're unquestionably going to be dramatic. You’ll be a more informed buyer. Even when you don’t go and do the purchase itself on the Internet. Say you’re going to buy a car; even if you go to a traditional dealer, you will have gone to the Internet and seen what the reviews look like, found out what your friends said, and found out how much that dealer paid for the car. But if he wants to negotiate with you, you’ll know everything about what a fair price should be.

SIR DAVID: So in five-year’s time -- we used to always talk about twenty-year’s time and ten-year’s time, but we can’t talk more than five years these days, can we. But in terms of the 0.5 percent or something I read somewhere was the figure of sales, percentage of sales on the Internet in the top seven economies, how much will be done on the Internet, what percentage of sales will be done on the Internet in five years time?

BILL GATES: I think if you take business to business, it will be on the order of 90 percent. It’s very easy to take a buyer and seller who are already doing business and say that instead of exchanging paperwork, that you ought to have the Internet there to confirm the order, let somebody check the status of the order, to let them browse through all the different options they have there. And so you’ve already seen people like Microsoft, Intel, General Electric announcing gigantic shifts, because they’ve decided the Internet is simpler.

That’s not really the most profound part of this revolution. It can generate very big numbers, but to the degree it’s the same buyers and seller, it’s not redefining the marketplace. You redefine the marketplace where the ability to find a seller and find a buyer is done in a new way.

So there’s a small company up in Wisconsin that refurbishes old phones, or sells really old phones. Now, that’s a business that they couldn’t have been in, in the old world, because in any city they’d put a store in, they just wouldn’t find enough customers. But because on the Internet they have the whole world able to find them, their business is growing, they’re hiring new people. It’s kind of a specialized business. So that’s a really profound thing, because it wouldn’t have been possible without the Internet there to form the new marketplace.

SIR DAVID: You pick out some companies in areas that are doing well in terms of the Digital Nervous System, and so on; you don’t specifically refer to Hollywood or the television networks. How many marks out of ten do they get for use of the new digital opportunities?

BILL GATES: Well, the whole process of creating content is going digital. So whether it’s the high-quality music that’s being mastered in a digital way, or the video cameras that are becoming digital and the editing systems that run off of disks instead of tape now, your ability to do the special effects, your ability to collaborate on a script with somebody who’s at a different location, all of that will transform the entertainment business as well.

The most dramatic thing that people are trying to figure out is this: how does it change delivery? How do you go from having just a few TV channels to anybody being able to call up high-quality audio and video across the Internet? How does that change the dynamics of the business?

I wouldn’t say tjat in terms of internal operations that the entertainment companies have been leaders. They could benefit in the same way, because they have lots of knowledge workers, lots of decisions to be made, and I’d say some of them use electronic mail, but most aren’t that far along.

SIR DAVID: And in terms of the future, you were quoting just now about making your own products obsolete. There was another quote here, which was a fascinating quote, "One day a meager upstart will put Microsoft out of business. I just hope it’s 50 years from now, not two or five." But you’ve got to fight back, and you’ve got the backing financially and everything to fight back. You can hold out longer than that, can’t you?

BILL GATES: Well, in the history of technology, when somebody doesn’t see a new direction and doesn’t fulfill needs, they don’t necessarily go out of business. I mean, even IBM, when it faltered in mainframes and racked up tens of billions in losses, it had enough of a reputation and enough of an asset in terms of its contacts with large customers, they’ve come back in and now they’re back doing business in a different way.

So you don’t want to have to go through anything like that, so you’re always looking out to say, are we doing speech recognition better than anyone else? Are we doing these tablet machines, or wireless devices? Are we simplifying user interface? And it’s the question of driving the product forward, using the customer feedback as a guiding light, and a willingness to invest in very advanced approaches, which we have been able to afford, and we’ve brought in a lot of the very top people, and that’s one of our big strengths.

SIR DAVID: In terms of the future of Microsoft, a spokesman for Microsoft said on Monday in the Wall Street Journal that there were plans for beginning settlement talks between the Justice Department and the 19 states and Microsoft and so on, but they probably wouldn’t reach any fulfillment before the resuming of the trial. Is that roughly your understanding of the situation, as of today?

BILL GATES: Well, even before the government filed this lawsuit, we had a great desire to settle this thing. I spent about ten days straight suggesting approaches and being in dialogue, because, you know, we’d like nothing better than to have this behind us.

There are some key principles at stake. I think a lot of people have lost the big picture, which in this case is that we put Internet support into Windows. That was a great thing for consumers, as even the government's own witnesses have said. There’s no consumer harm in making a great software product available. In fact, and we’ve shown that there were immense benefits to that.

So the ability to innovate in Windows, the ability to maintain the integrity of Windows as a fully designed product, those are important to us. And as long as we can keep those intact, it would be great to settle the thing. There are ongoing discussions, and I won’t speculate as to the probabilities or anything. But, you know, I hope it does get settled.

SIR DAVID: Last week in the New York Times, some of the state attorney generals were all saying, very confidently, "it’s safe to say our confidence has improved," and so on. Is it safe to say that your confidence has improved?

BILL GATES: Well, I’m not sure, confidence in what?

SIR DAVID: Victory, I suppose.

BILL GATES: Well, our confidence that every company should have this right to innovate, to make it easy when you buy a PC to get connected up to the Internet, that providing that functionality at no additional cost, including the new capabilities to be built in there, our confidence that that is not only legal, but it’s actually encouraged in the American system, since that’s the whole approach that brought about the PC revolution, created a gigantic software industry, created so many new jobs, so many new companies, and therefore it’s worth standing up for. You know, the people managing that are off doing that, so that I, and other people in the company, are not distracted by it. What we come into work every day thinking about is, how do we make Windows better, how do we make Office better? We've got to maintain our pace, because if we slow down, there’s lots of people who would love to take our place.

SIR DAVID: The New York Times said "we still have no firm idea what the government wants to do about Microsoft. "Basically, I think," the person said, "they just want them to be nicer to their competitors." (Laughter.)

BILL GATES: I think that’s a pretty good summary -- (laughter) -- of the situation. And you’ve got to remember what the system is here to encourage. It’s here to encourage us doing a good job for consumers. And in the Internet Explorer work we did, as we got to version 3, we won most of the reviews; and when we got to version 4, we won virtually all the reviews. And it was just last week I introduced version 5 of Internet Explorer, which is off to an incredible start and has also been acclaimed in virtually every one of the reviews.

And so that competition, whether it’s between us and Netscape or us and Sun or us and IBM, that’s what is making the computer industry the fastest moving, giving people much, much better products.

You know, think about this: this is an industry where a company was founded, Netscape, and in less than five years they were able to sell out for over $8 billion in value. Now, if somebody can tell me that’s a business where there’s barriers to entry and nobody can be successful, I don’t think they’re paying attention to what’s going on.

SIR DAVID: What about maintaining your growth levels, the 40 percent plus and so on, in the United States, and people say it will be lower, 20 percent, 25 percent, but is that why you’re focusing on China, Brazil, India and so on, because there’s massive expansion there, greater than there still is in the United States?

BILL GATES: Well, we’re very conservative. Whenever we talk to the financial analysts, we’re very clear with them that the growth, the rapid growth we’ve had, that same percentage isn’t something that people see in the future. And we’d like people to have a very conservative view of what that’s going to look like.

We are a very global company, and we’ve made huge investments in some of these developing markets. Over 4 million PCs a year are sold in China. Now, we don’t make so much revenue off of those PCs, because of the software piracy there. If we could raise the money we get per PC in China to be even half of what it is in the United States, that would be hundreds of millions of dollars for us. And so as piracy goes down, as that market grows, it’s going to be a fantastic thing, and that’s what justifies the attention we put in there, and those levels of investment.

The PC is a worldwide phenomenon. Even the idea of buying a PC in the home to help kids get educated, that’s something that really has driven the sales in China.

SIR DAVID: And in terms of the future, you were quoted -- I don’t know whether you actually said it, but you were quoted in Davos as saying that you thought Microsoft shares were overvalued. Did you actually say that? Do you think that?

BILL GATES: Well, first of all, I am not a stock market analyst. (Laughter.) I have my job because I like software. I come in and hire people to build great software products.

I’ve always had a conservative view of the stock market, and so at most points in the history of our stock, or any technology stock I think I would have said, "Wow," you know, "That sounds like a very high valuation to me." I’ve said that broadly about technology stocks, including our own. I think, "Boy, these are very high multiples for a business where you have so much uncertainty, where new things are happening all the time, where maintaining your leadership, nobody has, even the strongest company has a guaranteed position."

But I don’t think people look to me for stock market advice. If they did, they might have sold their Microsoft shares some time long ago.

SIR DAVID: But did you say they were overvalued? (Laughter.)

BILL GATES: Throughout Microsoft’s history, even when the stock price was a tenth of what it is today, I thought, "Boy, that’s a very high multiple" -- (laughter) -- you know, "can I fulfill those expectations?" And, you know, I feel that same way right now.

SIR DAVID: Right. (Laughter.) Now, Bill, what about computers? What will they look like in five year’s time? We talked four years ago about the wallet PC and so on. What are they going to look like in five year’s time?

BILL GATES: We’re definitely going to have a lot more form factors than we have today. And Microsoft is investing very heavily in these. The market is still very small. PCs are at about a hundred million units a year. And the small devices, even if you take a very generous definition, would be at a 3 or 4 million unit run rate. And, of course, the prices are dramatically lower for those. So we haven’t seen the explosion yet, but I think that the improvements in the screens, the batteries, the software, the wireless data is going to make that companion device that you can put in your pocket, and that connects up over the wireless network, it’s going to make that a huge market.

I also think that you’ll see the PC come in a new form. In the last year, the progress in portable PCs has been unbelievable. They’ve become very thin and very light. But the new form that we expect to see in the next two years is one where you can detach the keyboard and just have the screen in a tablet size, so you would be able to do handwriting on that screen, the handwriting recognition software would be built into Windows, the Office applications would let you take notes and deal with that information. So even at a meeting, whether it’s this one here or a small business meeting in a conference room, people would take their machine in with them.

You know, today I take a lot of my notes on paper, and I think, "Okay, I want to send mail about this and I want to do this and that." And often I don’t get enough time, so a few weeks later I’ll find those notes and think, "Jeez, what did I mean?" I haven’t gotten around to doing it, which if I had it in digital form, even during the meeting itself, it would be dramatically better.

So that tablet PC will be important. The palm-sized device will be important. The intelligent set-top box that connects to the two-way cable system we also think will be very important. And so we’re designing our software so that you can use these devices without having to think about moving your information between them, that if you have files, contact lists, schedules, mail, any device you pick up, it’s all the information is there without any effort.

SIR DAVID: And what about the convergence of the PC and TV? I mean, how far is that going to go, and how far will it affect the programs?

BILL GATES: Well, the future device you’ll have in the living room, we’ll probably still call it the TV, but it will be very different than what you have today. Today you receive broadcasts where you have to decide to watch them when they come on. In the future, because you’ll have the Internet you’ll be able to go out and get video, and also because the cost of storage is so low, you’ll be able to easily record things on a disk and go back and play them when you want. There will also be interactivity. If there’s an ad that catches your interest, you can say, "Hey, send me more information about that." The ads will be more targeted, because the ability to insert ads for the right audiences will come really very inexpensively in this digital framework.

So on your TV sets, the one in the living room that you sit far away from, you’ll be able to play games, you’ll be able to chat, and it will be connected up to the same network as the device in your den that you’ll sit closer to. And so the technology between that TV and that PC will be very similar, even though there will be some differences in terms of the kind of screen and whether you have different peripherals; all the information common to both devices.

SIR DAVID: And what about the bug situation in Y2K, et cetera, et cetera, how much do you think dealing with that is going to cost the industry as a whole? And would you be happy taking a flight on January the 1st? (Laughter.)

BILL GATES: Well, the cost of it, just as a distraction, to people to have to go through their software and do various updates is certainly billions and billions of dollars. And it’s a very serious topic that everybody who has computers is having to formulate a plan for. I think that in the United States, companies have that awareness, and the key steps are being taken. If you look broadly around the world, I think there are places where they haven’t woken up to what a serious issue this is.

In the case of the PCs, it’s mostly just getting the software updated. The really tough problems are the large mainframe systems where the person who wrote the code isn’t around anymore, and you really have to dive in and see what needs to be changed.

We’re close enough now that the approach of replacing the older systems, starting with the new systems, it’s probably too late for that, and so people should just scrub through and see what they can do.

I don’t think that infrastructure systems like planes flying or, you know, electricity being delivered, I don’t think those systems will be disrupted. I think most of those systems are not affected. As for the ones that are, I believe that people are taking that very seriously.

So I’m not going to change my behavior, but nor would I predict that there won’t be some foul-ups, particularly in billing systems or financial settlement that will get a little messed up early next year.

SIR DAVID: Tom Peters and Robert Waterman, Jr., wrote that "man is simply designed wrong for any mechanistic system." Do we have to reprogram ourselves?

BILL GATES: Well, part of the challenge of making the PC simpler to use is having the computer meet the user rather than the user meet the computer. If you go back to the original DOS machine, where people knew the commands and they could navigate around, that was really the user having to be incredibly intelligent about what was there. We took a big step forward with the graphical interface. We’ve taken a big step forward with browsing and links. We have a lot more to do in terms of making it easy to annotate, making it so when you search for information, the way you do that on the Internet, for your mail or the file system, those are all the same.

I absolutely believe we’re in the process of building the most powerful, profound tool that man has ever had, and it’s there to leverage our natural curiosity, our natural creativity, and it’s allowing everybody to be involved, everyone to publish. You just build up your own Web page and express whatever thoughts you have. You don’t have to buy a newspaper or a TV channel in order to do that.

And so I think it’s fantastic that man as the user of tools is going to get something that let’s us tap into our full potential.

SIR DAVID: One of the dramatic changes since we last did an interview is that you have time to embrace fatherhood. How has that changed your life?

BILL GATES: Well, it’s been an incredible change. Going home and seeing my daughter learn new things and just spending time with her, that is probably the most fun thing I do. And, you know, I get home a bit earlier. I think I have a broader view of the world, having my family as such a high priority and thinking about the world that my daughter’s going to grow up in. And we’ve always worried about making sure we do things right for her. We have another child coming in a few months, so our family is a growing family.

You know, I can’t say enough good things about it.

SIR DAVID: Absolutely. And what about the question of money in the sense that you’ve talked about -- you said once to The New Yorker that wealth could corrupt you and so on, and you said you’d like to give most of your money away and so on. Do you still feel both those things?

BILL GATES: Yeah, I think that if you’ve had the kind of success that I’ve had, that you’re a steward of society’s resources. And the vast bulk of that should go back to causes that create more equality and spread these great advances around to more people.

I’m such an optimist about the advances in information flow, the advances in medical technology, it makes me feel great about the people who have those things, but then I think well there’s all these people who don’t have them, even the most basic things like vaccines for children.

And so even though at one point I thought I’d probably get to 60 before I started really focusing on philanthropy --

SIR DAVID: Yes, you said that four years ago. You’ve started soon.

BILL GATES: That’s right. I changed my view and said, "Hey, there are some opportunities that just can’t wait." And so my wife Melinda and I have put about $5 billion into the foundation, and world health is our top priority. We’re learning a lot about that, and we're glad that we can give the money in that way.

What that means is that I’ve decided it’s not good for my children -- they may disagree with me, but I’ve got a very firm view that passing along most of this wealth to them is not good for them or for society, so it will go through the foundation.

SIR DAVID: And so what, most of all, is the thing you’ve learned in life, the most important lesson that you would wish to pass on to them?

BILL GATES: Well, I’ve been incredibly lucky, because I found a job that started out as my hobby. You know, Paul Allen and I just played with computers and we thought, "Well, let’s, you know, make the computer be the kind of thing we would have fun with." And we had a vision that maybe that could impact the entire world. So creating Microsoft, being able to hire smart people, being able to keep evolving these products, being in a business where you have to constantly learn and respond to the challenges that are out there; you know, I feel very blessed.

I hope my children are lucky enough to find something that they love to do, not in terms of financial impact or anything like that, but just that they feel that it really taps into their creativity and their potential. And I feel there’s an element of luck in that, but helping a child develop self-confidence, reading to them, getting them to read quite a bit, letting them try out new things really gives them a great chance of having that opportunity.

SIR DAVID: And here you are in your early 40’s and so on, could you imagine having a second career? We mentioned politics earlier on, but I mean whether it’s politics or something else, or do you think your working life will begin and end with Microsoft?

BILL GATES: Well, I’m a specialist. You know, when I was in my teens I was thinking about great software. When I was in my 20’s, my 30’s that was the thing I love to do. I think that’s the way I can contribute best, and I’m going to do that at Microsoft. Once I get old enough, I’m sure I’ll pick somebody else to be CEO, but I can see making a contribution there for my entire working life.

SIR DAVID: There was a wonderful phrase your mother said that they would sometimes "lose you completely for a few hours." And "where have you been," and you would reply, "I’m thinking, mother." Great reply. Do you still wander off? Do people still lose you? And, Bill, where the hell have you been? "I’m thinking, Melinda."

(Laughter.)

BILL GATES: She knows what I’m doing. (Laughter.) I actually do this thing where I take a week and I call it "Think Week" where I just get to go off and read the latest Ph.D. theses, try out new technologies, and try and write down my thoughts about where the market is going. Things are going fast enough that instead of doing one think a year, last year I started doing two a year. And that’s one of the most fun parts of my job. So, you know, not only trying things out, but seeing how the pieces fit together and thinking ahead what kind of software will that require, that’s a big part of my job. And I get lots of great ideas coming from the people inside Microsoft, whether it’s sending e-mail, or meeting with me, and it’s important for me to synthesize that and so there’s a lot of thinking that I’ve got to do. And, you know, that’s fun.

SIR DAVID: And as you do that thinking and that breakaway week and so on and so forth, who do you regard as your most powerful competitor?

BILL GATES: Well, I think the greatest threat to any successful technology company is some company whose name you don’t know. You know, you can’t say -- for example, would IBM have known that the PC phenomenon was what would change their environment? Would they have known to identify Intel or Compaq or Microsoft, who who drove the PC phenomenon way beyond what IBM expected, each by pursuing what we’re very good at? I don’t think they could have seen us by name, but if they thought about what customers wanted, where computing was moving from the glass house down to the desktop, and seen sharing and having these tools as being important, they could have done better. They could have developed their software expertise and avoided having to go through such a very, very tough period.

So if you stay true to the customer feedback, if you drive your research out to tackle the scenarios that people are interested in, I think you can maintain leadership. And at least so far, the transition from 8-bit computing, where our primary product was Basic, we made that to the era where MS-DOS was our primary product, then the graphical interface that people ridiculed, and then Windows NT A a high-end commercial system, and now it’s Windows, Office, BackOffice, we’ve got to keep tackling those frontiers. So if a startup could come in and do speech recognition around a system, people would buy that. If somebody could make these communication scenarios work out very easily, or if they could solve artificial intelligence, you know, there’s a big market out there.

And so it’s driving on the cutting edge, and seeing what the most demanding customers want that give you some sense that you can keep your leadership.

SIR DAVID: One area that covers both of the things you were talking about, both the private life or personal life, and also the business life is obviously being a parent will give you a new approach to it, is the question that worries a lot of people about pornography and so on, on the Internet. How do you balance civil liberties, which worry some people, with the protection of children, which worries a lot more?

BILL GATES: Well, this is one of the tough issues you’ve got, because you have the ability to reach out and find anything. It can be used for good or it can be used for ill. And every kind of material that’s ever been created is out there on the Internet. We’ve put into the software the ability to control what kind of sites get visited, assuming those sites are properly labeled. We’ve also put in the ability for a parent to keep a log so that they could go back and see what are my kids looking at, are these issues that we should discuss, and they’ve got to reach an agreement with their kids. What is the privacy protocol between parent and child, at what age is it appropriate to keep doing that monitoring and that’s clearly a topic for discussion.

Software technology can allow the filtering to be done. And the rules in each country will be different. We just need to make sure that we’re enabling that and understanding that this is a serious thing that could slow down the use of technology. I’d say that access to objectionable materials with kids and privacy are two of the toughest issues, issues that the industry has to treat very responsibly.

SIR DAVID: Well, those are two vital issues for the future. We’ve covered lots of issues this morning. I can’t believe that our 45 minutes is up. It’s rocketed by, and that’s all due to you. Our huge thanks to Mr. Bill Gates. (Applause.)