Statement before the Joint Economic Committee

Bill Gates

June 15, 1999

MR. GATES: Well, thank you, Mr. Chairman, and members of Congress. It’s a great honor to be with you.

Mr. Chairman, I know that we’re also joined today by a number of students. I’d like to extend my greeting to them and also to note how different things are today for them than when I was in school.

Today’s students have access to powerful computers and a sea of information through the Internet that I could only dream of when I was a teenager.

This is truly an amazing time.

The information age is opening up new possibilities for all of us, for our children and for the entire nation.

The advances in education and research, even in the way we conduct government, I think will exceed people’s expectations.

It is the greatest time of innovation in history. It’s less than 25 years since the personal computer evolved from a hobbyist’s tool to a tool that sold over 100 million units per year and a tool that Americans are very dependent on in doing their jobs.

The power of these machines, both the hardware and software, has doubled every 18 months. The price has come down and the use at home and schools and in offices has been really quite fantastic.

I know that many of you on this committee are technology enthusiasts and can personally appreciate the significance of this change.

As the information age advances, we understand better the central role of these incredible tools in advancing the new prosperity the country is experiencing today.

It’s accelerating economic development throughout the world. The digital economy is a vibrant economy and it’s kicking off the information age in a very positive way.

I know that yesterday, Chairman Greenspan was here before this Committee, and I think he has been very clear that these innovations really make a big difference.

He said, the newest innovations, which we label information technologies, have begun to alter the manner in which we do business and create value often in ways not readily foreseeable five years ago.

I’d like to reinforce Chairman Greenspan’s points by telling you about some new findings from a study of the digital economy carried out by the Business Software Alliance.

This is an organization that represents most of the nation’s large software developers. The study will be released tomorrow and I will ask that when it is released, its contents by entered into the record of this Committee.

The results of this study again confirm that the strong economic growth in this country can in some large measures be traced to the competitive and fast-growing use of computer technology.

That sector alone has created more jobs than any other part of the economy. In fact, one of our big challenges is finding enough skilled workers to fill these jobs.

Today, we can predict that by the year 2000, the software industry’s contribution to the U.S. economy will be greater than the contribution of any other type of manufacturing.

This is quite extraordinary for a business that is less than 30 years old.

Today, America not only sells more cars than Japan. We also lead the world by a huge margin in software development. I can’t think of any critical new industry that’s been dominated by one country like software export is by the United States.

Last year, the sector grew by more than 15 percent and is growing at four times the rate of the economy.

The industry has contributed more than $13 billion of surplus to the U.S. balance of trade and that’s going to rise dramatically in the years ahead.

And so, this strong technology sector has spurred the renewal of industries old and new across America.

These new technology companies are being created every day. And the valuations they create in the stock market are really quite impressive. That’s really fueling more entrepreneurs to come forward with their great new ideas.

The slew of recent mergers reminds us just how quickly the landscape of the high-tech market place is changing. That change will continue.

In this industry, in particular, the free market is working and working very well.

Mr. Chairman, I believe that here in Washington, D.C., there is a term for people who are incredibly interested in public policy.

They are known as policy wonks.

In my industry, people who have similar hard-core interests are called computer geeks. And I’m definitely one of those.

(Laughter)

If you’ll indulge me for a few more minutes, I’d like to share some of my enthusiasm for the developments yet to come.

I can say that we’re really just at the beginning of the fantastic technology advances. The mission of Microsoft, when we got started, talked about a PC on every desktop and in every home.

That’s driven our work for these last 25 years. It’s created a tool to help people get things done.

Today, a majority of U.S. businesses and more than half of U.S. households have this PC. We can say that we’re now advancing into a new era. The combination of advances in telecommunications, computers and consumer electronics, using the Internet standards, will create a universe of intelligent PCs and complementary devices that will deliver the power of the information age to anyone, anywhere, any time.

What this means is that we’ll have the smart-connected devices, starting with the palm-sized device with the beautiful color screen connected up to a wireless network, to a tablet computer that you can take to a meeting and as you do your handwriting, it will recognize the notes that you’re taking.

We’ll have smart TVs. We’ll have cell phones that connect up to the Web and give you the latest information.

All the information you care about -- your schedule, your address book, your files -- will automatically be available. And as you travel, you’ll be able to book an appointment of look at your stock portfolio wherever you go.

Wherever you are, you’ll be able to access your own digital dashboard -- the set of information that you care about on any screen, from a PC to that small pocket device.

Microsoft and thousands of other companies are advancing the software that makes this possible. We’ll spend next year about $3 billion on research and development.

One day in the not-too-distant future that software will allow computers to see, to listen, and to speak. At home or in the office, you’ll be able to talk to your PC, to dictate a document or to simply ask for the information that you care about.

It will automatically back up your information and synchronize it with all the other devices and everybody else that’s contributing information.

It will even have a color screen notepad on your refrigerator that will show the family schedule and allow you to scribble notes that will automatically be shared with everyone else in the family.

For people here, where Congress is in session, a wireless network will allow you to stay in touch with your office as you move around from meeting to meeting.

I don’t need to tell the members of this Committee how important mobility is as you move between your state and district and the Nation’s Capital.

As technology becomes more flexible and more powerful, it can be a tremendous tool in terms of creating efficiency and instant communication.

One aspect that we need to keep in mind is that the PC also holds the potential to make government itself more efficient and more responsive. We see the beginning of this with government web sites that offer a wealth of information.

But as government increasingly incorporates technology into its operations, it will make information flow even more open and efficient.

At Microsoft, we’ve used technology to eliminate all paper forms. And so, any information that you want to share, you’re doing so purely electronically.

And I can say from first-hand experience the efficiency that this provides is a wonderful thing.

Technology can also let the public get more involved, not only in seeing information but engaging in a two-way dialogue on the important issues and challenges we face.

The rapid growth in the Internet will power this information revolution along with these incredible devices.

Five years ago, who would have imagined that we’d be shopping for automobiles, home loans, airline tickets, or even clothing, on the Web? Electronic commerce has grown ten-fold in the last two years, by making it convenient to purchase almost anything, any time, anywhere.

In the next few years, over 50 million Americans will be shopping on the Web.

There’s endless speculation about which of the companies involved in E-commerce will be successful. But I think the answer of who the big winner is is already clear -- it will be the consumers.

They’ll see better prices, more information, more choices, and more opportunities to do the things they want to do.

As Chairman Greenspan has made clear, companies have already seen enormous benefits from the use of this technology. But there is much more to be done -- like helping companies integrate their computing systems and create digital processes to perceive and react to competitive challenges and consumer needs.

By doing this, they will be able to extend the gains in productivity that are helping fuel our economic strength today.

One other area to touch on is what this all means for the most important investments we make -- namely, the investments in education.

Education in the digital age will offer tremendous promise. Learning will be far more student-centered. Teachers, parents, and students will work collaboratively and students will be prepared for a technology work place with the opportunity to engage in life-long learning.

At Microsoft, we call this the connected learning community.

Taking education into the digital age is a challenge for all of us. Government at all levels, public/private partnerships, and philanthropy will all play critical roles in preparing students for tomorrow’s work place.

Today, only 14 percent of teachers use the Internet as a part of their instruction. At first, people believed the Internet was suitable only for quizzes or just for learning about the technology itself.

Today, the educational community knows that the Internet can be a resource for allowing curious minds to learn in new ways about math, physics, philosophy, and every other subject that’s being taught.

A New York school superintendent attending one of the educational conferences we hold, explained that the PC and Internet are encouraging his students to do more writing and more reading and less TV watching.

He said that , as a result, I don’t know is fast becoming I don’t know yet.

There are many exciting projects underway to give students the latest tools for learning. For example, we have a pilot project to provide 500 schools laptops for every student. And the results of this effort have been quite amazing in terms of increased learning.

Many other companies are involved in similar efforts, whether providing the latest technology for learning or providing scholarships for science excellence.

I’ve had an opportunity to learn a little bit about how Birmingham Seaholm High School and Pittsburgh Super-Computing Center College are using PC technology.

Juniors at Birmingham Seaholm are using computers in a very entrepreneurial fashion. They have built a cookie factory and next year they plan to develop a micro-robot that will take cookies off the cooling rack.

Students in Pittsburgh are doing great work on improving high-speed networking performance and capabilities. These schools are to be commended for the work they’ve done to use technology as an important tool in improving education.

I look forward to talking to these students about how they’ve been using PCs. Unlike their parents, most of them learned about computers in adulthood, the information age is the only age these students have known. Their success will depend on how well we teach them.

When you look at the phenomenal economic growth produced by technology and the huge increase in demand for highly skilled workers, it is clear that our ability to continue benefiting from technology will largely depend on how well we educate the next generation.

In closing, let me sum up why I’m so excited to be here today and to be part of this high-tech summit.

At Microsoft, we make software. We make software for a simple reason -- we want to provide tools that make people’s lives better. And we’re very excited about this future -- the tremendous economic benefits that are coming. But even more important, the ability to help every individual in business, in schools, and in the home to lead more productive lives.

Thank you.

(Q&A session to follow)

SENATOR MACK: Thank you very much. And I appreciate again your being here and your presentation this morning.

Now I would turn to Senator Abraham to introduce, I think, two different schools, which will be videoconferencing, I believe, is what we’re about to do.

SENATOR ABRAHAM: Well, Senator Mack, let me just begin by thanking you for holding this summit.

I think that as we go through the next couple of days, yesterday through tomorrow, we’ll really have a chance to see exactly what the potential is for us as a nation to strengthen our economy through the development of high technology.

And I want to especially thank and welcome Bill Gates here today. We very much appreciated working with you and the people at your company over the last year to put forward a number of legislative accomplishments, in no small measure to the efforts of you and your team.

Today I’ve got the pleasure of introducing two of the participating schools who are a part of this video conference. I’m sure that they will pose questions far better than any that we could come up with here because they really are on the front line with respect to determining how high tech and education merge to enhance our society.

So, without further adieu, let me begin be introducing a group of students from Birmingham Seaholm High School in Birmingham, Michigan.

I believe, Bill, that you have already referenced them and some of the advances that they’ve already undertaken. I would hasten to add that they are in the forefront in terms of our state, in terms of utilizing computer technology in the school for educational and learning purposes, but also as an inspiration to develop their own creative skills even further.

And so, at this point, let me turn to a student from Birmingham to as a question.

MR. HEDLICK: Hi. My name is Ross Hedlick. This is directed towards Mr. Gates.

How are you developing your products to enhance the learning environment in our schools? And how are you making them more reliable to have up-time in our school and stations?

MR. GATES: Great. Well, the key to making the computer a better tool in education is to make it able to browse information and tap into the Internet no matter where you go.

And of course, on the Internet more and more, we have not just text information, but video and audio as well.

We’ll be using more and more simulation capability with very advanced graphics.

What we see is that, eventually, you’ll have a tablet-type device that will be literally the size of a tablet and schools will have a wireless network.

So the teacher will be able to pick some Internet sites for everybody to look at, or the students find something that’s interesting that can be shared with all the other students.

We also want to make it easy for the school on their website to have enough information so that you can come in, see what the homework assignment is, connect up to other sites, perhaps engage parents in the dialogue about what the assignments are like, and it really becomes something where it’s not just that one student or that one school, but anybody out on the Internet who has the same interest, you’ll be able to draw in.

So the demands of education are actually among the ones that are really driving the PC to evolve most rapidly.

SENATOR ABRAHAM: I think at this time, we’ll now turn to another of the schools in Michigan that is utilizing computer technology in a variety of very exciting ways. That’s Madison Heights High School.

So we’ll turn to them, a student from Madison Heights, for the next question.

MS. DODD: Hello. My name is Anita Dodd. My question is what types of revolutionary problems of the equivalent of Y2K today may occur in the computers of tomorrow?

How can we foresee similar problems to Y2K and prevent them from occurring in the future?

MR. GATES: Well, that’s a very good question.

The increased dependence that we have on using computer systems means that making sure that that infrastructure is very, very reliable, even in the face of disasters that might take place, that is very, very critical to both business and government.

We’re seeing not only the Y2K problem, but we’re seeing virus attacks where people maliciously are actually spreading around computer programs that cause wasted time and loss of information.

And so, we need to design the systems to be far more resilient to resist these types of virus attacks.

We also need to design the systems to be far more redundant so that when you connect up to a website, even if some of the communications lines have gone down, there’s a way that things are routed around that and it’s possible to have the connections there.

There’s no problem exactly like Y2K ahead of us. The way that the dates are being solved now, people will be able to go tens of thousands of years without a particular date milestone coming in as a computer problem.

But there are other things like the virus problem that we need to get on top of in advance to minimize the disruption that those things cause.

SENATOR MACK: Senator Santorum, do you want to introduce the next school?

SENATOR SANTORUM: Thank you very much, Mr. Chairman.

I want to again join Senator Abraham, and Senator Bennett, who I know has been very active also, in holding this hearing. And I too want to welcome you, Mr. Gates, and thank you for not just obviously your tremendous work within the industry, but your participation here on the Hill in a variety of different subjects.

It’s been very helpful.

And I also want to thank you for the kind words for the Pittsburgh Super-Computing Center. We’re very proud of that in Pittsburgh.

I’m a native Pittsburgher, so I take special pride, even though I represent all of the State of Pennsylvania, in the Pittsburgh Super-Computing Center, which is run by Carnegie Mellon University with the participation, though of the University of Pittsburgh, which is a neighboring campus and in fact, even though the Super-Computing Center -- and you see the Carnegie Mellon sign there -- there are actually students from both Carnegie Mellon and the University of Pittsburgh there to fire questions at you.

So I will turn it to them and welcome them to Washington via video conference, and look forward to your questions.

QUESTION: Good morning, Bill. I work at the Pittsburgh Super-Computing Center. I’m a junior at the University of Pittsburgh.

My question is what role, if any, should government take in the development of the Internet as a business tool? How can one properly balance that role and the realities of the Internet as a public resource that empowers the individual?

MR. GATES: I think it’s pretty amazing the complementary role that work in universities and work In the private sector has played in the development of the Internet.

Obviously, the initial design in the early network itself was built largely with government funding in the university environment. It was the proving ground for many students like myself to get exposed to advanced computer networking. And then, of course, that flourished so strongly in the universities, it moved out into the private sector.

Today we have the positive situation that, based on those standard protocols, it’s no longer necessary in terms of building out the basic Internet capacity for government to be funding that.

We have lots and lots of private companies running high capacity fiber throughout this country that’s going to keep up with the demand that’s there.

And so, government has moved on to fund through the universities more advanced research like the work that you’re doing.

And so, I think that the balance has been struck very, very well in terms of only moving to the very risky frontiers for the university contribution.

In terms of keeping the Internet to be extremely reliable, that is a challenge that neither government alone, nor business alone, can really tackle that.

It’s got to be a joint set of discussions about what possible disasters could take place and how would the resources of government and business come together to solve and of those problems that come up.

Some dialogue along those lines is beginning. But I think that that’s an area that there needs to be more attention paid to.

MR. MORIN: Good morning. My name is Jeff Morin from the Pittsburgh super-Computing Center.

I’d like to know what you see for the future in high-performance computers? How would distributive computing and ultra-fast networking come to play in the future?

MR. GATES: Well, it’s pretty fascinating that at every stage in the computer industry, there are people who wonder what we’re going to do with all the power that’s created. Even some people say, boy, do we really need all that power?

But, from my point of view, just the ability of the computer to understand speech, the ability of the computer to see what’s going on, see when you come in, suggest to you things that you might be interested in, that basic capability is going to require somewhere ten and 100 times the power that we have in the personal computer today.

And so, the investments in these high-speed chips that people like Intel are making are very, very important to us.

Now when you look at super-computers, the kinds of problems that are being solved there are even more challenging. Things like physical simulation, being able to do weather prediction, being able to model any physical phenomenon turns out to be incredibly difficult because of the non-linearities from a computational point of view.

And so, we’ll be able to take any extra power, particularly the break-throughs in parallel software development and the total power that comes out of that, we’ll be able to use any increase that’s there in the sciences, whether it’s drug design for solving diseases or predicting weather to understand the impact of various things on the environment.

There’s a lot of very positive results that will come out of the investment in super-computing that’s being made by the universities and by the government.

SENATOR MACK: I wish we could go on and allow the students at the various schools to continue to raise their questions. They’ve done an excellent job.

But, again, because of the time limitations that we have, I want now to turn to some members. So I will turn to Senator Robb for your questions.

SENATOR ROBB: Thank you Mr. Chairman. And thank you Mr. Gates, for joining us this morning.

One of the areas that continues to trouble policy-makers or to challenge policy-makers has to do with the proper role of government in working with industry, and particularly the technology industry.

And I wonder if you could just share briefly your thoughts on what the proper role of government with respect to your industry is, what specific areas you think that the government has been to intrusive or too restrictive in terms of your ability to expand and grow, and areas where you think the government ought to be doing or could be doing more without unduly interfering or inhibiting your ability to expand and compete.

MR. GATES: Well, I think that the incredible success of this industry in the United States owes a lot to the light hand of government in the technology area.

The fact that people can take incredible risks and if they’re successful, they can have incredible rewards. That kind of risk-taking attitude is really unique to the United States.

In fact, as I go to other countries, I’m always asked -- how do we create the same thing here? How do we have companies like you’ve go there because we really are the envy of the world in this respect.

One thing that government has done well is they’ve supported higher education. And the strength of our universities in allowing these advances to take place here can’t be overstated.

Not only the Internet specifically, but the great students that Microsoft and others are able to go out and hire, come from the fact that we have the best universities in the world.

And again, that’s something that people are very envious of.

I think not only the computer industry, but the biotechnology industry has benefited from exactly that same focus.

There are some tricky issues that do come up where now there’s a very important dialogue between technology companies and government.

For example, in things like immigration policy. That’s one that we often talk about because we need even more skilled workers.

There are various taxation things relating to the R&D tax credit, things of that nature.

One issue that is particular to our industry has to do with the encryption export flexibility. I’ll just take this chance to say that the industry is losing a lot of sales because the encryption technology that’s widely available outside the United States, we uniquely are not allowed to export.

So countries like Canada, Switzerland, Germany, the companies there are taking more and more business away from us because of those limitations.

So we will get into particular issues like that that people need to really look into what the balance of merits are.

Overall, I’d say that the light hand is working very, very well. One of the tough issues today has to do with privacy. Consumers are very, very concerned about privacy and there are going to have to be industry guidelines and some dialogue with the government about how we make sure the Internet is not held back by people feeling like their information is used in the wrong way.

There are a lot of tough issues about kids and online safety. And that’s one area that we’re putting a lot of effort into to make sure it’s easy to configure machines so that kids have access to the good stuff and that’s all they have access to.

So there will be a lot of issues, but I think the basic philosophy of letting the market place work has been vindicated.

SENATOR ROBB: I think, for the most part, there is broad-based support in Congress for that approach. But trying to figure out exactly where and when to either intervene or regulate, without getting into the specifics of any pending litigation, let me just ask you about your view as to the role of government with respect to competition and anti-trust, specifically.

Again, not us focusing on specific litigation.

MR. GATES: Well, the framework we have in the United States encourages competition. It allows companies to enhance their products, add new capabilities.

That kind of freedom has been upheld again and again, whether it’s for large companies or small companies.

And so, I feel that the framework we have today is a very good framework and we can see the results that come out of that.

SENATOR ROBB: You would not advocate any change at this point?

MR. GATES: Well, there are many people who would dive into that. But I think the laws, as they’re currently written, are fine.

If somebody wants to tune those, probably has more expertise in it than I do.

But, certainly, everything that’s gone on in the technology industry has come about because things like integrating new features in are one of the freedoms that all companies have.

SENATOR ROBB: My time just ran out, so I won’t ask one more question.

Thank you, Mr. Chairman.

SENATOR MACK: Thank you.

Representative Maloney?

REPRESENTATIVE MALONEY: Mr. Gates, it is a pleasure to have you before this Committee today. I have the honor of representing an area in New York that has Silicon Alley, a group of high-tech firms that have contributed greatly to the phenomenal economic growth based on technology.

Our paths almost crossed earlier this year at The Hague while I was at the United States delegation on the International Conference on Population and Development.

I did have an opportunity to work with and meet participants from your foundation. And I want to compliment you on the foundation, its goals and the fantastic group or people that are working on issues that we both consider important to our country.

A concern of many Americans is privacy in regards to information technology.

We hear stories daily of companies using what most us would consider confidential, private information on individuals, gathered through computer use for their own marketing purposes or selling this information to other companies.

What are the practical steps that we could take to address these concerns?

MR. GATES: Well, the industry, including Microsoft, has a lot of people who are focused full time on this effort.

One of the things that I think we’ve made incredible progress on is making it easy for web sites to notify consumers exactly what their policies are.

If you go back six months ago, we’d made a lot of progress on the very popular web sites, the one that the big companies have.

Now we’ve come up with some tools that make it easier for small companies to include on their web site their policy statements and how any purchasing information will be used, will that be sold to third parties or not.

I continue to believe that this is an area where a dialogue with industry will be very important because information, consumer information, is often used on behalf of the consumer. That is, to help suggest to them things that they might be interest in.

So really separating out the legitimate use of information, and proper use of information, I think a guiding principle is informing that consumer exactly what’s going on.

We should be able to use the technology to do that in a good way without holding back the benefits.

REPRESENTATIVE MALONEY: Parents of young children that I talk to, and many of them contact me, and they are really of two minds regarding the Internet and computer software.

They’re really very impressed with what the systems are able to do as an information tool for learning in schools. But they are extremely concerned that violent and pornographic materials arrive unfiltered on their children’s computer screens.

What is both appropriate and possible to address these concerns?

MR. GATES: Well, I think any parent today should want their child to have access to the Internet, whether it’s a computer at home or going to the local library.

I think that is very, very important.

I also think that the parent should be involved in seeing what their children are going out and looking at, either by logging that information or spending some time with them as they use the computer and talking to them.

There are also ways of setting up the software so that it controls what sites you can go out to, so that you can either log where your kids are going, and if you have the familiarity with the computer, you can see, step through those things, and you can do that kind of blocking.

A lot of these on-line services, including our own, one of the ways that we compete is by making it clear to parents how we give them control -- control over the electronic mail that their kids receive, control over the kind of content that’s put forward there.

And so, there’s a market place interest there that good technology is being created for.

So I think, on balance, what’s going on is very, very good. I think there will be some stories from time to time that remind us how important it is to be more vigilant in this area.

REPRESENTATIVE MALONEY: My time is up. Thank you, Mr. Chairman.

SENATOR MACK: Thank you very much. And as I did yesterday, I’m going to try to keep this on time as best I can.

I’m going to just ask one question and then we’re going to go to Secretary Riley, who has already arrived.

And the question is really kind of triggered by comments that both you made this morning and tying them into what Chairman Greenspan said yesterday.

He kind of gave us all the first warning that this productivity increase that has taken place as a result of technology making its way into business practice can’t go on forever.

But in your statement this morning, you said, and I think this will be close -- just at the beginning of technology advances.

And also, in your book, you indicated -- very few companies are using digital technology for new processes that radically improve how they function, that give them the full benefit of all their employees’ capabilities, and that give them the speed and the response that they will need to compete in the emerging high-speed business world.

So that kind of says to me that we can see productivity increases for many, many years to come.

MR. GATES: We will absolutely see productivity increases coming out of the use of technology for many, many years to come.

We are very much at the beginning of what can be done with these devices.

If you just look at how bills are paid in the United States, if you look at the paperwork that goes on, if you look at workers and see, do they really have when they’re trying to do customer service or they’re trying to design a new product, do they have a their fingertips all the information they’d like? Can firms in different locations collaborate with each other easily to draw on the best skills of the different firms?

Those things within the next five years will make radical progress in the business sector.

And so, I think that’s a very, very positive picture.

I think Chairman Greenspan is pointing out that some of the valuations may not continue to go up at the rate that they’ve gone up. And certainly, if you take a long-term view of this thing, there are going to be some ups and downs in terms of the psychology of the valuations.

But underneath that, the actual efficiency and benefit to consumers will continue to advance year by year.

SENATOR MACK: Well, I thank you for that response and, again, we appreciate your being here this morning and for your presentation as well.

Thank you.

MR. GATES: Mr. Gates:

Thank you.