JONATHAN MURRAY: Ladies and gentlemen, for the last four years, and this being the fifth year, we have had the opportunity at each Government Leaders' Conference to hear from the gentleman who sets many of the visions for this industry. And it is with great honor and pleasure that I am able to introduce today, this afternoon, Mr. Bill Gates, chief software architect and chairman of Microsoft Corporation. Please welcome Bill.

(Applause.)

BILL GATES: Good afternoon. It's great to see the attendance at this conference and the energy that is being applied to e-government around the world. I think there's a lot that everyone here can learn from each other, because in the area of e-government, I'd say there's no one government that has all the pieces coming together.

And, yet, if we could take the best practices from around the world, the systems that are being put together are really quite fantastic -- fantastic in terms of citizen empowerment, getting information out there to improve democracy, making government more efficient -- less waiting in line, more transparency of information, just making it so people can focus on what they want to get done -- make it easier to think of government as a partner in what's going on.

Spreading this knowledge is something that we are very passionate about. And we believe that the fundamental advances taking place in the IT industry right now are actually very directly applicable to e-government. Steve Ballmer, of course, kicked things off talking a little bit about .NET and how that involves a commitment to this new XML or XML Web services approaches. And, in fact, Microsoft's R&D budget is now focused on those XML approaches. We have had very good industry uptake of this approach. When we first got behind it, we were on our own pretty much. But in the last couple of years the big participants have come along, and so you have a strong industry consensus.

Recently the announcement of the Web Services Interop organization, WSI, was a big milestone to show that the leaders like ourselves and IBM are doing this in a way that we are testing our implementations together. And so that anyone who has systems running on the Microsoft platform using this approach will be able to exchange information in a very deep, rich way with any of the other leading platforms that are out there. And so that's really the kind of progress that we had hoped for. We are very pleased to see that.

Our industry as a whole, I would have to say this last year has been a particularly sober one. You know, the general commentary seems to be, you know, '"When will some big recovery take place?" But what I would say is that the R&D being done today is far more focused on the real problems than it has been for many years. And I believe that the best work of the industry is being done right now, whether that's the work around XML; whether it's the advances that will allow broadband costs to the hope to come down dramatically over the next five years; whether it's the advances in making a tablet type form factor that you saw demonstrated in one of the kick-off showcases. It's things like that that can finally get computing really into the hands of people.

We think about computing right now, it's overwhelmingly successful when you are at your desk. If you create a document or want to navigate information, that's done -- whether it's a government worker or a business worker -- it's done with a PC. But as soon as you leave that desk and go to a meeting, mostly you are not taking the PC with you. Some do. But over time as wireless networks, including WiFi, get installed, as you have moved to this Tablet form factor, the value of the PC in those meetings will be quite dramatic -- navigating information, keeping notes, searching your notes -- simply working on a digital basis instead of having the effort of taking paper notes that then have to be reentered.

We are coming up on a big milestone with that Tablet device. This fall, five major manufacturers, including people like Compaq and ACER, will introduce those machines. And the prices will be essentially the same as today's portable machines -- the ability to run applications -- all these applications run. And yet it's revolutionary in terms of the types of things you'll be able to do with the device -- reading, note-taking -- many things that haven't been economic. For example, can publications make a business out of only being on the Web as a subscription? Well, as long as you have to go to your desk and sit there and stare quite a distance to a CRT that's in a fixed position, that's never going to catch on. People will prefer to read something they can hold in their hands. And so the tablet solves the fundamental problem -- it's not just about notetaking; it's also about reading as well. And so I think people will be stunned at the numbers of hours of the day that you get value out of the PC -- how that increases with that breakthrough.

Another big area of breakthrough is taking the world of voice and the world of the screen and bringing those together. Today if you are sitting at your desk, somebody calls you up, they are probably sitting at their desk as well. They've got a PC screen, you've got a PC screen. But it's not being used to let you share information and let you edit things together, look at a list or a contract or a budget or a plan, and work on that, so that the screen and voice together. Well, that's about to change quite dramatically as the software in the PC can handle voice very directly. And whenever you make a phone call, your PC will notice that, and then offer to simply connect your screen to the other person's screen -- whether that's PC to PC, or even PC to a mobile type phone, which of course the latest ones are getting more and more high resolution screens as part of their capability.

So it's that kind of basic advance that will allow us to really say that this decade is the digital decade; that this is the decade that it's not just about creating documents, but it's about the way business is being done, how people track what they are up to, that it becomes common sense to do that in a digital fashion.

Some things are actually moving very rapidly -- more rapidly than I would have expected. The continued rise in Internet traffic from browsing -- particularly with people browsing from their job, at work. That goes up in a big way. Some areas have clearly emerged as bottlenecks in achieving the full potential. The cost of broadband in most developed countries, with a few notable exceptions like Korea, remains high enough that that's a fairly small percentage of households, particularly less than 10 percent, that are connected. And that really does hold back many of the most interesting applications and their widespread use.

I think in the policy areas the key issues have been identified for several years -- promoting competition in telecommunications; promoting use at all the different levels of the educational system; promoting government as the best user of the technology. Those things -- still a lot to be done in every one of those areas.

One thing that we get people discussing with us a lot is how to create jobs around IT activity. And I think you will see some countries who really believe in the capitalistic approach; that is, that software should generate jobs, and government R&D should generate jobs, so that government R&D should be done on a basis that it can be commercialized. There's a faction against that, the so-called general GPL source license free software foundation, that says that these other countries other than the U.S. should devote R&D dollars in the so-called open approach, that means you can never commercialize that software. And it is an interesting choice to deny -- for a country to deny itself the benefits of these high-paying jobs and the kind of taxes that let countries fund their universities, and fund general research that then goes to renew that pool of commercial R&D. Clearly there's an ecosystem there that has worked extremely well in the United States, and has probably been the unique thing that has let that push forward. And there is now a recognition that it's really a question of policy of allowing the so-called capitalistic approach to win the day there.

In the area of e-government, Microsoft has a belief that the really fantastic ways of using XML and Web services for this are just beginning to emerge. And the one commitment I'd like to make to you is that when we do this conference a year from now, you are going to see showcases that are at a whole new level in terms of both how they work internally and the kind of impact that they can have. We have got a real mission here. It's a mission that's about this high- volume, low-price technology getting out and being used, and making these applications easy to build, taking what would have been multimillion-dollar budgets, and allowing the tools to do enough of the work that, often for a million or even less, pilot projects can be put through that prove out these systems.

So it's a learning process for everyone involved. We're excited to be part of it. We take a very long-term approach to the things we're doing. When I say this is the digital decade and that things like eliminating government forms or having consumers expect the way they stay in touch with friends and family, share photos, share activities, that that will be largely digital -- some of those things will take most of this decade. Some of them will not happen overnight. To even achieve them within that timeframe requires a lot of ongoing work in the different areas. And certainly for us part of that is saying that even during this time when the industry is -- industry sales growth is not as energetic as it's been, taking and continuing to increase our R&D budget, including the parts that focus on key breakthroughs. The handwriting recognition that's in the tablet -- that's been 10 years in the making, and many hundreds of millions of dollars of R&D. And most organizations abandoned that when about four years ago the machines that -- the pen -- so-called pen computers -- didn't succeed.

Likewise, in areas like speech recognition we have seen companies come and go. It's a very tough problem, but it will yield itself to breakthroughs that will make that just common sense for every computer over the next five years.

A lot of tough issues -- tough technical issues, tough policy issues. And partly the diversity of different approaches that are being taken by the different governments is one of the ways that we will see what's right and what's wrong here. And I expect that the five sessions where people have been able to talk that through have been among the most valuable thing. So very exciting for me to come here every year and look at how far we've come. I think the next year will be particularly important. This is a conference that we will put on again and again throughout the digital decade. And the full potential of the things we've talked about should be largely achieved in that timeframe.

So, thanks very much for coming, and I look forward to having Jonathan pass along to me the questions that you have all provided. Thank you.

(Applause.)

JONATHAN MURRAY: Thanks, Bill. Well, we have had a lot of questions, as you would imagine. We have consolidated some of the questions -- I have some of them here. We have consolidated some of the questions that were on common themes, and trying to get through as many of them as possible. And some of the questions -- there are a lot of questions about your travel and the foundation -- and we'll handle those through the people on your staff who deal with those issues. So we'll talk about the e-government and technology issues.

Let's start with the first question, which is a question that we heard from a number of the delegates, which is: What in your opinion are the real impediments to progress in e-government that are really slowing things down today?

BILL GATES: I'd say there are several things that slow things down. First of all, there's some of the most basic mundane things don't get the focus they deserve. What's a basic mundane thing? Every government worker using e-mail and being contacted by e-mail. Having the e-mail system be so reliable, that sending around files, rich attachments -- that that works 100 percent of the time. That's basic infrastructure that, if truth be known, I think most governments haven't put the energy into it. And that holds back the digital thinking and digital usage, and just pure basic efficiency in a pretty dramatic way.

Another basic thing is saying that the government shouldn't print anything that isn't out there accessible through the Web. You know, I think there are very few governments that would pass that basic test of saying, hey, some things should only be on the Web, but there should be nothing that's in print that isn't accessible through the Web.

Now, once you get past the basics, you do get into some more difficult issues. The idea of how you authenticate a citizen, how you know who they are -- that's a tough problem. I do think that this is a case where in most countries the government alone will find it difficult to get things to critical mass. Some countries, fine, the government will do it. But in many countries it will be a partnership between commercial providers, like the online companies such as AOL or Microsoft, are the beings who need to register people for on-line usage, and get them working with a name, a password, and probably a smartcard for many applications, that there will have to be a cooperation there for that to take place. That authentication thing has held back many of these projects. Or the projects have been put into place, and they haven't gotten to critical mass because of the difficulty of the sign-up and getting those new things that has really held them back.

What I want to make very clear in the course of this year is that some people have overcome those problems -- they have dealt with them, either on their own or through partnerships. That's very addressable. But I would say that holds things back. The cooperation between the various departments in the government -- that is never going to be a simple thing here. People have their classic systems, and they don't want to yield to the centralized IT group. Now, there is some light at the end of the tunnel in terms of XML Web services, allowing you to create a layer on top, but actually fools those departmental systems into thinking somebody is really typing into their system, whereas they are really using that unified interface. So if you change your address once, you can even force it into those older systems. People don't understand how that layering really has gotten to be very straightforward, so it's not a case of doing some of these rebuilding things.

I think some of the outreach projects going out to libraries and community centers -- I think there are definitely some best practices there. Getting things going into universities, where you take the Internet for granted -- that, you know, I see the whole range from countries doing that very poorly. That's one where the U.S. continues to get probably the best grade on doing those things.

The U.S. as a whole I would say is about average when it comes to e-government. I mean, like everyone we have our bright and shiny spots. But it is fascinating that you can be so strong in the commercial and technical invention side and yet not have that be true necessarily of the governmental applications.

And, you know, in some of the developing countries, because they have never had legacy systems, they find themselves looking at this, and saying, okay, you know, maybe we can do this from scratch in a better way. And sometimes you see very healthy competition, like between the various states in India -- that's healthy competition. Sometimes the competition isn't quite as healthy as that. But, you know, on the whole I'd say my mood is -- I am pleased at what I am seeing, but I am impatient. I thought three years ago that at least in the developed countries we would be somewhat further along in many of these systems than we are today.

JONATHAN MURRAY: And, connected to that, there is another question from one of our delegates, which is: Given the interest in government leaders connecting increasingly to the private sector -- and you mentioned some of those connections -- what do you think are some of the common misconceptions in the government sector regarding private industry?

BILL GATES: Well, I think there is a temptation that when you have got this paradigm, you're going about some huge, you know, tens of millions of dollars project, you know, that you go through this long complicated process, and your specifications are out of date by the time the thing gets spit out. There's -- you know, that kind of an approach was the only approach in the past, as opposed to maybe even picking one or even two people to do pilots at fairly low costs, and insisting, hey, we are not even going to run the pilot unless it can be done that way, and see how far that can get -- and being willing to take partial results from another government, saying, okay, we'll start with that as a building block. We don't have to reinvent those things. So, you know, a little more open-mindedness about the high-volume, low-price part of the computing market, which is the PC, PC server, Intel, server- type part of the market. I think that is important. And when you get new technologies, like Web services, it takes a long time for all the developers to see that and understand that and get excited about it. We see it first in pioneering companies like Wall Street. Wall Street XML Web Services -- boy, they actually were in many cases ahead of industry, pushing us to do that stuff, and do it right; whereas other industries aren't as far along. And government is somewhere in the middle on that. Developers in government often don't get the chance to be exposed to those new things, the new tools, and so their mind-set isn't around this.

I think some investment in renewing your developers' skills, which is hard to budget, actually would pay off quite dramatically in this phase of the industry.

JONATHAN MURRAY: You mentioned in your previous answer the whole issue around authentication leading to trust in government systems. And there's a question from one of our delegates, which is: How does trustworthy computing, which is a big issue for Microsoft today -- how is that reflected in Microsoft's R&D budget?

BILL GATES: Well, the thing that has really risen to the top over the last several years is this Trustworthy initiative. These systems -- we become so dependent on them that they have got to work incredibly reliably. And you know it's just you have got to have redundancy in these systems in order for them to work that way. Now, we have these techniques that let's that happen -- the so-called fault-tolerant scale--out type computing. But even beyond that you have to find weak links -- passwords for information that is of critical importance -- a password is an absolutely weak link. Some of those things about the way e-mail works today. Today you can send e-mail, and make it appear to come from somebody it doesn't really come from. That shouldn't happen, because you can create all sorts of concern and panic and fool people if the e-mail is not properly authenticated.

Also, when you send e-mail to somebody, you'd like to have in some cases control over whether that e-mail can be forwarded to anybody or printed out. You know, what's the scope -- disclosure when you are mailing that e-mail around? And, you know, for example, say it's a health care record that you are sharing between different professionals, or in the business world some confidential business plan. The fact that the e-mail systems can have that type of control built into them -- there is a clear need for that. That fits in this umbrella of trustworthy computing. So you get things all the way from blocking viruses, which have been a problem to measuring reliability in terms of five-9s to authentication, e-mail control, and just basic practices on how you write applications, which makes it easier to write applications that aren't going to have security holes.

The whole process we have gone through in this year, where we made the security the top priority -- there's a lot of lessons there that we need to pass on to application developers around the world. Things in this area have gone from about 15 percent of our R&D to about 40 percent of our R&D. And that's during a time when our R&D was growing. So it's more than tripled. And of our top engineers, the most elite group, we have them spending more than half their time driving these practices. And some of the ways that we are doing this and getting this out comes from a commercial set of things from GE called Six-Sigma. Some of it is unique to software-defined disciplines. So it's -- some people have said it was overdue. Certainly as we spread it around, we have gotten a lot of our developers who wanted to push in this direction and had extremely good ideas on how to do it.

JONATHAN MURRAY: You mentioned the importance of e-mail as a core infrastructure for governments. One of our delegates poses the question that many years ago we were promised the paperless office. How realistic is this goal today, and when can we expect to see the paperless office appear?

BILL GATES: In terms of paperless, you know, I'm a diehard. I still believe that is something we will achieve, and yet when you go to offices today you don't see that at all.

There's two kinds of paper. There's paper forms -- and I am a very strong believer that form-type information should always be entered at the first point of availability digitally. And there's just every benefit doing it that way. That's common sense, and every government should go through every form and do that.

Then there's, essentially, documents that you read. And until the screen -- until it's as comfortable to read off the screen as it is off the printed paper, you are going to have a lot of paper in your office. You know, I spent this morning reading a several-hundred-page document from my lawyers -- (laughter) -- and you know I printed it out. If it's something four or five pages, I read it off the screen. If it's much more than that, and I am going to make notes on it, I print it out. And then I put the notes on it, and then I have to turn to my terminal, and I have to say, Okay, at this page, which I hope is the same page for your copy, Bill -- you know, please make this change. Well, you know, I'm dying to use the Tablet PC for that, because then you get the best of both worlds -- you get the readability, and those little notes you make are right there in contact, whether they are just on the side or in the body. You can open space as a little gesture. So readability and note-taking are key to this. And you will just have to see. It's clear that CRT that is in a fixed position will never be something you read long documents for. Even if it gets high resolution, the fact that you have to stare at it in a fixed position fatigues your neck muscles in a way that subconsciously you think, Hey, I want to print this out. You won't even know why exactly. You'll think maybe it's the resolution or something, but it's actually more the fixed position than anything else.

And so we can't get to the paperless office until that Tablet PC and LCDs that you write on are a very big deal. So that will take quite some time. But I still see it.

Forms? People should do that now. Long documents -- they should be transmitting them electronically, but perhaps printing them to read.

JONATHAN MURRAY: And, linked to that, you mentioned the developments that are required in the display technology area for that to take place. What are other areas in the hardware/software development arena that you need to develop in order to deliver the vision that you have for e-government?

BILL GATES: Virtually everything we want from the hardware industry they are providing -- faster microprocessors, larger disks -- disks double every year. You know, optical fiber bandwidth doubles every year. That's partly why it's such a tough business to be in the long-haul fiber business, because although demand is very big, supply is even bigger, and that's a very challenging business.

We are getting the great high resolution LCDs. The prices haven't come down that much. If you take an extreme where you want to have like four 15-inch LCDs in a two-by-two grid, and have that as your display at your desktop -- very cool. That's still pretty pricey. You probably won't have too many government workers doing that in the next two or three years. But the price of that will come down to be the same as the price of the large CRT sometime during the next three, four, five years. And so the amount of display service you have for tracking your personal information, for calendars, working on multiple forms of a document, looking at different numbers. That will be there.

The main disappointing thing is the consumer broadband thing. Broadband to businesses, you know, great like it's always been. But consumer broadband is a dilemma. Clearly if you can get it down to $20, $25 a month, something then will happen, and that's probably going to happen to about a dozen countries in the next 18 months -- you know, Japan has got the price down, Canada has got it down -- Korea was the first. But, you know, in the U.S. it's not clear that will happen, and many others it is not clear it will happen. But there is some price threshold there that is fairly magical in terms of getting it to critical mass.

JONATHAN MURRAY: You touched upon this in your opening comments, but several of our delegates have asked questions about Open Source. As some countries have recently adopted Open Source for some aspects of their IT operations in government, and from your perspective what are the strengths and weaknesses of that approach?

BILL GATES: Well, there are many different aspects here. One question is: Do you need the source code of an operating system as a user of that operating system? That is, should you be paying your people to study the intricacies of how the operating system is built and stuff like that? And the basic answer is no. That's something that for a few percent of the price of the PC you can buy a commercial operating system, where all the work of testing it, supporting it, delivering it, is included for a few percent of that price of the PC.

For customers who want source code -- universities, large customers -- we provide that. But 90-some percent of that time, that's more a -- okay, it's nice, I have it, you know, should I ever need it. That's fair. So source availability is not the big issue. That's -- you have got source availability from us and others, and it's not much needed in any case.

Then you get to the issue of who is going to be the most innovative. You know, will it be capitalism, or will it be just people working at night? There's always been a free software world. And you should understand Microsoft thinks free software is a great thing. Software written in universities should be free software. But it shouldn't be GPL software. GPL software is like this thing called Linux, where you can never commercialize anything around it; that is, it always has to be free. And, you know, that's just a philosophy. Some said philosophy wasn't around much anymore, but it's still there. And so that's where we part company. We say there should be an eco-system so something like VSB, which is a free form of UNIX, but it's not - -doesn't have this GPL with it, versus Linux which does -- there's a big contrast. A government can fund research work on BFP, UNIX, and still have commercial companies in their country start off around that type of work. You know, technology policies like biotech -- you only -- if your universities are doing work that can be commercialized, you will have IT jobs in your country. And if they are not, then fine, just say that farming is your thing, or whatever it is. All the taxes will be paid by those guys or something -- I don't know. And the farmers will go home at night and work on the source code. (Laughter.)

So, it's -- I don't mean to be facetious, but capitalism is something that's hard for me to defend, because it seems to work. (Laughter.) And so, anyway, software, if you look at systems like, oh, PCs, desktop PCs or any of these systems, the actual software, packaged software cost of these systems, compared to hardware, communications, personnel costs, support costs -- packaged software costs are never more than, say, three, four percent of any significant project. And so the fact that there is a commercial price for software, like Windows, that's not significant in any project that somebody is going to do. They're going to find, yup, there's all those other pieces there as well, and you might as well have that piece that can make you more productive, less problems, and it's been improved on on an ongoing basis. It is worth, we would say, you know, doing what happens in the U.S. and many other countries, which is using commercial software.

JONATHAN MURRAY: That links to another series of topics that we were asked, which is really about the linkage between information technology and development. And one of our delegates has asked the question: With more pressing priorities -- like health, food, education -- what do developing countries need to do to not be left behind in the e-government revolution?

BILL GATES: Well, I -- you know, developing countries have tough challenges in terms of their budget priorities. It's something I learned a little bit about, because I am interested, and then a bit more because of the health issues that I have a personal interest in. All governments have -- hopefully have strong universities. And it's worth making sure that those graduates, particularly the ones that are going to stay in country and contribute, that they have got exposure to the Internet, Internet technology and Internet applications. It's worth lavishing resources on those universities so you have those people who are going to design government systems, have the up-to-date thinking about how these things should be done. Every government should have people inside its government, inside its country, who have that kind of expertise. And that means picking at least one university where things get to critical mass inside the country.

Because of the use of IT in areas like agricultural productivity or healthcare tracking and things like that, a government can justify having a lot of expertise in these areas and have quite a pay-off in terms of those things. They won't be able to go as far in terms of laptop computers in all their schools and all their libraries and things of that nature. It may be fairly narrowly focused on the universities, the K-through-12 schools and some of the libraries. And so there's kind of a scaled approach that can be used to draw people into these things.

But if you take India as sort of the prime example, if human resources are part of your strategy for moving to fully developed status, then IT -- and I mean commercial IT, where people actually license stuff -- that's the way forward. And so it's fascinating to see these countries thinking through, wow, do I want to participate in commercial IT? -- most of them opting in to do that.

JONATHAN MURRAY: As we look out further, one of our delegates has asked -- and this is quite a long way out -- what do you see the focus of this conference being in 10 years' time?

BILL GATES: Well, I'd like to think in 10 years that everything we're talking about today will be a solved issue, and that some of the more complex issues having to do with trade- offs, privacy trade-offs, how automatically these systems do things on behalf of their users -- some of the issues like renewing your -- take your employees in the government -- how you keep them motivated, how you renew their skills -- some of those learning things, you know, I think will have some real breakthroughs in terms of how IT systems can draw organizations together, motivate those organizations, share a common set of purpose, track things in a regular way. You know, some of the best practices there will grow up in government; some will grow up in the commercial sector. So the whole way that we use these systems -- we will still be talking about that in 10 years' time.

But I hope that things like smartcards, basic security, scalability of these systems, the tools that you use to build these things -- a lot of that will have come to common sense, and that literally everybody in the audience has a tablet PC.

JONATHAN MURRAY: Earlier this year at the World Economic Forum you spoke about the obligation of wealthy countries in the global economy. Can you summarize your feelings on that for this audience?

BILL GATES: Well, it's pretty simple to summarize, which is that the -- you know, the rich world, the developed world, has done extremely well, in that the difference in conditions in the rich world versus the world at large is quite stark. And so -- you know, when you go to something like the World Economic Forum there is all that security -- you know, with the garbage trucks, you have to go through five checkpoints -- it makes you feel very important. But, you know, you say, why is there all this security? I mean, are we doing something wrong? You know, is this like the mob getting together? I mean, what is going on here? And so you know there's all this stuff about globalization. Well, in a certain sense you can say, hey, that's misguided. The conditions of the world, you know, a hundred years ago, before product breakthroughs to be traded with some degree of international markets, health conditions were worse, education conditions were worse. Nobody should want to turn the clock back on globalization. But if you want to say that angst or concern has a certain legitimacy, it has got to relate to the issue of, does the rich world at large give opportunity and share with the world at large in an appropriate way? And if you look at things like how agricultural prices are fixed, or how trade in textiles is fixed, or efforts to impose standards on those countries at low levels of development that the countries themselves didn't have at that stage of development -- or you look at what's happened to a budget over the last 10 years. You look at what's happened to investments in the health conditions, the 90 percent of health problems that occur in the poor countries, you can say, hey, the rich world deserves a very, very low grade. We decided at one point that development assistance would be .7 percent of GDP. The U.S., in response to that, went from .2 percent of GDP to .1 percent of GDP -- and you have only got five countries that are up there at the number that was targeted there.

So, you know, a lot that should be done. I do think that low-cost computing, which is acceptable to the world at large, which is a big move away from expensive UNIX or mainframe type computing, is a contribution that has helped. I do think the Internet, in terms of seeing skilled jobs emerge in places like India and many other countries. You know, we are seeing -- things are moving in the right direction. There are a few things, like the AIDS crisis or you know tensions around terrorism that could move things in the wrong direction. But must things should make one say, Hey, given that we are in the right direction, why can't we make more progress on these things?

Now, the person I debated with -- it was very strange at the World Economic Forum -- it was Bono and myself debating the Treasury secretary. Since then, as part of the Monterey commitment, the U.S. government has said, and I hope to see it passed legislatively, that they will increase their aid budget about 50 percent, which would be a huge move in the right direction.

JONATHAN MURRAY: Just two more questions. How do you -- and this is related to your previous question -- how do you hope to make a difference with your foundation, which I know is very important to you?

BILL GATES: Well, one of the great market failures is the lack of investment in R&D on the drugs that are -- the diseases that are prevalent in the poor world -- malaria, AIDS vaccine, tuberculosis -- it's a long list of in some cases hard-to-pronounce and often obscure diseases that just get no research money, because the market mechanism isn't primed. There's isn't the money to buy the drugs, and therefore the work isn't done. And that's just a disastrous market failure that only governments and philanthropy can come in and change that condition, whether it's vaccines for children, or whatever it is. So it's kind of bizarre that in terms of an AIDS vaccine, you know, private efforts, that it's getting so little attention compared to what it deserves. So hopefully that can be changed.

I have to say, I think, you know, the impact I have in my day job, which is great, all that I feel is greater -- even greater than what I'll do in the foundation. The foundation is also very gratifying, and hopefully it will get its focus on world health. But there will be some leverage in not just what the foundation does, which is about a billion a year, but that that will say to smart young people -- hey, IT is not the only thing to go into. Some of these world health things, it's worth it to go into those things, too, and to get governments to focus on those things. And, you know, I am optimistic that a big difference can be made; that is, vaccines that would arrive in the developing world 20 years later we can actually make that down to more like four or five years.

JONATHAN MURRAY: Final questions -- and this is one of our delegates: Do you still have fun? (Laughter.)

BILL GATES: Absolutely. One of the changes for me a couple of years ago was having to see Ballmer take over as CEO. And it was interesting. For the first year my schedule didn't change all that much. And then as we got into the second year, I really got more time with the product group. And, you know, that's what I love. That's what's fun. A lot of that is mapping scenarios -- like saying, okay, this government wants to do this application -- does our technology make that easier? So it's not just a matter of retreating off to the ivory tower and doing things that are kind of academic in nature. It's really sitting down with engineers, to say, okay, let's bridge this gap. Why don't we read off our screens? Why don't we get rid of government forms? What are all these steps that still make that too complicated? And you know it's clear that there's a lot to be done. You know, Microsoft, despite what we have done, we are not anywhere near half of what I'd like to see us do.

And it's kind of a fun period for our industry, because the period of '99-2000, where everybody thought everything would happen overnight -- I didn't like that, because I knew it was unrealistic. The valuations were unrealistic, the expectations, and sort of a little bit of the frenzy, the greed around it -- it was just not realistic. And there were a lot of things that were misdirected in that time period. And now that things are more back to basics, more things that prove out, more long-term approaches and stuff like that -- it's a lot more fun. The industry is focusing talent in more of the right ways. And the industry is in a position now -- including Microsoft -- to actually surprise people. We are going to surprise people how quickly we can make these systems easier to use, more reliable, and do breakthrough things. And that's a lot more fun than being in the middle of sort of a tulip-bulb-like phenomenon.

JONATHAN MURRAY: Well, we're certainly looking forward to having you have more fun for many years to come. Thank you very much, Bill.

BILL GATES: Thanks. (Applause.)