Remarks by Bill Gates, Chairman, Chief Software Architect, Microsoft
Mark A. Emmert, President, University of Washington
National Conference of State Legislatures
Seattle, Washington
August 17, 2005

MARK A. EMMERT: Well, first of all, on behalf of the University of Washington, both Microsoft and the University of Washington, along with a number of wonderful, wonderful organizations in this city and in this state would like to extend our welcome, along with all those welcomes you've received so far to the wonderful State of Washington, and the City of Seattle. We're delighted to have this organization here in town, and we're very pleased to have such a full house tonight, this morning, so welcome to Seattle.

And I would like to begin our conversation, Bill, by talking a little bit about your history, -- it's a little ironic to have a university president interviewing the most famous college dropout in the world, but Bill, as everyone here knows, began his educational career at Harvard University. But you had some experiences before then with the wonderful state public university. Why don't you tell us a little bit about your first interactions with higher education?

BILL GATES: Well, when I was 13, my friend Paul and I -- Paul Allen -- had discovered computers, and computers were so expensive then the problem was that people guarded their usage very tightly. They spent literally millions to buy these machines, and so they had very specific things they wanted to use them for. We got a little bit of computer time from our high school, but we went through that very quickly. And so then we thought, so where can we find some computers? Paul's father worked at the University of Washington, and so we started wandering around thinking, hey, there must be some computers that don't get used too much late at night. And, sure enough, if you're diligent enough, if you look around physics, and the medical school, and engineering, there were a couple minicomputers, and maybe one fairly large-sized computer that if you came in about 3:00 in the morning, and it was only a couple of miles walk from my house, you could go in there and get full control of one of these unbelievable machines.

And so, all our early usage for the key years there were at the University of Washington. And that was the time period where we saw the discovery of putting the computer on a chip, which meant that eventually the power that we were having by borrowing million dollar machines would be available to everyone. And so, that's when Paul and I got brainstorming about, well, maybe software would be the key missing piece. So that was a very important piece of university resources. (Laughter.)

MARK A. EMMERT: And the lesson to all these state legislators is, if you think that your resources at your state universities aren't being utilized enough, you're wrong.

You know, you and Paul helped usher in the era of the PC, which has had such a revolutionary impact on the way we manage information, the kind of communications that we have now. It's really transformed business, and public policy in so many ways. Could you give us a sense of where we are today in that revolution, and what you think the next immediate phase is, and maybe even some hints about where we'll go over the next 10 to 20 years?

BILL GATES: Yes. I think this is a very important topic, because whether you're looking at the jobs that legislators themselves do, and their ability to find information, and communicate very effectively, or whether you're looking at the top issues that you deal with, the cost of healthcare, the excellence in education, you know, really across the board, the opportunity to take these technological advances and use them for transparency and efficiency, and effectiveness, being able to see the best practices, being able to measure what's really going on in a better way, there is a huge gap between even the technology that exists today, and how that could be utilized. Now, it's up to Microsoft working with partners, and showing examples, to try and close that gap. But if you went across all the different legislatures, the use of technology, you'd find very wide differences and some best practices that are only in one place.

The thing that's amazing today is that we're really changing from a paper-based approach to a digital approach, and that should happen in all the government publications. It should happen even eventually in education. We're hard at work on taking the portable computers we have today and making those smaller and smaller, and actually making them work not only with a keyboard, but also with a pen, what we call the tablet-type device, and then getting the curriculum into digital form so that you don't have to have paper textbooks. And as the cost of all of this comes down, eventually that tablet device is inexpensive enough that you can save money by simply buying the tablet PC for the student instead of buying all those textbooks.

In addition, what that means is the ability of the teacher to take all of the material and customize it to point to different things on the Web, to use motion video and audio and different approaches that a paper design can never allow for, it really opens things up in a very big way. That means that teacher has to have the right training to do that, the classroom has to have the wireless network, and those things. So, it will probably be a decade until in a very pervasive basis we get there. There are pilot schools. I think around the U.S. we have about 400 today under what we call the laptop program that are trying this out, where each student has a device, and the curriculum is being molded to that. So, that's just one example of how these things can be used.

The idea of collaboration, sharing information, even say how each of you relate to your constituents, the idea that your Web site would let people come in and comment on things, really be able to get better feedback that way, there are definitely some best practices there that should be wider spread.

So, we're just at the beginning of this. Basically, in terms of impact, we're not even halfway towards what can be done. And the pace of innovation is accelerating. It's in the next 10 years that the tough problems around greater ease of use, better screen quality so that reading off the screen is even better than reading off of paper, making some of these configuration for security things far more automatic than they are today, letting you control what information you're interested in so that, instead of you having to go get it, it comes to you in a fairly direct way. The next 10 years we'll make as many advances as we've made in the last 30. And so building on what we have today, the standards of the Internet, and Windows, and the big software industry, we'll get devices that are far, far better than we have today.

And in some ways, the revolution is very clear to people, because they're adopting what I call a Digital Lifestyle, where they're doing their banking this way, paying their bills this way, organizing their schedules this way. Of course, if you look at younger people, it's more pronounced than older people as a whole, but for society in general, once you get drawn in by one thing that really makes you get familiar and comfortable, then you have a tendency to use it very, very broadly. You know, it does raise questions about the cost of broadband, getting that down. Today in the United States, we're at about 32 percent of households have broadband access. There are five countries in the world, Korea is the leading, which is over 60 percent, where 60 percent of their households have this broadband access. So, we're at the forefront, actually leading in many ways, but there's a few aspects around mobile phones, and broadband pervasiveness so that we can actually see in other countries they've moved ahead on those things.

MARK A. EMMERT: You mentioned in your observation of technology the impact on education. And you, of course, have spent a good deal of time talking about education. Your foundation is deeply committed to issues around education, as well as health. Your mom and dad, of course, all of their lives were heavily involved in the education processes in the state, at the university. Tell us a little bit about your views on education, its role in competitiveness for this nation and for the states that are represented here, and where you think we need to be going with education?

BILL GATES: Well, there's certainly no more important topic for the future of this country than taking the educational excellence that we have, strengthening that, and taking the increased awareness we have of some of the shortcomings of the education system we have, the incentive systems, the curriculum, the degree to which we engage the students, even at the high school level in the right way, we need to change that, because the nature of global competition is that the workforces, particularly in China and India, are getting better educated. And the only way that we stay in the position of getting such a huge proportion of the improvements, the increase in wealth of the world is if we're at that leading edge.

And we can see this, take the two big leading industries, industries around biology and medicine, that's one, and industries around computer technology, that's two. The job creation and the success for those industries have been overwhelmingly in the locations where there is a great university. There's an almost perfect correlation between the number of jobs in a region and the strength of the universities. And, that will continue, whether it's new fields like nanotechnology, or those two fields I mentioned, on the ongoing strength that they'll have. And so for this country, we have to have the best universities. We're in very good shape on those. The top 30 or so in the world, we'd be over 25 of those. And, it's very impressive that although a number of those are private universities, almost half of those would be state universities as well. So, it's a phenomenal system. In fact, if you think of numbers, the state system turns out more world-class graduates than the private system. So, it's incredible how that's worked. And legislators have decisions to make about the level of investment that is made there, and really thinking through what the follow-on benefits for them are in terms of not only the country, but also their state as well.

Now, we are going to fall short if we just focus on that, though, if we don't think about K through 12, we're not going to have the great students to go into these universities and do these incredible things. And there, as you mentioned, the foundation has that as one of its top two priorities, global health is the biggest program, but the second biggest and almost the same size is what we're doing to look at new things in U.S. education, and work with partners on high school design, and curriculum, ways that you can drive stronger relationships, stronger relevance, stronger rigor to that whole high school process, because now that we're doing more measurements as a country, more tests and things, it sort of creates this thing of, wow, there are more dropouts than we thought, because we're not just looking at the senior year now we're looking at that whole four-year period, and we're looking at some people who come out and nominally graduate, but whose skill sets really in terms of where the economy is going are not that effective.

I had a chance to speak at a governor's association meeting earlier this year and I was pretty blunt in talking about the need to change the high school system. I literally used the words that it was obsolete relative to the task at hand. So raising the standards was actually necessary in that. And I'd say that's probably the top issue for the United States. If we do that well, if we really push on that, that will keep us in the strong position we want to be in.

If you look at that it's a huge problem. The incentives, getting the incentive systems right, making sure excellence is really measured there, making sure the math science piece of that is strong the way it should be, thinking through some of these designs, that's going to take all the attention of the people in this room and getting the voters to understand that the tradeoffs need to be made.

MARK A. EMMERT: Certainly, the other challenge, of course, that state legislators face every day, you do in your business, we do in higher education as well as the cost escalation of healthcare, and the impact that's having on the budgets that are available for education, for transportation, for all the other things that these people here in the audience want to invest in, in their home states. I know Microsoft and others in the technology fields have been working in this area, but what do you think is going to become, or would become in the healthcare industry standard practices that may have some good news for folks here that maybe help is on the way?

BILL GATES: Certainly the U.S. system is, in many respects the best in the world, but it's also dramatically the most expensive in the world, even compared to other countries whose health outcomes are not much different than ours, we spend over 50 percent more to get that result, in some cases double what they're spending. Of course, it's very easy to go in and look at what categories that's in, is it the cost per unit, is it the treatment, things like that, and really trying to understand how we've gotten to this stage.

One of the inefficiencies in our system is that there are so many players in it, in terms of different doctors, hospitals, insurers and those things, that the overhead of just information flow within the system is way higher than any other country. In a few countries that's because they've digitized. The UK is going through a pretty radical change there. Singapore is best in class. But, in most cases it's because their systems are so much simpler, they don't have as many players, as much information.

So the United States should really be the first and get out in the lead on this digital patient record, digital information. And that's been very slow. It is starting to happen now, some of the standards have come in place, some of the software adoption for that. If you looked back three years ago I would have expected us to be further along.

As that happens, say it takes another three years before we largely get there, you do take out a lot of cost, and you create visibility, because you can really track outcomes, you can do comparisons of different approaches, different entities, are they operating efficiently, effectively compared with others, and sort of put back in some of the incentives that today don't work in the system, so the signals aren't there to drive the right behavior.

I do believe that between using information technology in the right way, and the advances that will come in medicine, because of the deep understanding of biology we're developing, a lot of these projected costs can be brought down pretty dramatically. People, I think, are underestimating the innovation that will come to both of those areas. Now, as you innovate people's demands sometimes go up, they expect new treatments, but even so, out in that 10 to 20-year period I think there some good news that's not yet understood, if we adopt these new practices.

MARK A. EMMERT: You mentioned the increasing understanding of biological sciences, and you talked a bit about universities and their educational roles. Of course, a lot of innovation in this country comes from the fundamental R&D that goes on inside universities, and the large-scale R&D that goes on in industry like Microsoft, of course, has a multi-billion dollar R&D enterprise going on. We who work in public sector arenas often hear debates about investment in technology, and biotechnology, and nanotechnology, and info-technology and how that's going to drive economies forward.

I know these legislators worry all the time about keeping their states at the cutting edge of technology for economic development's sake. What do you see as the appropriate role, I guess, of universities public and private, federal basic research, industry, and state governments as they think about how you create a dynamic economy for the future. Where does R&D fit into all of that?

BILL GATES: I think it's interesting to look back at how this country has fared over the last several decades, and how that relates to these questions of research investment. In the 1980s many of you will remember there was a lot of angst in the country about comparing ourselves to Japan. Japan was doing a better job in building high-quality cars, they were doing a better job building consumer electronics. They seemed to have targeted a number of additional industries, including the computer industry, that they were going to go and take that over. Maybe they just had a harder-working, more efficient, better way of running an economy.

So during the 1980s there was a lot of humility in the U.S. looking and saying, why isn't our quality better, what is it that we're better at, but even so there was a lot of prognosticators who saw Japan just completely taking over. What really happened?

In the 1990s some of the inefficiencies, and capital misallocation, and lack of dynamism in the budgeting process in Japan really held their economy back. They had a bubble, their share of world GDP actually declined somewhat, and it was actually the United States in the 1990s that had the only economy that generated a massive number of new jobs, generated income improvements, and for part of the '90s state and federal government budgets often would have good news for the expected amount of income, there was an increase.

MARK A. EMMERT: They have all forgotten those days.

BILL GATES: That's right. Those were the good old days. Now, the last three years of that were partly driven by a bubble in the United States, in terms of particularly technology and telecommunications stock valuation. So we had a few years, particularly 2002 and 2003, where a little bit we paid the price for those excesses. In fact, that job creation that the U.S. had we didn't see it in many other countries, and a lot of that is very, very directly attributable to the investment and research that the United States makes more than any other country. At the federal level the National Institute of Health spends about $30 billion a year that goes down largely to universities, and university hospitals, and funds great research. That doesn't exist in other countries. The equivalent, if you took Europe as a whole, is about 10 percent of what the United States puts into that. That's why even European pharmaceutical companies are often creating their jobs and their research activities here in the United States, because we've got the excellence that comes out of that.

Likewise, in computer technology when I was growing up a lot of the projects were funded by the Department of Defense. It seemed kind of strange that this agency called Defense Advanced Research Projects Agency was funding basic computer research. And the majority of the technology of the Internet, including the specific protocols and various things, came from those projects, that came from Defense, federal Defense spending, into the universities, the universities did a lot of invention, connected these things up and then it came out into the commercial sector.

That's why the United States embraced the Internet first, and got the benefits in its economy of not only new companies that came up around the Internet, where today you think about eBay, Amazon, Google, those are U.S.-based companies, and there's no equivalent of those companies anywhere near that scale outside the United States. Likewise, all the existing companies, not just in the technology sector but all sectors, because they used technology better they became more competitive and got a great share of global sales out of that.

So we are the envy of the world in terms of these leading-edge industries and how we get in there early and allow the progress to take place, and not only have our own students that do a good job, but the best and the brightest from all over the world will often move to the United States sometimes for a period of time, sometimes permanently and come to those universities, come to those companies and do their work here. We've been really an IQ magnet that is a self-reinforcing thing, because great people like to work with other great people. Some of those things, again, require really keeping those policies strong, renewing those things, but the kind of advances and innovation that made us so strong in the '90s, and really surprised ourselves and the world, those same type of things will be happening in this decade.

MARK A. EMMERT: Related to the IQ magnet phenomenon, I know for a good while it was an issue for Microsoft and most technology employers, and for universities, as well, especially in the post-9/11 environment, with understandable clamping down on visas and immigration policy, and that's all explicable and we all understand what happened there. It also seems to have had some challenging impact on our ability to bring to this nation that flow of great minds. Microsoft now has R&D, I think, in both China and in Great Britain. We in higher education are doing more and more partnerships abroad, as well.

How do you see the United States finding a balance between its own national security needs, the need for this flow of brain power in the United States to work at our great companies and our great universities. And similarly, what ought our relationships be to those countries when it comes to just the moving of those IQs, the movement of brain power around the globe, let alone around the country?

BILL GATES: Well, I may have a bias on this one, but I certainly believe that the United States should be as attractive as possible to brilliant people outside the United States, and make them want to come here. And today our process, our visa limitations and process relative to the past makes it far, far less attractive, in some cases, the delays, the humiliation, the complexity are keeping people out, and I think that's a problem.

A long time ago, it was in the early '90s when Microsoft first went over to India and interviewed a lot of people who come out of a great college there called the Indian Institute of Technology, we ended up hiring over 40 people to come work at Microsoft. It was interesting when we did that the headlines in India were, bad news, brilliant people leaving India, and the headlines in the United States were, bad news brilliant people coming to the United States. So I thought, well, it really can't be bad news for both countries. If we sent them back what is the U.S. going to say, good news, geniuses are gone?

In fact, of those original 40 that we hired in, about half of them have gone back. We do have a reasonable size, as a percentage of R&D quite small, but several thousand people there doing work that were part of that founding group, that got to know how we do things, and then could create that there. The majority of the work we do will always be in the United States, and that's why we're so biased towards wanting it to be possible to have world-class talent here, because otherwise you get incredible pressure not to develop more here if those great people can't come across.

No matter what happens with the whatever the U.S. does, there's no doubt that the universities in China are getting better. So there always was going to be an increased ability for them to retain some of their talent, and even bring back some people who had been in the United States. There wasn't anything we could have done to stop that. We just need to make sure we move up to that next level.

This idea that other countries are getting rich, and that they are going to be demanding goods and things like that, overall that's good news, it's causing people to think again, okay, do we really believe in free trade, do we really believe that capitalism works, and these economies work. It is kind of scary sometimes how hard it is to explain the benefits that have come out of the free trade system and those policies. The U.S. always teeters sort of on the edge of doing things that would cut off those benefits. It does kind of hang on the balance, it's a more competitive environment than it's ever been.

MARK A. EMMERT: This summer I was meeting with the president of Singapore University. And, in fact, you were in Singapore at the same time. Somehow, the world knew you were there, and they paid no attention to the fact that I was there. (Laughter.) And the IOC was there at the same time, so you know where the UW ranked on those things. But, the Singaporean universities are sending a handful of students to the University of Washington and many other universities now, and I was chatting with this president and said, gosh, your students are doing so well in their engineering and science classes, and we're really pleased with them. And he got frustrated and even a little bit angry because he said, look, I don't send students to the United States to get engineering and science, we do that fine. I want them to learn humanities, and English, and arts, and pick up some creativity there, because that's what you Americans do so much better than us. And then he laughed and he said, I want some of them to come back with purple hair and tattoos. (Laughter.) And I said we could oblige.

But, how much stock should we put in this sort of secret sauce of American entrepreneurial feel, and creativity and energy, and is that really something that's uniquely American or, in your experience, do we exaggerate that effect?

BILL GATES: I don't think there's anything inherent about our skill set that gives us an enduring advantage. That is, when these students come over from India and China and they are in these computer science departments, or starting firms, or working here, they do extremely well. If we look at the productivity of our research group in, say, Beijing, China, compared to what we do here, they're both incredibly high. They're really there's not a difference there. The United States has the momentum that, when you have good universities, people want to go to good universities, so they stay good universities. We have the momentum that the amount of risk taking that young people are willing to do, the amount of venture capital that we have here, the willingness to make bets on new technology has been stronger than in other countries. They're going to try and imitate those things. They will take on some of those practices. So, it's really the strength we have can, if we renew it, maintain itself. But there's nothing inherent about this. In fact, many people, including myself, when you visit China, Singapore, Korea, and you see the degree of hard work and the focus on science and engineering, which is where all the advances will come, it's a bit scary. You almost feel like it's capitalism moving at a faster pace than sometimes is practiced here, where we've been the best of it.

If there's any trend that scares me a bit, it is this trend of science and engineering students in the United States, how that's coming down. And if you even look down at the pipeline into the high schools, and look at the interest levels in science and engineering, that is down a lot. So, in China and India, you have a soaring number of engineering students passing the U.S., and the U.S. is coming down. So you can say, what is it that the U.S. has decided is this new big thing that maybe we're going to get out in front of, well, the fastest growing major in the United States is physical education. And, maybe the Chinese are just missing it, and there is this whole new set of industries, and breakthroughs in productivity, but it might not be the case. That one confounds me a bit. In fact, I did a college tour last year to go around and talk about why computer science is exciting, neat things that can be done, what these jobs are like. And I'm doing another one of those later this year, going to about 10 campuses, and just talking through why the great problems are going to be solved now, and why being part of that should be the most interesting kind of jobs there are in the world.

MARK A. EMMERT: What in your mind then is sort of the ideal Microsoft employee? When you go out and you hire young people, or not so young people, what mix are you looking for? What kind of person is the perfect next Microsoft employee?

BILL GATES: Well, we have an incredible range of skills that we're recruiting people into. I would say in all the jobs these are people with four-year university degrees, first off. (Laughter.) It may seem ironic, but it's certainly the case. If you think the thing you want to go do is so timely that it never can be done in your lifetime again, fine, but otherwise finishing school is an incredible thing. (Laughter.)

When we look at for engineers, we are looking for people who have shown the independence to do a lot on their own, to really absorb the state of the art, read a lot. We'll take them through any projects they've been on and see if they have a depth of understanding and a passion for what they've done there. If we move over and look at our support and marketing areas, we still are looking for people who have embraced technology, feel comfortable talking to engineers about technology, are excited about what can come out of that. We, today, are in a period, which we've had many of these, but we're in a period where the key limiting factor for us is not financial, it really is our ability to hire people who meet the criteria. And that's through primarily engineering, but in a number of the other job categories as well. So, when people talk about is there some big outsourcing thing going on, the job category with the greatest shortness in the United States right now are these jobs with these engineering skills. And there is no prospect of that changing in the future.

MARK A. EMMERT: Let me shift gears for a minute. I know that the legislators here, as elected officials who hear from their constituents, are increasingly concerned about information technology, security, and spam mail, and people wanting to help get money out of Nigeria, and all of those kinds of things that have come along with this great information revolution. Where do you see all of that going, and what advice might you have for these folks about how to respond to that constituent e-mail that they get?

BILL GATES: Well, certainly as these digital approaches will become more mainstream, not only good people are sitting down and taking advantage of this effectiveness, but people with bad intent, starting with spam. I probably get more spam than anyone does. And that's one area where I'd say, if you've got a system that's set up properly, the improvement we've had in the last two years has been fairly dramatic. If your server and client are set up the right way, you shouldn't be getting a lot of spam. That should not be a huge problem now. There's other advances that need to be made there before that really gets to be a minor problem, which it should be, including some laws, and some prosecutions, and technological things, but we've made very good progress on that.

There is just a lot of randomness out there. I was offered, actually, a college degree in spam. That looked pretty attractive. I got another one where they said they'd pay all my legal costs for just a few dollars a month. That also seemed very attractive. (Laughter.) But they haven't come through on that. And, so this has become the top priority of the computer industry. And there's a lot of partnerships we need. We need to work with law enforcement so they understand the technology so they can go out and enforce new laws. At the legislative level, we want to thank legislators who are getting involved in these issues, because although the existing laws work surprisingly well in some cases, for a number of these things, in terms of being very specific, strengthening the penalties, there are new laws that need to be passed to stay up with these things, and we've had great cooperation on that.

I would say that I'm very optimistic that we can provide tools so that people can manage their systems in a secure way. The same way that in the physical world there are still break-ins, there are still thieves, we'll never get to perfection, but we can make it so that people are willing to use the digital approaches, willing to give out their credit card number, willing to put medical records onto these systems, there are ways of auditing whether you're getting your software updated the right way, whether you've got the firewall set up the right way, and there's a lot of invention that we and others are doing that will step up and make this not a big blocking problem.

But, we recognize today, and for example, our new release of Windows that we just named Vista, that would have been out about a year earlier, it would be out almost about now, if we hadn't had these security things as the top priority, both in terms of things we needed to do in the meantime, and things we needed to build into that system. So, it's late next year that that will come out because of the priority we put into security work.

MARK A. EMMERT: I've had the pleasure of working with legislators in about five different states now. I know that in every place I've ever been, one of the issues that they all struggle with is the economic development of their states, and attracting business and industry, and growing their own indigenous business and industry. They're always looking for what's the right practice in terms of tax incentives, and regulatory requirement, and how do you structure that to be competitive in your state. They're all going to go home now and tell their university presidents that the first rule is, if there's a 13-year-old walking across campus at 3:00 in the morning, leave him alone. (Laughter.) But the next thing that they'll want to worry about is how do they make themselves attractive to grow the next Microsoft? What can states do to make them more attractive to business and industry? And I guess a follow-up, Bill, would be, what is the right relationship between business and state legislatures and the federal government for that matter as well?

BILL GATES: I think the greatest burden for funding research activities will stay at the federal level, because at that level the scale of the budget, the ability to really have competition across all the universities in the country, that can work well. It's another system we could renew its excellence, but on a relative basis it does quite a good job.

The industries that I think about the most, information technology and biological industries, they are far more sensitive to the quality of talent in a location than they are to the tax policies. If you say, okay, where in the United States did jobs around information technology grow up disproportionately, well, California would be number one, and not because they have the most friendly tax policies compared to other states. This state would be strong, Microsoft distorted that a little bit, but again it wasn't based on any particular tax policy. And so those things, you can go overboard on those things.

It may be that for manufacturing that I'm less familiar with that some of the incentives, and the tax policies there really do make a big job that people are going to locate manufacturing jobs. That may also be true for things like telecommunications centers, or things like that. But for the areas where the difference of coming up with a breakthrough medicine, or not coming up with a breakthrough medicine, it doesn't matter where you pay a little bit more taxes than if you don't come up with the breakthrough, you're nowhere, and if you do there's enough money to go around to make it attractive for you to have done it in any state. It really is this issue about the R&D environment being positive, and the great talent being there, and the state being a place where talent really enjoys coming there, and working there, and raising their kids in that location. So if you take some of the big population centers in the United States they haven't been as much the beneficiaries of either the computer-related, or biology-related advances. It's been somewhat unrelated to actually where the most people are.

So again, I'd go back to education as really trumping all other things. There are some other issues around telecommunications policies or restrictions on certain types of research that do come into the mix, and get discussed quite a bit. Some states have better broadband pricing than others do. There's an emerging issue where the phone companies are now coming in and really competing with the cable companies to provide video and data type services. Some states will make it easier for them to come in and make those investments. I think Texas just did something to push that forward. That will drive down broadband pricing, and that will drive penetration on that.

So there are some very specific issues. But, if you took one that when you stepped back and had to look at it that kind of trumps all the others, it absolutely is K through 12 education and university education. (Applause.)

MARK A. EMMERT: And I didn't even tell him to say that. Let me shift gears globally from state affairs, or even national affairs to sort of global affairs for a minute. We were chatting a bit beforehand about Africa. Your foundation, your and Melinda's foundation has been so engaged in healthcare issues around the globe, and you've personally spent a lot of time worrying about the global economy, and especially the elimination of global poverty and the healthcare issues that go along with that. Tell us a little bit about your thinking in that regard, because here is somebody who had such a great impact on this nation, but yet you're spending an enormous amount of your personal wealth and your time and energy worrying about the poorest of the poor, for which I salute you and I think everyone else does, but why?

BILL GATES: If you look at these incredible advances in medicine and information technology, of course, anybody involved in those areas wants as many people as possible to benefit from those advances. So for Microsoft getting software out, getting computers to be cheap, everywhere in the United States we have a thing called Partners in Learning and all over the globe, there's a real passion for that. Our employees really get behind that and get energized by it.

But, that's going to happen, because the computer prices are coming down and that's good. As I looked out there and say, hey, is that a primary need, I learned some things and Microsoft put a lot of emphasis on that. But, the more I learned about developing countries and the real needs that are there the more this issue of the difference in health jumped to the top of the list.

If you're having a lot of children die, it turns out that leads to a situation where families have a lot more kids, because they want to have a very high probability of having kids survive to become healthy adults and support them as they get older. So ill health actually leads to population growth. That's somewhat paradoxical, I hadn't expected to learn that, but over the last 30 years that's been very clearly established.

So then you can say to yourself, take all this improvement in health, 100 years ago health for everyone, the United States, every country, was awful. Of 1,000 children born only about less than 700 would make it to age 5 in every country in the world. Today even in the worst country things are somewhat better than that. And yet, the difference between the rich world and the poor world is very, very dramatic. In fact, it is stunning that medical research largely has not been applied to the diseases of the developing world, things like malaria, tuberculosis, there has been very little advance there. The simple statistic on that is that 90 percent of the money is spent on 10 percent of the health problems, and those are the health problems that are largely in the United States, cancer, heart, and those things. And these infectious diseases that don't exist here get almost no R&D applied to them.

The good news is that our understanding of biology has improved a lot. So that's a platform on which if we just put some money to focus on these childhood diseases, malaria, and on AIDS as well, that we can expect to see some breakthroughs. So the great opportunity our foundation has had is to really say to scientists around the world, hey, let's apply the latest understanding to this. We did I'll just mention one particular thing, we did what was called the "grand challenges," where we wrote down 14 things that would save literally millions of lives.

For example, one of those was the idea of being able to deliver vaccines as like a sugar drop, instead of as something that you need to keep cold, and that you need to deliver with an injection that can be very difficult. So we had lots of scientists around the world, literally thousands of applications where people said, okay, if you're going to put money into that we have ideas. So recently we granted 43 of those groups the money to go pursue those things. So seeing that outpouring of good ideas really showed that when the resources are available people want to work on these things.

So if you take a long timeframe, like 20 years, now that the focus is coming there, the great people are being drawn in, and we're building on top of the advances in biology that have been taking place, I think we'll see dramatic improvements in health, dramatic improvements. If you take the top 20 killers, I'd be optimistic that over half of those we'd have very dramatic solutions to those things. What that does then is that as health improves, education becomes easier, family size goes down, nutrition becomes easier, and you start to develop that cycle that leads to economic development that we've seen not just in the United States, but many other countries, Malaysia, Korea, Taiwan, even China are clearly on that ladder of development, but large parts of Africa, parts of India are not on that until we get these health breakthroughs.

So it's sort of about equity, taking science and saying, let's apply it for all of humanity, and find the people who want to do that. The great thing for me has been not only the advances that have been made, but in many ways the work that the foundation does in this area is a lot like what we do at Microsoft. We find smart people, we give them big, ambitious goals, we let them take that long-term approach, and even now when we're only about six years into this, we've had some breakthroughs that can make a big difference. (Applause.)

MARK A. EMMERT: Well, we're nearly out of our time and we certainly appreciate your willingness to take some time and share with us. Let me ask this, if you could give folks sort of a few take away messages to leave with as they finish their week in Seattle and go back to the hard work of legislating in states around the country, what would that be? What take away messages should everybody get from Bill Gates today?

BILL GATES: The first might be that, in terms of your own use of information technology, the way that you find information, the way that you're working with e-mail and documents, the way that your office deals with those things, the way the constituents inputs come in, I'd really encourage people to look around and find best practices there. It's often the case that if you're willing to make an investment, a few days time, being a little confused, learning something new, maybe having somebody younger show you how to do something, the payoff to that can be pretty incredible.

I know in terms of my own work, I couldn't get nearly as much done, track the broad range of things that are important, and really feel like I'm on top of those, and be able to use my time very effectively in how I schedule things, organize things, get briefed on things, if I wasn't using these tools in the best way. So I'd encourage people to dig into that, and certainly Microsoft would like to help people do that. In some cases things like having wireless networks in place, there might be some infrastructure things that can help out there.

The second thing, I think, is to look as you have issues to think about bringing in somebody who can talk to you about why the because technology is not standing still, the way that area will work will be very different. As you're looking at medical costs, as you're looking at even how schools get organized, and the curriculum gets built, it's going to be very different. Some of the capital investments you're making today as legislators are about things that will happen 10 years from now. When you take that kind of timeframe technology will have really changed things, just increased exposures of the advanced thinkers in those areas I think can be very helpful.

I think getting exposure to what are the best things going on in education, really looking at some of the numbers that are coming out. At first you have to kind of brace yourself for looking at bad news, that's saying what's going on in the system, what people aren't getting out of the system, but then certainly the opportunity to visit schools that are taking some of the new approaches and be reenergized by that, and then thinking about what kind of incentive system, what kind of open approach lets those things spread out in a very broad way.

So there's a lot of neat things that are happening, if we can just get those to scale, even the education problem, I think, is quite solvable.

MARK A. EMMERT: Thank you very much. It's been a pleasure to get to chat with you for a little while.

Thank you.

END