Answering Back - Susannah Simons interviews Bill Gates

...company you can count on, and yet that individuals can do their best work. And we've been very unique in trying to make those two things go together. That's part of the challenge of my job. And I do see a lot of our competition coming from smaller companies that don't have that same challenge. Yes, because it must have been very easy in the beginning when Microsoft was driven by the enthusiasm of all those people who knew that they were in at the beginning of a very exciting new growth company. You all worked all hours of the day and night. You set the example. That's the challenge to you to keep that going, isn't it? I mean, how are you going to keep it going? One of our ways of doing it is to have small business units. And that's in total only a couple hundred people who control every aspect of a product. So Microsoft Excel, our spreadsheet, there's a group of 200 people who wake up every day thinking, you know, we want to get this new version out. We want to increase our market share. And so they're, you know, keeping ahead of Lotus when they do that. In word processing, there's a group the same size that wakes up every day and says, you know, here's how we're going to get even further ahead of WordPerfect. So that kind of structure is part of it. Also, a great thing for us is the way we use computers in our own company to keep open communication. This electronic mail where you can sit down at your desk and type in a message and send it to lots of people all at once. And then when they come to their machine, they see that message. It allows us on a worldwide basis to keep things coordinated. I send hundreds of messages a day so I can touch, you know, a variety of products and lots and lots of people can know what I'm thinking without, you know, endless meetings as part of that. So we need to come up with new ways. But email is just sort of electronic bureaucracy, isn't it? Not at all. Not at all. It's an opportunity for me to give feedback, you know, very quickly. It is communication, the best form of communication we've got. I mean, say our group in Japan finds new technology, they send email. I forward that to some people. They, you know, ask some questions. And so we're all trying to figure that out in a few hours after the first message. And everybody who needs to know knows without hardly any distraction at all. So it's a fantastic thing. But it's also a way of you keeping your tabs on what's going on and you keeping your control over the whole of the rest of the company. The approach we take is there's only two people who oversee all these business units, myself and one other person. And so the business units charge off and do what they want to do unless the two of us see something where we insist on some cooperation or sharing between them. And so it's a very efficient process. People present their plans to the two of us. You know, we say, okay, that's fine, go ahead. That's it. But it's quite unusual, though, isn't it, in a company the size you've now become, to still have the control vested in two, albeit one more powerful than the other individuals. Well, control, this word control is a dangerous word. I am the chief executive officer of the company, so I have responsibility for our overall strategy. But, you know, I'm traveling, I'm focused on future technology, and so the health of the company depends on my having hired very, very smart people. And everybody has very big jobs. Believe me, this is not a company where people sit around worried about control. They've got a lot of challenge, a lot of room to do new things, and they're just seeing if they can live up to that. But can you foresee a day when Microsoft could become too big to keep all that going? I mean, what's the optimum size? I've always thought that the company wouldn't grow much. At various sizes, I've said, we'll get twice as big. When we had 500 people, I said, oh, twice as big as all we'll get. When we had 2,000, I said twice as big as all we'll get. Even today, with about 12,000 employees, I'd say, honestly, I think twice as big is about all the bigger we'll ever have to get. But where is your growth going to come from in the future? Is it going to be from outside, or is it going to be from within? Well, the products will be developed inside the company. We've used acquisition in a very limited way. We did buy a database company to add in to some internal efforts we were doing. But unlike the other software companies, only a very small number of our people came through acquisition, maybe 1% or 2%. We have preferred to hire people out of college and teach them our way of doing development. So we grow through internal development. So when you've got your creative people and you're happy you're going to keep your creative people, so let's now look to the future. Will operating systems continue to be as important as they have been in the past to Microsoft, or will there be a relative shift towards applications? Well, these are both big businesses for us. In operating systems, there's a lot we're going to do with Windows to make it more powerful and to adopt to new kinds of hardware, whether it be speech or handwriting or just the pure power of the chips that are built into these machines. So that's a big growth business for us. At the same time, we're entering new applications categories and growing our share there. Probably applications will grow a little bit faster than the system software, but both very healthy rates of growth. But doesn't it present you with a problem? I mean, if you've got people who've already got an office of, say, 50 people with 50 computers, how are you going to persuade them, once they've invested all this money in the equipment and the software that they've already got, that they should actually swap to something else? I mean, that extra expense is going to kick them off, isn't it? It is a problem. The person who has the installed base and has those customers in software always has a huge advantage, and that works for us in the businesses where we're strong, and it's a challenge to us in some of these other businesses. One of the ways we're doing it is by growing the business. Take networking. Only about 30% of the machines are connected to networks, and yet virtually all of them should be. And so by building networking into Windows with a form we call Windows for Workgroups, we'll be able to make it very simple. So what you're doing, basically, is tweaking and upgrading and slightly shifting the emphasis on your existing products, really. Sure. Now, one of the things that you've done that to is DOS. You are continually tweaking and upgrading DOS, which is the operating system. You tweaked it and upgraded it to turn it into Windows. But people are using an operating system, DOS, which is 10 years old. I mean, how long are you going to stick with DOS? Well, saying that DOS is 10 years old is almost like saying, you know, the combustion engine is very old. The code inside there is constantly rewritten and improved to take advantage of the new hardware. And so DOS today has no piece that's the same as that original version. The thing we do carry forward is the ability to run the same applications. We take what we call an evolutionary approach, where even as we give you new features, you get to take along the old software. So there are still so many possibilities left within DOS for you not to worry about another operating system. Does that mean that anybody who does worry about another operating system is actually wasting their time? No. What often happens is somebody starts from scratch and does a new operating system, and they'll promote the new feature. And then the market can judge whether that new feature can be added in to our DOS Windows approach or whether it's better in this start from scratch. And they weigh the benefits of giving up all their existing applications and what they've learned and what's the most popular versus this other thing. And in every case, we've been able to provide those same advantages but with compatibility. And that's a healthy dynamic. People try to come up with new things. When handwriting came along, a few guys started new operating systems. When the idea of making a smart TV is coming along, people are trying new approaches to that. And we're taking Windows and adapting it. And our approach of adapting it so far has won out. But it doesn't mean that people should give up trying. It's healthy to always compare the two approaches. But if you go on continually tweaking and upgrading, what is, after all, I mean, I know you say 10 years, but 10 years in computer terms is actually quite old. So DOS actually is an old product. If you go on tweaking that, somebody else comes on with a completely new, radically new, exciting product, you could be vulnerable, couldn't you? I mean, they could wipe you out in one fell swoop. Well, there'll always be a huge benefit to being able to run today's applications. Nobody wants to throw away all the training and investment they've made in those. And so what we do with DOS is even if we have to rewrite it completely, we add in the new exciting features while continuing to run the old applications. It's very worthwhile for other people to try incompatible approaches and see if that's better. But for everything that we've seen, we feel the evolutionary approach is going to be far, far preferable. Even things as far out as speech or handwriting, all those things we see a way to have the best of both worlds. Well, over and above the computers themselves, I mean, you've actually started moving heavily into services now. Why have you done that? Well, our focus will always be great software products. But in order to let people take advantage of those products, you have to spend time with them and understand their problems. Say it's a bank, their requirements of branches, reliability, transition from their old systems, it's quite complex. And training their people on how to use the new tools for the software environment is very important. So we've actually got a consulting group that can go in and spend as much time with the customers as is necessary to help them exploit this new world in a smooth way. We also need to be able to be there to answer the phone or even to an individual user at home. So those services are really part of what people expect from Microsoft in order to get to a solution. But does that service extend as far as writing personalized software, or is it just a case of actually helping them cope better with the proprietary stuff that you already produce? We're very willing to do special software. Through our consulting group. The best thing for us, though, is actually if we do one as a sample and use that as an experience to teach the internal staff of these corporations how to do it themselves. Because that way, even after we've moved on, they're using the tools the right way. So it's a little bit of an apple seed approach of going around lots of places rather than focusing our business strategy on hiring tens of thousands of consultants. So is it essentially an adjunct to the existing company, a sort of support operation, or is it going to be an important revenue-earning service on its own? It can be profitable, but it'll never be a huge percentage of our revenues because the products keep going up. So it really fits in together with the products rather than has a life of its own. We also like to be very cooperative with the consulting groups that are out there, whether it's large people like Arthur Anderson or PA or even the small shops. And so we don't want to get so big that we're really a threat to them. Right, let's move on to the completely new developments in the whole world of computing. As you keep saying, it's still an exciting, growing industry. You've been investing heavily in something called multimedia, which is the integration of sound, pictures, words, graphics, so that you can call up a movie or a record or do some drawing all through the computer. Now, is that playtime, or is there something really serious going on? Well, humans are very used to looking at video or hearing sounds as part of the learning process. So whether it's making the computer easy to learn from or using it as a pure educational tool, putting an encyclopedia on there or putting a sales catalog on there or medical information, having pictures and sound is very important. And so we were the first company to really declare how important multimedia would be and work with the hardware people and other software companies to get this going. It's still at a very early stage. A few encyclopedias have been done. Some museums have started to use this. Some things like music teaching have been put into this form. But you'll see an explosion in the next couple of years, both for consumer use, for educational use, and also for business use. But presumably the vision of multimedia is more than just having easy access to a computer or a dictionary or something like that, isn't it? I mean, it's more, isn't it? Well, any information you can think of, having it there in easy form, that's very important. And so whether it's looking up a movie or looking at parts of history, information is the key to this in making it compelling to learn. We think improving the educational process is one of the more exciting aspects of the computer revolution. But actually books have been making it compelling to learn for years and years and years. I mean, what can the computer do that a book can't? I mean, that's the foremost interactive process, isn't it, when you sit down and read a book? No, it's not. It's not at all. If you want to learn about musical instruments, just seeing, you know... Well, you listen to one if you want to learn about musical instruments. No, but you'd like to read about it and then point to it and hear it and maybe point to a particular string and see what that sounds like, or saying you're studying the human body. You'd like to zoom in on a part. You'd actually like to see an animation of how that works. Or say you're in chemistry. You'd like to actually see how that bonding goes together. So the ability to take text and pictures and sounds and animations and have them all together so you can go at your own pace, go get more details, skip over things, ask the computer to quiz you to see if you really understand it, that is a higher form of interaction than the book. I love books, but this is a stage beyond. But that's such a solitary occupation, if you learn in that way. Do you really think there's a market for that, when people can get all those things you've spoken about elsewhere already? I don't think there's any way to sit down and look at Beethoven's music and play passages and understand where he did it and how he did it. Now if we could all have the best professor in the world sit across from us and pick up an instrument and play it and go get a bunch of historical photographs and show that to us, that might be nice, but it's not possible. There's millions of people who want to learn and very, very, very few good professors. So the ability to capture it in this form, where everything is there, sound and pictures, and you can go through it in exactly the form that's fun for you, will be an incredible breakthrough. But how convinced are you that people really want it? They're going to have to go out and buy it, and you're going to have to persuade them to spend money on it. And are they really going to do that? It's just a sort of hodgepodge of things they've already got, which is going to cost them. Well, we have a vision that this is going to be a great thing, and we've invested a fantastic amount in it. And certainly it's risky. It's based on saying that people really are curious, and they would like to learn in a new way. And you can sit people down and show them the work we've already done. For example, we put out a product that has all the movies on it, and you can see pictures of the movie and actors and look at the awards and what was done in what year, hear the theme songs. And when we see the excitement level for that, we believe we're really on to something. And we're pushing ahead, spending tens of millions of dollars. You've also been, of course, putting quite a lot of your own personal money into actually buying all these things. Is that because other people don't share yours? Well, other people may not be as excited about this as I am. I see it as a way to have a learning environment where you can call up any kind of picture and have a very dynamic environment. I think to really appreciate that, people have to know that there are going to be these very high-resolution color screens and that the ability to send data even into your home using optic fiber will really be quite incredible. And so I'm looking out ahead and investing in making that vision come true. And I hope eight years from now, in the same way that Microsoft's belief in software is so obvious now, but we were the only ones who did anything about it, that this vision of images and constant learning and interaction, that's also an incredible success. But why is it your money and not Microsoft's? Oh, for the very far-out stuff that I'm doing. I have created a new company and hired some other people to really look into image libraries and how those should work. And they have a little bit different time horizon than most things at Microsoft, and it's a lot of money being poured into that. And I can afford to do it, and I don't really have to put much of my time into it because I've gotten great people. And so it's off to the side and hopefully will become something important. But it's still a very high-risk venture, isn't it? Oh, extremely high risk. And not everybody should invest their money in it, only people who believe and have a lot of money to invest. And that's why the risk is yours and not Microsoft's. That's right. Now, in the light of the success of Microsoft over the last 10 years, what do you think it offers as a model for other companies, never mind those in the computer industry? Well, sometimes I think you have to be careful to take what has worked so well for one company and try and apply it to other areas. But maybe there are some lessons. We've taken a very long-term approach in building products, being patient about how long it would take to see our vision realized. We've really focused in on the people we hire and keeping very lean, giving people big jobs, not having large groups. We've used computer tools in a way that should be an example for everyone. Instead of having print reports, just have the information right there on the screen that you can play around with it and compare it to other things. It's very empowering for the data to be there and not to have your manager have data you don't have and you have to go to a meeting to get it or dig through a lot of things. So there are some lessons there, but you couldn't rigidly take what we've done and be successful elsewhere. But what about the computer industry itself? What's that going to look like in 10 years' time? Well, the hardware industry is a very different business than the software industry. In that separation, some people still can't get used to that fact that hardware, a lot of the great work is at the chip level. The support of installing systems and helping to build applications, that's really one industry. And then the package product software industry is another industry. So that continues to have an impact as some companies are good at one thing, others are good at the other. And the ones that are trying to do all three, like the IBMs or several others, are having great difficulties in having to lay off tens of thousands of people. But how's it going to shape up in terms of the players involved? Is it just going to be a few big people? Will there still be lots of little ones? Will you all be talking to each other or aggressively fighting each other? Or what will you all be doing? Well, in software there'll be always lots and lots of companies because there's need for software for engineers or lawyers or accountants, very specialized software that can use the general purpose software like Microsoft builds but fits in in a special way. So Microsoft wants to work with those people and encourage them. It's an industry that will never have just large companies. It will always have mostly small companies all over the world. On the hardware side, it may come down to less companies because the chip technology keeps absorbing more and more of those functions. But it's not just computers. It's everything in the office, the fax machine, the copier, the printer, the phone. All of those things will be combined into a single information network. And will it still be an American industry? Or do you think the Japanese will be a threat? Well, the word threat is one of those words like worry which seems to bring an emotional way of looking at these things. Will they be a serious player? Oh, the Japanese companies are already a big part of this. Certain technologies like today's generation of flat screens or certain of the memory chips, they've made great contributions. And they are investing a lot in new types of research, optical devices. Particularly as consumer electronics becomes digital and uses the same techniques that computers have used, their huge investments in those areas will play out. So things like digital motion video or what is the TV set of the future. Japan has a role to play here. The software side, Japan has done very little. And for the foreseeable future, that will continue to be a business where the Japanese have a fairly small share. We can't expect that forever. We have to keep moving to be aggressive because there are certainly companies that are very capable of doing good software. And what about Bill Gates though? Where is he going to be? I mean, does Microsoft still represent a challenge for you? Oh, absolutely. I mean, I have the best job in the world and I work hard because it's fun. Working with smart people and doing these products, it's great. We have leadership products. When a product gets behind, we get together and think about how to change that. So there's nothing better than building great software. But will you still go on doing it and be doing it and retire at 65? No, I don't see myself staying that long. I'm sure some of the smart people at the company will be more appropriate to lead things. Not in the next five years, but sometime after that. And I'll take a different role. It's hard to predict. I'm 36 and when I get to my 40s, I'll be thinking in different ways. But will Microsoft be able to run without you? I mean, if you fell under the proverbial bus, would it still go on without you? Oh, absolutely. Microsoft is a company with so many great people and so much strength. Although I'm in the most visible part of it, what goes on there every day is a small part of it. I get to coordinate things. Some of my ideas, I think, are pretty good. I'd hope the company might be worth a little bit less if I wasn't there to get everybody pulling together and contribute some of my vision. But Microsoft would still be the leader and continue to push on without me. I mean, is there nothing else or something else that might not tempt you? After all, we had another software billionaire who was tempted to become President of the United States earlier this year. Might you not share that same temptation? No, I really don't see that. It's not attractive to me. I really like what my vision of what computers can be and some kind of involvement in that is what I see for my future. It's still that same vision of the boys in the room next door to the massage parlor with the long hair and the clothes and pizza, isn't it? Yeah, it's the same vision. I mean, it's good to become an expert in a field and drive it forward and stick with it. It's really that rather than the size of the opportunity that's always made it so much fun for me. And it still is fun. Absolutely. Bill Gates, thank you very much.