00:13: Charlie Rose: Welcome to the broadcast. Bill Gates has, with the help of some very bright people, created Microsoft, the world's largest software company. Some say it is the most successful company in the most dazzling new industry of the century. It is approaching $10 billion a year in sales and Bill Gates's stock is worth more than $20 billion. That makes him the richest person in America and, because of Microsoft's influence, one of our most influential citizens. Many observers will tell you this company's poised to be the most important business enterprise in the world in the next century. Bill Gates has also written a book called The Road Ahead and we'll talk about that. I'm pleased to have him on this broadcast for the hour. Welcome.
00:50: Bill Gates: Thank you.
00:57: Charlie Rose: It's good to have you here. We have done a few people in your business, so you--
01:03: Bill Gates: Yeah, I've seen that.
01:06: Charlie Rose: --in a sense, bring us full circle. Take me from 1995, at the end of the year, about a year ago, to right now and how you-- what your life has been about and what the company's life has been about and what's changed and how have you, in a sense, redirected Microsoft?
01:23: Bill Gates: Well, the focus of the last 12 months have really been-- is driven by the Internet-- building Internet standards into all of our products. And throughout 1994 and 1995, the importance of the Internet grew and grew. We were working on Windows 95. We were getting Windows NT done. But we saw that we needed to really build in easy access and we needed to do authoring tools. And so by the-- by late 1995, people were really wondering, ''What is Microsoft going to do about the Internet?'' We got the press and analysts together on December 7th of 1995 and laid out a plan, 12 months of very ambitious activity. And we've been able to deliver on that during these 12 months-- a browser called Internet Explorer, a server, authoring tools. And it's been a fun year. It's been a year of more success than expected.
02:24: Charlie Rose: Well, I want to come back to that. It also required you, because so much has changed, to revise for the hardback-- for the paperback this book.
02:33: Bill Gates: Right. I went in and rewrote about five of the twelve chapters because the path to the information highway, which is the term I use for sort of the ultimate--
02:42: Charlie Rose: Yeah.
02:44: Bill Gates: --vision there-- it's quite different now than people would have said two years ago. The idea of interactive T.V. is clearly less important. That didn't pan out, despite what the cable and phone companies have predicted. And so it's less T.V.-centric and it's more centered around the personal computer and how that hooked up to the Internet is building a new way to communicate.
03:05: Charlie Rose: Does it benefit, in the end, notwithstanding what control you have over operating systems for software and P.C.'s-- does it, in the end, benefit you because it opened up a whole new arena for you to apply the resources of Microsoft, rather than simply dealing with the same kind of business you had in both applications and operating systems?
03:26: Bill Gates: Oh, absolutely. Our vision had always included the idea of the P.C. being used for communications, but it was very slow to catch on. On-line services weren't very popular. And we were a little worried. Why wasn't it catching on? And then, boom, the Internet came along and then, sure enough, then there's a standard for mail. There's a standard for the protocol. And it's really driven P.C. sales. It's gotten a lot of people who said they'd never buy a P.C. to sit down and say, ''Wow, there's a world of information there. There's a world of''--
03:58: Charlie Rose: ''I need one of them to get me on this Internet.''
04:00: Bill Gates: Okay.
04:02: Charlie Rose: Yeah. Here-- I mean, that's what they're saying, in a sense.
04:04: Bill Gates: Right.
04:06: Charlie Rose: Yes?
04:08: Bill Gates: Right.
04:09: Charlie Rose: Did-- as the Internet came on strong, did the memory of IBM and how they missed the P.C. haunt you?
04:15: Bill Gates: Well, I think, throughout our history, we wake up every day knowing that in the business of technology, you have to think about what are you missing? What is the research or customer feedback that you should be paying more attention to? And how do you keep that pace of innovation very, very high? How do you make sure you're hiring the very best people? And that kind of focus has helped drive us forward through all the milestones the company has had. Certainly, the Internet is a great example of that. We had to tear up our plans and step back and say, ''Well, how do we-- how do we really embrace all that's good about the Internet and recognize some of the shortcomings and make sure we're leading the way in reducing what-- what has held people away from the Internet?''
05:04: Charlie Rose: But did you have to be convinced by people within Microsoft-- had they been knocking on your door, saying, ''The Internet's coming. The Internet's coming'' and you were too busy, to occupied, too concerned about Windows 95 to pay attention until, all of a sudden, you woke up and said, ''I better get on this''?
05:21: Bill Gates: Well, that's not quite that black-and-white. I mean, even in 1994, I wrote a memo saying ''The Internet will be very important.'' But then it just grew and grew until it got to the point where we said, ''This is the most important thing. It's our biggest opportunity. It's our biggest challenge and''-- so it meant that some of the interactive T.V. work we were doing, we redirected that. The work we were doing on Microsoft Network, we redirected that. The team that had been building Windows 95, that had the
05:59: Pcp Protocol Stack And The Browser In It: In a matter of hours, probably.
06:05: Bill Gates: No, in a matter of a couple months we got people re-vectored and then actually articulated that change in strategy very crisply in December '95.
06:14: Charlie Rose: Was there anything, though, without making it that simple, in which you almost missed it? I mean, there's-- you can't look back and say ''We're just lucky that we woke up.''
06:25: Bill Gates: I don't think it's just luck, but there are many transitions the business has gone through. Graphical interface is something we bet the company on and there we had the great work that Xerox had done, some people we'd hired from the other-- that made that a driving force behind our software for many, many years. We had the relationship with IBM, where that helped us establish standards in the 16-bit environment to create MS-DOS as a standard. And certainly, there's elements of luck that came into why were they willing to come to an outside company who'd done the software for all the personal computers at that time and depend on us instead of doing it themselves?
07:06: Charlie Rose: Now that you have wrapped a browser within an operating system, what does that-- where does that leave Netscape, your competitor in creating a browser?
07:14: Bill Gates: Well, they're in the same situation we're in, which is you can't just keep doing the same old thing you were doing before. You have to take your skills and attack the new frontiers. For example, graphical interface used to be outside the operating system and so there were many people doing those systems. Windows came out ahead there and now it comes with the operating system. Likewise, the browser is something that Netscape looked at turning the browser into an operating system and we looked at taking our operating system and building the browser in in an integrated fashion. And so that was a good example of the kind of competition that spurs this business on. Now Netscape has moved on to a strategy they call their ''Communicator strategy'' and they say, ''Well, that's about Intranets and helping businesses to communicate well.'' Well, Lotus has a product called Notes--
08:07: Charlie Rose: Yeah.
08:10: Bill Gates: --and that's base. (? ) We've got Exchange. And so all three of us will compete vigorously to see who's delivering the best solution there.
08:18: Charlie Rose: How big is that market for Intranet, which Barksdale on this show talked about as their future?
08:23: Bill Gates: Well, everybody comes up with these new terms.
08:26: Charlie Rose: Right.
08:28: Bill Gates: The idea of helping people communicate inside a company, that's often called ''mail'' or ''groupware'' or ''Intranet.'' It's a gigantic market. Companies are waking up to the fact that if they want to be in the information age, they've got to have their employees sitting down at that computer several times a day reading messages, sending messages, going out to Web sites that are inside the company and Web sites that are outside the company. And if they're not doing that, they're not really at the starting line of what they need to do to lead in this new age.
08:58: Charlie Rose: Navigator has what percent of the market now?
09:01: Bill Gates: It would still have 80, 85 percent share.
09:04: Charlie Rose: And Explorer has what?
09:06: Bill Gates: The most of the rest of it.
09:08: Charlie Rose: The rest of it. So you've got 15.
09:12: Bill Gates: Right.
09:15: Charlie Rose: Where will it be a year from now?
09:17: Bill Gates: It's a little hard to predict that and we always try to be very conservative in our projections. Given the partnerships with have with AOL, with AT&T, the partnerships with the P.C. manufacturers who are including the Internet Explorer in, I think we can more than double our share over the next year.
09:33: Charlie Rose: At their expense.
09:35: Bill Gates: Well, they-- they're not that focused right now on the browser war. They're very careful to say to people, ''Don't measure us''--
09:43: Charlie Rose: Right. Right.
09:48: Bill Gates: --''by our browser market share. We''-- that they've moved on from that and moved to this Communicator product. So in a sense, they're ceding some position to us on the browser thing and saying, you know, ''Now-- now let's talk about electronic mail and groupware.''
10:02: Charlie Rose: With the Explorer III, do you think you've won the Browser war?
10:06: Bill Gates: I wouldn't say that because we're going to keep enhancing the browser. There's a lot more to be done to integrate it in with the system so that the way you find messages, the way you find files, the way you find pages-- bring that all together. Also, this idea of having information come to you, what we call ''active desktop,'' so instead of you having to go out and find it, if it's what you like, then it's right there when you start up. That's a very important concept and we need to make it completely customizable. So there's still a lot of room for building better browsers, making the browser have editing and layers and lots of technology things that allow for a better browsing experience.
10:49: Charlie Rose: All right. You mentioned the ''active desktop,'' which I want to come to in just a moment. But speak to me about what people like Lawrence Ellison and Scott McNealy-- at least you saw one of those interviews on this program.
11:05: Bill Gates: Right.
11:07: Charlie Rose: They think the network computer is the wave of the computer, backed up by Java and backed up by these larger systems, that people want simplification. They want inexpensive. And the best way to deliver the Internet is through the network computer and they will drive away the notion of Windows 95 and that kind of operating system.
11:27: Bill Gates: Well, certainly, Scott has been consistent in disliking P.C.'s and predicting the demise of the P.C. when it was a rather minor phenomenon. And now Scott's got a situation where the P.C. has gotten so powerful, it's a grave threat to his business. The very high prices he's charged for Unix-based servers are under attack because the kind of chips that Intel's making and the power of Windows NT with new applications now can do as much and more than those Unix systems. And so, you know, Scott, once again, is speaking out and saying, ''The P.C. was a bad idea. Nobody ever should have bought one. Immediately, please, take the P.C.'s away from people that are using them. It's not a''--
12:07: Charlie Rose: Yeah.
12:09: Bill Gates: ''It's not a good thing.'' Now, there is a valid point here, which is simplicity is important and we can use the Internet to make things far simpler. In fact, if there's a theme to this next year at Microsoft, it is simplicity-- using the Internet to keep your software up to date so you don't have to fiddle with it and do these big installs; using the Internet so you can track whatever changes you made and have those backed up, up on the server, automatically; using the Internet to provide better support than what we do today. And so in the same way that the Internet was the theme for last year, simplicity, with some great, innovative ideas for delivering it, is the theme for this year.
12:45: Charlie Rose: But is the network computer the great, innovative idea for delivering the simplicity or is it the net P.C. or some other means? Because you seem not to want to let go, as you shouldn't because of the market share you have, of the idea of the P.C. and your operating system at its core.
13:05: Bill Gates: Well, the personal computer is going to just get more and more personal, more and more responsive, while the price of the machine comes down. And what we're saying to people is that every idea about ease of use we can develop in software for the P.C. without asking them to buy new hardware, without asking them to throw away their old applications. And so in the same way that people two or three years ago said, ''Let's start over with an object-oriented operating system,'' something like Taligent (sp? ) that IBM, Apple and H.P. were behind-- well, we evolved object orientation into the Windows system. And so today software is delivered in components and you get those benefits, but you didn't have to give up the old hardware and the old applications. And when we look today and say, you know, ''How many network computers are selling?'' Well, they don't really exist. They are quite incompatible with each other. The operating system that Scott wants to give you-- it's different on your desktop than on the server and it's different than the one that Larry Ellison wants to give you on the desktop, which is different than the one he's got on the server, whereas our strategy is Windows and Windows with a separation between the hardware business and the software business. So as you want to pick your hardware, that's independent of whatever advances are taking place in the software.
14:28: Charlie Rose: Do you think they have a product?
14:30: Bill Gates: I'm sure they'll ship a product and I'm sure they'll get some customers there. But the momentum behind the P.C., in terms of the training people have there, the applications that are out there, clearly means that what people would like to see is for us to deliver the benefits that they imagine for that network computer without asking anyone to start over and that's what we-- we're quite sure we'll do in the next year.
14:53: Charlie Rose: When you look at the change over the year, one is the adjustment to the Internet-- you've always had two businesses. You've always had an operating system and you've always created software or had applications as part of your two pillars of Microsoft. You now seem to be getting into the media business. Where is this company going?
15:19: Bill Gates: Well, Microsoft is not getting into the classic media business. We're not doing newspapers or movies, anything like that. We see two new businesses where we have great opportunity. One is server software, so Windows NT and a data base called SQL Server and our mail product called Exchange-- that's our fastest growing business. It's over a billion dollars now and the Internet is really bringing the demand for that server software and that--
15:46: Charlie Rose: That's your fastest growing business?
15:49: Bill Gates: That's right. And that's where Sun and Oracle see a big threat because the power there, combined with those Intel chips, is moving beyond what they're able to do. But there is a fourth area and it's the one that gets the most visibility of anything we doing, which is starting up Internet content activities and we're being very entrepreneurial here. We're saying, ''Let's go find partners,'' whether it's Dreamworks for the--
16:15: Charlie Rose: Film studio.
16:18: Bill Gates: --storytelling that they do--
16:21: Charlie Rose: Yeah.
16:24: Bill Gates: --whether it's NBC for the news things that they do--
16:27: Charlie Rose: MSNBC.
16:28: Bill Gates: --or some things that we'll do on our own. Like Michael Kinsley called us up and said would we be willing to try something new, to take the Internet and deliver great editorial content, which is his expertise. And we said, ''Let's try that.''
16:37: Charlie Rose: All right, let me interrupt you there. That's Slate.
16:42: Bill Gates: Right. Exactly.
16:47: Charlie Rose: Pretty soon you're going to start charging for Slate. You've got to pay to get it, right? Is it going to make it as a commercial enterprise?
16:56: Bill Gates: Well, what we'll do--
16:58: Charlie Rose: Because Michael is worried about that. I mean, it's one of the things that concerns him because he wants it to be viable.
17:04: Bill Gates: Absolutely. You know, that's-- the measure of success--
17:08: Charlie Rose: Right.
17:09: Bill Gates: --is to make it viable. We're getting more successful in delivering it through electronic mail. We have some paper pay (? ) distribution through people like Starbucks. We're also looking at where some sections of the magazine would continue to be free and so you'd be kind of drawn in because you can see those pieces, but only subscribers would get--
17:31: Charlie Rose: It's a tease.
17:33: Bill Gates: That's right. And that's the way a lot of sites on the Internet work today is there's a free portion, which has the heaviest traffic, but then a lot of the very neat stuff is kept for people who are subscribers. And, you know, our goal here was not just to do neat editorial. That-- they've done that. That's great, but we also want to make a profitable business, so--
17:55: Charlie Rose: But when you look at the experience, say, of The Wall Street Journal, one example, where you have to pay to get it, does that offer any likelihood of success for Slate, when you look at that? And that's where people have to pay to get a known product.
18:08: Bill Gates: Looking at the Internet today, it's easy to be pessimistic about will people who do content be able to make money. There are-- there are three sort of views of how this might work out. One is advertising, and that'll be valuable, but only sites that are visited by a lot of people a lot of times will be able to fund themselves that way-- maybe the news sites, sports sites, weather sites and that's about it. Then you move on to subscriptions, where right now, because you can't do tiny payments, micro payments, on the Internet, you have to buy a whole year's worth of subscription. You can't just have an article that you pay a nickel to go see it. Now, technologists are working on these micro-payment systems and that'll make it easier to buy content on an a la carte basis. Finally, some content lends itself to transactions, things like the travel site called Expedia that Microsoft is doing. And that business model works out pretty well because for a far less than the commission you normally would pay on a ticket, we can fund all the neat content we're doing in that area. And so you really have to believe the Internet's going to be mainstream -- a lot of people are going to get out there and use it -- and that they're going to be willing to pay for some content.
19:24: Charlie Rose: Is that the operating idea that you have?
19:26: Bill Gates: Well, each of these businesses is an entrepreneurial business. The overreaching theme is that, yes, I believe in the Internet. I believe it'll get increasingly popular and we're doing some neat new things to take advantage of that.
19:38: Charlie Rose: You've got a lot of cash on hand. Yes?
19:42: Bill Gates: Right.
19:44: Charlie Rose: All right. It puts you in a enviable position. You can experiment with a lot of entrepreneurial ideas and see what sticks and what flies.
19:51: Bill Gates: Well, we're in business to make money and--
19:53: Charlie Rose: But the other thing is providing such a cash flow for you.
19:57: Bill Gates: Well, it all belongs to the shareholders.
19:59: Charlie Rose: Yeah.
20:00: Bill Gates: We're not dilettantes.
20:02: Charlie Rose: No, I know.
20:04: Bill Gates: We are businesspeople. And it is true that if you find an idea that requires three or four years of improvement and patience and really sticking with it, that we're very good at that. Take Windows, which we bet our company on. Everybody who doubted that would succeed-- IBM did not support us in that. It took longer than we expected, over four years, before finally, graphical interface got popular and now people take it for granted. It's part of every personal computer and you just expect it to be there. That was one of the grand successes of the company. In the same way, we're betting on the Internet, that our tools there will be popular and that a few of these content places that we've decided to get involved in, that the scale and the users will make those into great businesses.
20:48: Charlie Rose: Speaking of that-- Windows 95-- here's what they say. You've heard this criticism more than once. Microsoft gets out there with a product and they let the consumer take-- react to it, use it and come up with modifications, so by the time you get the third modification by Microsoft, they've got the best product in the business, but they don't always come out with the best product. And Windows 95 was not nearly as good when it came out with some bugs as it is now. But the genius of Microsoft, it gets way out there and let's the consumer give them advice as to how to fix it.
21:22: Bill Gates: Well, Windows 95, actually, has not been revised. It's a product that the reliability was extremely good because of the incredible beta testing that we've done. And we appreciate the feedback we get from customers. Every time they call us, we write that down and we use that to make a better product. During the beta test, people spent millions of hours telling us what they'd like to see faster, what they'd like to see easier--
21:46: Charlie Rose: Yeah.
21:48: Bill Gates: --what things didn't work together with each other. And that's why we were able to ship tens of millions of copies and have the kind of satisfaction level that we have. Now, we're always getting smarter. The products are getting better and better. Some of our products, like our first word processor, were a little too technological-- great richness in the product, but we didn't let people get at that in the right way and--
22:09: Charlie Rose: Why was that? I mean, when you had Apple having such a simple system?
22:14: Bill Gates: Well, none of these systems are all that simple, but--
22:18: Charlie Rose: But it was-- I mean, there are many Apple users, as you know-- I'm not telling you anything you haven't heard before-- many people saying, ''At long last, Microsoft is where Apple was, in terms of Windows 95, in terms of user-friendly. It took them 10 years to get there.''
22:32: Bill Gates: Well, the basic vision of Xerox, of the graphical interface, was absolutely right.
22:38: Charlie Rose: Yeah.
22:41: Bill Gates: And the day the Macintosh came out, the company besides Apple that had software there was Microsoft.
22:46: Charlie Rose: Right.
22:48: Bill Gates: We've been big supporters of the Macintosh. In fact, Excel was one of the products that really drove its popularity in business and so that's been a successful working relationship with Apple. Now, in parallel with that, we were trying to help P.C. users, as well. The P.C. hardware was not as strong and these things, to get bootstrapped, you need volume, but to get volume, you need applications, but to--
23:14: Charlie Rose: Yeah.
23:16: Bill Gates: --get applications you need volume. And so that's the kind of evangelism that we're very good at, going out to people and saying, ''Hey, let's work together and get early on this and then you'll be in a strong position.'' So literally thousands of small software companies backed Windows and they've had a big payoff because of that. But it did take time to get graphics interface to be popular on the P.C. Moving people from the character world just didn't happen overnight.
23:44: Charlie Rose: Yeah.
23:47: Bill Gates: So at the same time, we were getting smarter and smarter about graphical applications by doing a great job for the Macintosh customers.
23:53: Charlie Rose: Candidly, do you think Apple will survive?
23:56: Bill Gates: I think it's within their power to continue to be very successful. I think, like all technology companies, they don't have a guaranteed future. Microsoft doesn't. Intel doesn't. Sun doesn't. We all have to use that customer feedback loop, use our research, and really try and stay on top of things. And right now, Apple's at a pretty critical juncture. Gil Amilo's (sp? ) come in. He's stabilized things. They're talking about having an operating system strategy that they'll talk about early next year. And I know we, as a software developer, are very anxious to hear about that so we'll know what we can do to take advantage of Apple's new work.
24:36: Charlie Rose: The active desktop-- I see a vision, which I'd like to explore with you, where you can sit there at your desktop and you just-- everything is at command, easy, much easier, and that maybe 18 months off or it may be a year off, where both Internet access and access to things that we can't even imagine today with such ease are going to be there. Is that ''active desktop''?
25:00: Bill Gates: Yes. ''Active desktop'' says that what you care about is information like stock prices or your urgent messages or your next few appointments. Right now, when you walk up to a computer screen, what do you see? You see a bunch of folder names--
25:20: Charlie Rose: Right.
25:22: Bill Gates: --or device names.
25:24: Charlie Rose: Right.
25:26: Bill Gates: Well, in terms of using your visual space to really notify you about what might be happening, that's a very poor use of the screen. And we started to see a little bit of this with screen savers that had new information or with point casts (? ) that brought down information. Here we're taking that further and saying, ''It's not just tickers and it's not just one source of information, it's your mail, calendar, your internal corporate news and whatever your interests are, you can mix those together and have that come right onto your screen.'' And if you see something that grabs your attention, you click on that and then you get more in-depth data. So it's the best of sort of mail, which comes to you, and the Internet, which you go to it, but fusing those and making it customizable.
26:13: Charlie Rose: When is it here?
26:17: Bill Gates: Well, we're right now experimenting with this. We've got early versions of what we call Internet Explorer 4.0 out in users' hands and so they're telling us--
26:24: Charlie Rose: Now, who are those users? That's what we want to know.
26:29: Bill Gates: Well, they're telling us is our channel metaphor-- is that easy to use and is the way we're laying out the screen right? We'll be putting out Internet Explorer 4.0 during 1997 and we'll have a lot of people with Web sites that are customizing their Web sites to take full advantage of this.
26:47: Charlie Rose: Why didn't interactive television work, in terms of the traditional notion of the information superhighway? What was the miscalculation by the telcos who bet on it happening and then got out? What was the miscalculation even in terms of entertainment by some of the Japanese consumer companies who've had-- lost a lot of money in the entertainment business?
27:10: Bill Gates: In interactive television, it's a darn good question why people were so fooled that that would catch on. The basic problem is that the cost to build out the new infrastructure and put a box in the home and a box at the other end-- the cost is very high and the extra revenue you get by just telling somebody, ''Hey, you can watch any movie any time you want,'' isn't enough to fund that. And so it was the wrong bootstrap. And so many people went off the deep end with this. The cable companies were promising millions of connections. The phone companies were trying to outdo each other. Oracle declared that not only was there a great opportunity, but they'd already won.
27:51: Charlie Rose: Yeah. Right.
27:55: Bill Gates: They had all the business and everybody who didn't think it was happening was just crazy. And so there was kind of a group-think there that is cautionary. Whenever the technology companies get into a frenzy, it's worthwhile for people to stand back and say, ''Look, is there really something valid here?''
28:12: Charlie Rose: If everybody's saying yes, watch out, if there's no contrarian view.
28:16: Bill Gates: Right. And there are some people saying that about the Internet today. Now, I happen to disagree with them. I think, in this case, we've got a clear bootstrap and a way that it'll just get more powerful, using the better
28:28: P.C. Charlie Rose: Now, what's the argument they're making that you rebut, those who are saying the Internet's not going to be-- the first thing they say is, ''You're not going to make money on it. There's no way that we can see''--
28:40: Bill Gates: Right. Right.
28:42: Charlie Rose: --''to make money on it, and therefore it's going to fall of its own weight.''
28:47: Bill Gates: Some people talk about congestion because they think the economic model for how the big pipes are all funded is not good enough and, you know, that's not clear. There are people like Bob Metcalf (sp? ) that point out that we shouldn't just take it for granted that there won't be traffic jams and problems there.
29:04: Charlie Rose: They're already happening, traffic jams and problems, are they not?
29:10: Bill Gates: Very limited. I mean, if you-- if you want to connect overseas, you often get limited speed. If you have an Internet service provider who sold their service to too many people, you get busy signals. Or you get things like election night where we had millions of people coming to the MSNBC site and it overloaded the site so some people weren't able to get in. So there are little hiccups like that along the way and every time they happen, people figure out, ''Okay, let's make sure that doesn't happen again.'' But what you have is demand is rising dramatically. So is supply, but supply could fall slightly behind. So funding the infrastructure people worry about. Is it really engaging? People wonder about that. The content model, the security problems that are out there, the ease of use-- these would be the things that a nay-sayer would come in and say that it's the same craziness that got us, as an industry, behind interactive T.V.
30:11: Charlie Rose: And you say to them what, all those nay-sayers? ''Here is what convinces me that this is the right way, that this is the way the business is going and this is the way Microsoft is going.''
30:24: Bill Gates: Well, I'm-- I'm a big believer in electronic mail. I mean, it's the simplest thing about the Web and the Internet is that you can send electronic mail.
30:32: Charlie Rose: Michael Kinsley said he rarely gets a phone call anymore because he's out working at Microsoft in Redmond, Washington, and everybody out there sends-- communicates with each other by e-mail and not by phone.
30:42: Bill Gates: Well, it's our basic way of communicating. When you do get a phone call, it's because the person really wants to touch base with you personally and they're willing to interrupt your time and get you on the phone and so what-- when you get a call, you take it right away. There's a reason why that person is calling. What you don't get is short memos. That's much better on the electronic mail. Even a long memo is mailed to you and then you'll use your local printer to print it out if you happen to want to carry it around with you when you're reading that document. So electronic mail is-- it's basic, but it will be pervasive. People will contact their friends that way, their kids that go off to school. They'll stay in touch with that way your doctor, your lawyer. You will expect to use a electronic mail. And this is the starting point. Every company should view this as what they have to put together in order to get their company moving into the information age.
31:39: Charlie Rose: So the most important reason you believe in the Internet is because of the significance of e-mail?
31:43: Bill Gates: Well, that's one point. It's not the only point I'd make. The other point, I think, is that the content is getting better and better. If you just track the Internet-- think of what it was like six months ago and what it's like now. You know, you've got a very steep learning curve that we're going up and-- interactivity-- how do you use it? Can you make news more engaging with interactivity? Well, we're smarter today than we were on that and over the next year we'll get smarter and smarter. So because of better personal computer hardware -- bigger screens, three-dimensional graphics, getting the audio in, having higher bandwidths -- I just feel like every year more people will get connected. And I have not met anyone who said, ''Yes, I'm an Internet user, but I've decided to stop using it.'' There may be a few, but when people get engaged, overwhelmingly they want to stay involved and they actually become evangelical, sort of telling their friends, ''Please, you should see this. Come and use it.''
32:44: Charlie Rose: In terms of the Internet and the future, in terms of us, as a country, and the world being connected by, you know, this system that unites all the P.C.'s in the world and all the computers in the world, how is it going to change us, do you think? You know, I mean, it's sort of some of the things you speak to here.
33:03: Bill Gates: Well, I think we're definitely going to make the world a smaller place. The ability to find expertise, even in a different country, the different-- the ability to find people who share a common interest with you, no matter where they live-- this is a tool that sort of makes distance a lot less of a problem than it used to be. My friend, Warren Buffett, got involved in using personal computers because he could play bridge with people who don't live in Omaha.
33:35: Charlie Rose: Yeah.
33:37: Bill Gates: And I tried to get him involved with spreadsheets and tickers all and that but--
33:41: Charlie Rose: Yeah.
33:43: Bill Gates: --it was bridge that finally got him in and now he wouldn't admit it, but he's quite proficient at using the thing and--
33:49: Charlie Rose: So he was motivated, at long last?
33:52: Bill Gates: With the thing he cares the most about.
33:55: Charlie Rose: Yeah. Right.
33:57: Bill Gates: And it's kind of like the telephone changed the world. That happened over a long enough period of time that it's not like people got up one day and said, ''You know, the world is different. I can stay in touch with people in move. We're willing to be more mobile because we can reach out in this way.'' But it was a fundamental impact. And now, with the Internet, you can see it on college campuses where kids take it for granted that they can sign up for courses, order pizzas, get in touch with their friends. They're living a lifestyle where the Web, the Internet, are taken for granted and the rest of the world is just slowly but surely being drawn into that.
34:39: Charlie Rose: Who's responsibility is it to make sure, because it is such a magnificent tool, the computer and the Internet, to see that as many people as possible in this country and around the world have access to it?
34:51: Bill Gates: Well, I'm certainly a believer that it is important enough that we have to think of it almost like we thought of books, where over a long period of time, through political action and philanthropy, local libraries are now available enough that people really who want books, there's a way for them to get them. And that's, you know, the most fundamental skill there is. What we'd like to see is schools and libraries play the same role here that they played in the past-- that is, introduce people to the technology, get them comfortable with it, and be a place that people can go, not just young people, but people of any age go to the library and use it. Now, this is going to--
35:32: Charlie Rose: Open up schools and libraries as a venue where you can go and find a means of connecting to the Internet?
35:39: Bill Gates: That's right. And so we put into hundreds of libraries P.C.'s connected to the Internet, so people can go in and do word processing and browse the Web. I was out in Brooklyn with the mayor of New York, showing off what they'd done there, because that's just one of the libraries this has happened at. Now--
35:59: Charlie Rose: And computers were paid for by the city, computers were given by a computer company, the operating--
36:05: Bill Gates: In this case, it was a combination of city money and Microsoft money that actually bought all the equipment there. And we provide the support, so if the library is confused about something and has a question, then it's a Microsoft group that's always there, making sure they've got the latest software and that they can manage those systems very well. And now we're just touching the tip of the iceberg here. There are, you know, over 10,000 libraries and so it's going to take local political action and lots of people being involved before we can say that we've solved this the same way that it's been done for books.
36:41: Charlie Rose: I read today, I think Newsweek magazine, there's a story on you. There's also a story on you, as you've seen, in Economist, saying that you're-- talking about Disney as an entertainment company and how you want to see your company be a media company, as well. But the Newsweek story quoted, I think, someone as saying that Microsoft will be the most powerful company in the history of business enterprise in the 21st century, certainly the most powerful company in a long time. Do you see that?
37:15: Bill Gates: No, I really don't. We're a company that makes tools and-- you know, Windows, it's a tool. The word processor, it's a tool.
37:26: Charlie Rose: But you-- so many people are dependent on Microsoft and those tools.
37:32: Bill Gates: No, they're not dependent on us. Once they have those things, they can use them and do whatever they choose. And if we don't make the next version exciting enough and easy enough to get to, then they'll just-- they'll just stick with what they have.
37:50: Charlie Rose: What's the market share of Microsoft operating systems?
37:54: Bill Gates: Oh, it's a little hard to measure because it always depends on if you include piracy of what types of systems, but it's certainly in the, oh, 70, 80, 90 percent range.
38:04: Charlie Rose: Pretty good market share, I'd say.
38:06: Bill Gates: A good number, right.
38:09: Charlie Rose: It's a commanding position. And when you look at where you want to go-- you want to be in the home, not just in the P.C., but you want to see a computer there or a P.C. there, but there's a lot of things, in terms of almost operating the home, yes?
38:24: Bill Gates: We're just a software supplier, but--
38:26: Charlie Rose: Yeah.
38:29: Bill Gates: --we're hoping that--
38:31: Charlie Rose: I know you don't--
38:33: Bill Gates: --to develop software that--
38:34: Charlie Rose: --make the computer, but you want your software to run those--
38:37: Bill Gates: If people want to buy it, to do those things, we're going to try and make it so easy to use that they find that a great decision.
38:42: Charlie Rose: And a P.C. in the car, perhaps.
38:46: Bill Gates: We're working with some partners on that.
38:47: Charlie Rose: Yeah.
38:49: Bill Gates: We think if you can see a map and know where things are--
38:54: Charlie Rose: Yeah.
38:55: Bill Gates: --that'd be a great opportunity.
38:57: Charlie Rose: Well, where else are you going, in terms of providing the software for the use of computers in what other places that might--
39:01: Bill Gates: Well, in your pocket, definitely.
39:03: Charlie Rose: Yeah. Okay.
39:07: Bill Gates: That's the wallet
39:08: P.C. Charlie Rose: That's here, almost.
39:10: Bill Gates: In the intelligent T.V., where the set-top box or video game let you do software. I mean, we're glad to sell our software wherever it makes sense. But remember, the Internet is the most democratic medium there's ever been. It's not just a few guys who own newspapers or network channels who get to decide what's on. Anyone can publish. You just buy simple software and you're out there. And so no one will have any kind of dominant position, not even the real media companies--
39:36: Charlie Rose: Right.
39:38: Bill Gates: --the Time-Warners, the Disneys. They will share this space with thousands of entrepreneurs or just teachers or anyone who wants to come in and say what they want to say. So we're going to have a lot less concentration and a lot less media power, thanks to the Internet and the basic structure that it has.
39:54: Charlie Rose: Yeah, but at the same time, it offers all kinds of other opportunities.
39:58: Bill Gates: It offers an opportunity for anybody to get in and do great content.
40:03: Charlie Rose: Yeah, but you're in a so much better position than everybody else and you know it. Your company probably today is better positioned to do what it wants to do and realize its dreams than it's ever been at any time in its history-- better positioned.
40:14: Bill Gates: Well, the high-technology business is not one where you-- you get to take your future for granted.
40:19: Charlie Rose: Yeah.
40:22: Bill Gates: Now, there are wonderful companies in this world, companies like Disney or Coca-Cola, who you can say 10 years from now, 20 years from now, they will be on top of their business. I mean, you might not guess their sales exactly, but those are unassailable positions, whereas Microsoft, if we don't do the right thing in this next year, in terms of simplicity, ease of use, someone else will come along and do that. In the next year, it'll probably be speech recognition or visual recognition. So we've got to keep all those smart people and really use that customer feedback. And so thinking of us as somebody with a guaranteed future, that underestimates what this business is all about and the rules that have allowed us to be successful are that we don't take anything for granted. We don't assume that we're in a strong position. We just keep trying to improve what it is we're doing.
41:12: Charlie Rose: I don't think they assume it's a guarantee. They just assume you have so much more power than everyone else that they're fearful of you.
41:21: Bill Gates: Well, if you're a competitor of ours and you've seen how we've been able to use customer feedback and ship great software, then I understand. It's okay to be concerned about competing. We have some great competitors and I'm sure they'll do okay, but Microsoft has really defined the standard of what it means to be an excellent software company.
41:40: Charlie Rose: And what it means to adapt.
41:42: Bill Gates: Yeah, what it means to be willing to step back and say, ''Wow. What we thought-- the way we thought the world was going to go, we were wrong and so let's take our skills and push them in this new direction.''
41:54: Charlie Rose: And the biggest mistake you made in that thought that you had to change was the idea of interactive television and all of that and shifting to the Internet because you realized that it was going to be the vehicle for the future.
42:06: Bill Gates: Right, that it had achieved critical mass, that it was not just a phenomenon inside the university, that it was moving out into the commercial space and that the bandwidth was going to come along and that these standards would be improved. A lot of times, committee-driven standards don't get improved very well, but in the case of the Internet, these committees really work and they've taken and improved and improved all the things that were needed.
42:30: Charlie Rose: What worries you the most about Microsoft's future?
42:35: Bill Gates: I think the scariest thing is that the company would become successful enough that it would get complacent and we'd stop worrying about what we're missing and stop--
42:44: Charlie Rose: Yeah.
42:46: Bill Gates: --really hiring the very best people or listening to customers as well as we need to. And then missing a turn in the road would become very, very easy. People hold us up to an incredibly high standard now. You know, whenever analysts ask me, ''Well, aren't you going to earn a lot more profits?'' I'm saying, ''No. Lower your estimates, please.''
43:06: Charlie Rose: Yeah, but you just exceeded your estimates the last time out.
43:09: Bill Gates: And we still want them to lower their estimates.
43:11: Charlie Rose: Yeah. All right.
43:14: Bill Gates: No, seriously. I mean, the business is more competitive than they're giving it credit for and it is a challenge. You know, take our office business, to keep growing that--
43:22: Charlie Rose: Yeah.
43:24: Bill Gates: --and keep doing new things. So, you know, I don't see any room for complacency here. I do see immense opportunity.
43:29: Charlie Rose: So the only thing that worries you is complacency.
43:32: Bill Gates: I think that's our greatest enemy. I think we're doing enough research, working enough with the universities--
43:38: Charlie Rose: Right.
43:39: Bill Gates: --enough in touch that there isn't a specific technology that is a particular threat. Simplicity is this year's theme--
43:44: Charlie Rose: Right.
43:46: Bill Gates: --but I've seen a great response to that theme, just like I did to the Internet theme.
43:50: Charlie Rose: You have heard some of this, but I want you to take a look at this and respond to it. This is some of your competitors--
43:55: Bill Gates: Okay.
43:57: Charlie Rose: --who've been on this show. Roll tape. (April 22, 1996) What do you think Gates's genius is?
44:01: Lawrence Ellison: I don't-- Bill Gates, I think, is one of the most remarkable people, business people, I've ever met. Some people say, ''Well,'' you know, ''Bill's absolutely the most brilliant guy I've ever met.'' Those are the people that-- there are a lot of really brilliant scientists in our business. There are a lot of-- Bill, forgive me. There are a lot of people in the world smarter than Bill Gates. There are very few people in the world that have his focus and endurance. Someone once said that Bill wants people to think that he's Edison and he's really Rockefeller. If he were Edison, he'd be less dangerous. He is utterly relentless. He is indefatigable and he's absolutely focused and he wants it all. And Barry Diller-- I'll get in trouble-- Barry Diller said--
44:51: Charlie Rose: Barry Diller--
44:54: Lawrence Ellison: Barry Diller said ''He's young and he's mean and he's not tired.'' And that's a high compliment coming from Barry Diller and it's true. And he's tough and he wants it all and I have incredible respect for him.
45:08: Charlie Rose: (September 24, 1996) IBM missed the P.C. There was a time in which some people thought Bill Gates would miss the Internet. He scrambled.
45:18: Andrew Grove: Right.
45:20: Charlie Rose: And came back. (crosstalk)
45:25: Andrew Grove: And we scrambled in this case, too.
45:28: Charlie Rose: Yeah. You two companies, you-- Intel and Microsoft are linked.
45:33: Andrew Grove: We are what business school books call ''complementors.'' Our product needs their product; their product needs out computer for our computer to work.
45:42: Charlie Rose: You provide the brains and they provide the instructions.
45:47: Andrew Grove: That's correct. That's right. That's a very good analogy, actually.
45:54: Charlie Rose: (October 16, 1996) It wasn't so long ago that people would speculate on this question. Will the Navigator take all of the juice out of Windows, you know, as an operating system? Will the Navigator allow companies to do what Windows has done for their P.C. in the past? Is that an ambition of Netscape?
46:13: Marc Andreessen: Our ambition-- well, first of all, our ambition is not to drive Microsoft out of business, right? Our ambition is to build a big company.
46:21: Charlie Rose: Well, now, let me turn the question around. Do you think Microsoft's ambition is to drive you out of business?
46:27: Marc Andreessen: Microsoft's ambition is to drive everyone out of business. Those of us in the computer industry just assume that, right?
46:33: Charlie Rose: Yeah. They all-- they all think about you and ''What is Bill Gates doing?'' and they worry that you are way out front and in a commanding position. And the numbers suggest that, in terms of revenue. Do they have a right to be fearful? Do they have a right to say, ''He's tough. He's relentless and he's staying-- he's lying awake tonight thinking''--
46:58: Bill Gates: Well, what Microsoft does is we ship software products and we keep trying to improve them. And so, in that sense, yes, we are relentless. We're always hiring smart people. When you ship a great software product, there's nothing tough about it. There's nothing mean about it. People take it, put it in their computer and they decide if they like it and it's word of mouth that drives that. Intel, who you heard from, we have a very complimentary relationship with. They keep making these computers faster, more capable of doing video and audio, and then we come along and take advantage of that.
47:31: Charlie Rose: Right.
47:34: Bill Gates: And things that we want to do, like speech recognition, are going to require Intel to make even more powerful chips and so we really need them to make those huge investments they make. They're not tied to us. We're not tied to them. But because they're the leader in their field and we're the leader in ours, we've been able to work together and grow the industry. In the case of Netscape-- hey, Netscape's a fine company. We're not trying to drive Netscape out of business and I predict a good future for them. I mean, think of it. Of all the software companies you chose to have on the show, there are dozens and dozens bigger than Netscape, but you picked them because they're an up-and-comer. They've recognized the Internet. They're doing some neat things there. We both-- believe me, they watch us, but we watch them and, you know, we think we've gotten ahead of them on some things. They've changed their strategy. And that's one that'll be fun to watch, but Netscape's going to be around, making a contribution.
48:21: Charlie Rose: Do you worry about anti-trust?
48:24: Bill Gates: Well, it-- as long as the business is changing, with new chips and new customer expectation, there's only one clear winner in this business, and that's the customer. You know, if you take a Microsoft product like the office product, the prices today are a third of what they were five years ago, and yet the product is dramatically better in the things it does automatically for you, the ease of installation, the capabilities that are there. And so it's fine for the anti-trust authorities to look into what is a very important industry and say, you know, ''What are the dynamics here?'' As they look at it, what they're going to find is that we're all just, you know, fighting to get our message across and get these new products out as fast as we can. And it's exactly what government should look to in a market-- U.S. companies doing very, very well and not being at all complacent.
49:21: Charlie Rose: Twenty billion dollars -- I haven't talked about that for lots of reasons -- enables you to do a lot of things. It enables you to spend some $35 million on Leonardo's notes and put them on display here at the American Museum of Natural History. What else does it do for you? Someone who loves his business and loves his work and loves his Fuhrman, that most of us do-- what does $20 billion do for you and what--
49:51: Bill Gates: Well, I don't have $20 billion. I own part of Microsoft, a little over 20 percent, and so if the company continues to do well, that will have some value. And it's a huge responsibility to be the head of Microsoft, you know, when so many people are gunning to, you know, take away our leadership and customer expectations are very high. That's something that I love doing, but it really keeps my very busy. Now, if a decade from now I've, you know, kept Microsoft successful and I've chosen to turn over the CEO role to someone else, then I will have the opportunity, the burden or challenge, of finding smart ways of taking those resources and giving them back to society because I don't believe in passing on a significant portion of that wealth to children and-- you know, I've done a little bit of giving, but that'll be something that, as I'm older, will-- if it's still there, will be--
50:52: Charlie Rose: Well, I--
50:55: Bill Gates: --something to look at.
50:57: Charlie Rose: Other than-- you share that with Warren Buffett, don't you.
51:01: Bill Gates: That's right. He and I have talked about this and it's a common-- common view.
51:06: Charlie Rose: What's the-- what's that relationship about, you and Buffett?
51:12: Bill Gates: He is-- he is just an amazing person. He's so much fun to be with, whether it's playing bridge or golf or talking about the world of business. He and I went to China a year ago.
51:22: Charlie Rose: Yeah.
51:24: Bill Gates: And we had the time of our life. It's-- you know, we're very different. I'm into technology. He stays away from technology-- and for all the right reasons, too. I understand perfectly well. And he-- yet he has a lot about the way he does things that I just find not only interesting, but so admirable. And I feel very lucky to be his friend.
51:49: Charlie Rose: Who else has influenced you significantly?
51:52: Bill Gates: Well, there's a lot of role models--
51:53: Charlie Rose: Other than parents.
51:55: Bill Gates: If you're talking about in the industry--
51:57: Charlie Rose: Yeah, well, I'm just talking about generally-- friends or people that--
52:00: Bill Gates: Well, I get to work with a lot of my friends.
52:03: Charlie Rose: Right.
52:04: Bill Gates: Steve Balmer, (sp? ) who's at Microsoft, is my closest friend and--
52:08: Charlie Rose: And he's the designated successor if something happened to you?
52:12: Bill Gates: He-- yes, he would be the one, if there was some contingency.
52:16: Charlie Rose: If you decided to sail off into the sunset.
52:18: Bill Gates: No. No, I-- my plans are very, very clear. I'm going to keep running Microsoft for at least the next decade. I think it's the most fun job in the world and I think I have something to contribute there.
52:34: Charlie Rose: He's one.
52:36: Bill Gates: Right. I think Hewlett-Packard, the way that they created their company--
52:44: Charlie Rose: David Packard.
52:46: Bill Gates: Yeah, and Bill Hewlett. That was a great company. It is a great company because of the values they inculcated into it. And they-- one of their great people, Dick Hackborn, (sp? ) is on the Microsoft board and helping us think through some of the issues that they did so incredibly well on. I think Andy Grove is a great business leader. His recent book, Only the Paranoid Survive--
53:06: Charlie Rose: It's a great book.
53:09: Bill Gates: --that you guys talked about-- that basic theme is in the culture of Microsoft, to wake up every day and say, ''What are we missing?'' And so I thought he did a very good job of articulating that.
53:20: Charlie Rose: Other than assembling 20,000 over-achievers out there in Redmond, it is the notion of waking up, saying, ''How do we do it better?''
53:31: Bill Gates: Well, two things. The vision of making this a better tool so that in every home and on every desktop people really want-- want to use the thing and then thinking, you know, where-- were are we going wrong? Where should we be moving faster? Those are the two thoughts that really drive us forward. And when we hire new people, we look for people who care about those same things.
53:55: Charlie Rose: Bill Gates, The Road Ahead-- this is a revised and up-to-date version, a best-seller in its hardback version-- did it go to number 1? I don't remember whether it went to number 1 or not.
54:05: Bill Gates: Yeah, for a little bit.
54:08: Charlie Rose: It was at number 1 for a little bit. He has incorporated this last year and the Internet into this. If we come back -- before I say good-bye -- a year from now at this table, what would you like to have accomplished, looking ahead to November, '97?
54:22: Bill Gates: My goal is that one two issues people will say we answered them just like we answered the Internet challenge of last year: simplicity of setting up the software and managing the software on your P.C. and, second of all, the scalability, the power that you can get out of our systems being as great or greater than Unix-based systems or mainframe systems. Those are two things that I'm spending the majority of my time on.
54:48: Charlie Rose: And what's the likelihood that you'll be able to say you've accomplished those goals? Is it better than 50-50?
54:55: Bill Gates: Well, usually, if I'm that focused and they're that key of a priority, I can get a lot of energy and a lot of intelligence inside the company and get it done. And yet, you know, there's enough of a risk there that it really keeps me working hard. I think there's some invention that we have to do and getting those products out to market is-- it's going to require hard work.
55:14: Charlie Rose: Bill Gates-- The Road Ahead, as I said. Great to have you here. Thank you for coming.
55:18: Bill Gates: Thanks.
55:20: Charlie Rose: Thank you for joining us.