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Sunday, February 23, 2003 - 12:00 a.m. Pacific

Microsoft at midlife

Gates became a familiar face to TV viewers as the company fought antitrust charges.
Q & A session with Bill Gates

By Brier Dudley
Seattle Times technology reporter

Microsoft Chairman Bill Gates recently sat down with The Seattle Times to talk about the company and its future.

Q: Can you discuss the bigger role Microsoft is playing in designing computer hardware?

A: We've always had a very close partnership with the hardware companies. I would say we've got more resources involved in building prototypes now than ever before, because some of the new frontiers, whether it's how the PC exists in the living room or in the office, the hardware and software advances go kind of hand in hand.

Q: Are you doing more things to push the envelope of PC design?

A: Well, yeah, we've got a lot of resources in these areas, you know, thinking about the microphone and the PC, thinking about the relationship between the telephone and the PC; what does it mean to get very high-resolution screens.

One of our areas of research is screens. They are getting cheaper. So if you're sitting at your desk we should give you more screen area and how will you take advantage of that screen area. I mean, you're going to have a screen area bigger than the front page of the newspaper, which is quite a step up.
Microsoft at midlife: The series
Part 1: Bill Gates' view of the future
· Q&A session with Bill Gates
· Milestones in Microsoft's first 28 years

Q: Recently you have been talking about computing power in multiple devices, yet the company has been criticized for being too focused on desktop computers. ... A: That criticism is always a strange one because we were into interactive TV super, super early, not that it's paid off for anyone yet. We were into small devices way before they really became mainstream. And it's important for us to get in and be a pioneer in those fields, even if it means coming in when the market's still not there.

It's much better for us to come in early than to come in late. We want to make sure that the things people like about our platform are carried over to the different form factors, so the way you develop software for this has a lot in common with how you develop for the PC itself.

Q: How would you characterize the new era of computing after the PC era?

A: We've thought a lot about this. We call it the PC-plus era. And the reason is that the role of the PC is still quite central. You know, when you want to do your homework or fill out your tax return or really see what the news stories are, that much visual area is very beneficial. Sure, you can do some of those things here (holding up a handheld computer), but I'm not going to read BusinessWeek on this device. I mean, even The Wall Street Journal, OK, I might see some hot headlines and some prices but I'd really rather have the bigger form factor.

So particularly for document creation you know when you get small like this — we're all getting creative about small keyboards and little handwriting things — but creativity really needs the full-screen device.

And so that's why we use this term PC plus, you know, the digital cameras let you do more with your PC.

Now, there's intelligence in the digital camera. And, yet, even in a rare case, you might take a photo and directly send it to the printer going around the PC. But in most cases you want to organize it, save it, send it off to various people and so then you really do want the PC to get involved. So the more you have digital cameras — in fact, the more you have these things (holding up a Pocket PC) — the more important the PC becomes.

Q: Will people still continue to have some kind of creation station in their house, then?

A: Yeah, full screen, you'll always have a full-screen device, which will be a PC.

Q: Microsoft is doing a lot of work on new interfaces, such as speech and handwriting recognition. Twenty years from now will we still be using keyboards and mice? Are you trying to do away with the keyboard?

A: No, and we're very clear on that. Certainly the Tablet PC, if you want to do significant amounts of text entry, you use the keyboard. The handwriting recognition is very advanced, but it's not a keyboard replacement. It's just not as accurate or as quick as the keyboard is. Even as we make that better, we'd say that you'll always have keyboard, pen and voice working together. So very typically, say you want to edit an article. You would point to the word you want to change with your pen and say, you know, change this to such and such. Well, that's the pen and the voice working together. Or you would just circle the thing you want to change and then type over it with the keyboard.

So we need to design our systems to be sort of multimodal — where you're switching back and forth between voice, pen and keyboard as freely as you'd like.

Q: Do you have any projects or technology that could lead to a revolution similar to the PC revolution that made Microsoft so big and important?

A: There's not like at some moment nobody is using, doing something and then everybody is using, doing something. Every year, we're just getting the computer to be a better and better tool and that's why we pick a time frame like the end of the decade where we say, "Yes, it will be common sense that your music is digital and you don't use CDs. It will be common sense that you can correspond with your doctor and ask him questions electronically. It will be common sense that if you go to a meeting that's recorded digitally ... you can go back and get that information."

So there's all these scenarios we're driving into the mainstream that the effect of all of them together and the pervasive use of them are very profound. But there's not like one moment of magic. It's just the digital decade is much bigger in its impact than everything that came before it.

And when did the PC revolution start? You know, what year was that? Well, very hard to say. Was it '75 with the Altair, was it '81 with the IBM PC?

Q: Do you expect a steadier growth trend as opposed to a run-up like you had in the '90s?

A: Well, several things. The current economic situation, particularly for a company's willingness to do ambitious new technology projects, is as tough as I can remember it. And so at some point you'll see that turn around. I'm no economist but I think sometime in the next five years you'll see that turn around. And I think the advances we're making this year and next year will be part of the reason for the turn around ... the extra productivity and efficiency that Web services and the new form factors, simpler forms of communication will bring will help drive that productivity.

Q: Can you talk about the culture inside Microsoft and how it has changed recently, or is it changing much?

A: Well, we're always trying to preserve the willingness to try new things, the willingness to take risks, the ability to move fast that characterized us as a much smaller company. We compete with ... much smaller companies and so we need the advantages of our size, which is funding very tough research and having a global presence, being able to support people 24 hours a day, and yet the nimbleness of if we see a new opportunity quickly adapting to it, not letting broad policies hold us back from diving into new areas.

And so that always pushes us to be creative. I mean, for example, giving the Xbox team the freedom to go out and do things that were unique to their business or letting this SPOT team do things a little bit their own way and yet having the customer expectation of what you get out of it have the consistency. It's a challenge. Every day that idea of nimbleness, we're trying to keep it fresh.

Q: How much is the culture being affected by cost controls?

A: Less in our company than in many others.

Q: But there's pressure now to control costs

A: Sure, sure, but, you know, that's a fact. I mean, when people want to do a new project, the discussion about do we want to put a lot of people working on that project is a very key discussion. And the threshold to say, OK, let's have an incubation mode with 10 people is a lot easier than saying, OK, now it's time to put 50 on it or now it's time to put 200 on it.

And we love having incubations. Sometimes we've actually pushed projects to move out of incubation to 50 people sooner than we should. So we've got a lot of experience about what are the right milestones to let things grow in size, you know, that early core group being a particularly talented, dedicated group and then you've got to scale it up.

Chairman Bill Gates, photographed on the Microsoft campus, says company headquarters will stay in the Puget Sound area: "Being in Seattle has worked super well for us, and it's not something that we'd ever, ever change."
So the kind of cost things we have to be aware of and deal with are not unique to Microsoft or even unique to this phase of Microsoft.

Q: How is the culture affected by the stock price. You used to be able to get rich working at Microsoft pretty quick. The options might not be quite as much of a draw now, although now you've got stability that other companies don't have to draw people in. Do you think people are willing to work 100 hours a week and really immerse themselves without that gain?

A: Well, understand that the picture you describe there isn't quite right. We never said to people that their options would be worth a lot of money. We didn't know they'd be worth a lot of money, and we were hyper conservative in saying to people, look, you know, these have a lot of variability in them, and so we didn't ask people to come to Microsoft for that. In fact, that's not the kind of person we would have selected. We selected for people who love to create great software or support great software. They own part of the company, but they don't know what that piece is going to be worth.

Now, it turned out that for people who started in early years that became quite valuable. But it's easier to see that now than then. There wasn't that expectation or that promise and so it wasn't part of why people joined the company.

And today again we're in the best hiring environment we've ever been in the history of the company in terms of the ability to get the best people coming out of college or even talented, experienced people from other companies in the industry to come to Microsoft and help us with the very ambitious things that we're trying to do. So the hiring situation is very strong.

You know, again, we say about the options we don't know how valuable they'll be, the stock has a lot of fluctuation. In some ways that kind of makes some of the options have significant value and some not have value. But people should be coming for what we've always said, which is to participate in creating the software.

Q: Will people still be motivated to put in 150 percent?

A: Oh, people are more dedicated — as dedicated now as they've ever been. People work hard because they enjoy working on this stuff. And one of the things Microsoft is very careful about is we don't have people work in a way that's unsustainable. I mean, yes, if you're about to put a product out the door there are some great things that teams do to really keep things on schedule and keep them very high quality.

But, you know, Microsoft isn't about the next year or two years. Microsoft is about the next 10 to 20 years. And so the way we deal with everything is long-term, our relationships with our employees in terms of encouraging the work at a sustainable pace, making sure they take advantage of their vacations. So we get the dedication we want. But it's more the nature of the work than anything about the compensation structure.

A: Could you talk a little bit about the Seattle area and how it has contributed to the company? Do you expect to continue growing and keeping the centralized operation the way you've got it?

Q: We came to Seattle in '79 with about 14 employees and to downtown Bellevue. Today, maybe a little less than half are in the Seattle area. And our headquarters, we do more of our development in a single location than any other technology company. IBM does development in 20 different locations. HP does development in about 10 different locations.

We are developing a few other centers of activity. In India we've got about 200 people now. Silicon Valley — I can get you the numbers — it's like 400 or 500 people down there. And a few of our businesses allow us to do very distributed development. Our games work is in many locations. Fargo and Copenhagen are key development centers for some of our Business Solutions work.

But for our major key work, our biggest research center, the vast majority of the work on Windows and Office, that's going to be in one location. It's a challenge but it allows us to innovate across the boundaries and get a level of coordination that if we split it into too many locations we just wouldn't get.

And so that's been a conscious decision. We feel very good about the campus environment that we've been able to create. Not everything fits on the campus but a lot if you count the main campus and the so-called Red West campus, (something) like 70 percent of our employees in the Seattle area are on those two locations.

Q: So you don't have any plans to move to Chicago or move the headquarters to New York or anything?

A: No. No, you know, we're very satisfied where we are. People, when they come to Microsoft, they're either moving their family there or they're there and they're starting their family up there. They have some employees who go off and work for us around the world, you know, go over to Asia and work for us, go to Europe and work for us. At any one time there may be hundreds that are off on assignment. Most people are in Seattle and are very keen to benefit from the things that are great about the area. So being in Seattle has worked super well for us and it's not something that we'd ever, ever change.

Q: Microsoft backed Referendum 51 and it was rejected by voters, so I wonder if frustration with transportation problems would lead you to decentralize or anything like that.

A: No. I personally, and the company, hoped that R-51 would pass. There are other Microsoft employees who were on the other side. Some investment in infrastructure needs to be made, and I don't think waiting for it to be a crisis is the right thing; anyway, complicated set of issues.

You do get concerned about the willingness to have taxes that allow for good long-term infrastructure investments. For people who live in the Seattle side getting back and forth, particularly going home at night, I mean, it's terrible. The traffic is just terrible and there's not anything on the drawing board that would help with that.

Q: I know you like to win and your competitiveness has driven the company along. How do you feel about (sales chief) Orlando Ayala saying the company is willing to give up a sale here and there to build long-term relationships?

A: The key to our success has been the long-term focus on the thing we believe in. And our relationship with our employees, we've taken a long-term view, having that kind of care in our investment and R&D, and with customers certainly makes sense. We're going to be working with those same customers five years from now, 10 years from now. And fortunately there is no short-term crisis where we say, OK, we have to meet some earnings number. We always tell Wall Street, come on, this business has its ups and downs, we're not going to manage to some expectation.

We, I think, have always done more than any public company to highlight the risks in our business as well as the things that are going well. It's tough for the analysts. I mean, they almost — we're almost in a class of our own saying to people, yes, the growth will slow, yes, this is a very tough period.

Now, the fact that we sometimes caution them about these risks and then end up doing better, hopefully they don't lose their acuity in listening to those things, because they're very sincere. Whether it's reinvesting in customer satisfaction or doing some R&D that may take a long time to pay off or the Xbox, where it will take at least a second generation of the product before we get into the profitability mode, we are making trade-offs that favor the long-term. And Orlando is absolutely right about our philosophy there.

Q: How are things going in your role as chief software architect?

A: I've always had the best job in the world. I was finding myself heavily loaded between the chief executive officer role and this chief software architect role. I was really trying to do both. Now that I've got two-thirds of my time really purely on the chief software architect activity, I am enjoying that a lot. It means I get to meet with product groups very early on before they've kind of made up their mind about what they want to do. So we can steer their activities in the right direction from a very early stage to make sure that they take into account what the other groups are doing and really dial up the ambition.

So, yeah, for me it's been great. I think we're already starting to see some of the benefits of that. You know, Tablet was a project that I put a lot of time into. This SPOT (Smart Personal Objects Technology) thing is another favorite of mine.

My big time focus now is the next major client release of Windows, which is code-named Longhorn. There's a few things that have been dreams of mine forever that we're going to achieve in that release, the so-called universal-storage thing. This is the first release where that's really going to happen. And that's been tough. Even internally it's been a challenge to get people lined up behind it, but it's coming together.

Q: How long will you have such an active role at Microsoft?

A: Well, my views on that haven't changed. You know, by the time I'm 60 someone else will be doing my job. I'll probably be involved in Microsoft and helping out, but someone else should be chief software architect, taking that central role. And yet I can see at least 10 years of work yet to be done that I think I can help with. And so somewhere in my late 50s someone else will step up.

Q: That's the digital decade I guess?

A: That's right. I will help finish the digital decade.

Q: What will life be like post-Bill at Microsoft? It's so oriented around you and people are motivated by you.

A: There's a thread of truth to that but the image in the press always overstates that because if you want to explain a company to the world at large you've got to boil it down to a few people and so you pick the people at the top, the founders, the product-passionate people, the CEO. I've played some of those roles so there's been a view of Microsoft as me.

I'd fully acknowledge that there is a very important job of picking technical direction — seeing is it time to do the Tablet? Is it time to do voice? And Steve and I talk about how we're developing people to step into his role and my role because Steve and I are about the same age. We're very deliberate about developing people to be able to do what we do.

But my role is not as central (broke into a laugh) as you might think in the articles. I mean, I haven't written a line of code in a shipping product since, what was it? — 1983.

Q: The TI for Radio Shack.

A: The Model 100. And there's an incredible number of smart people there who I'm synthesizing the input from them and at the end of the day somebody has to choose the direction but I, I just have a role. And we do think we'll be able to get a set of people to step up to that when it's needed.

Q: You don't think of Martha Stewart Omnimedia beyond Martha Stewart ...

A: But this is an engineering — this is not about image. The next guy may not be quite as — well, no one, because he won't be a founder — but the engineering decisions is what the job is. And ...

Q: Spiritual leader, too, in a way.

A: Some of that, there doesn't have to be an abrupt change in that. I mean, there can be some ongoing support.

You know, it's one of those complicated things where you want the new person to have all the authority and autonomy and, yet, you want to help them out. And deciding how we do that, we have lots of time fortunately to figure out how you manage that. But you're supporting the person and yet letting them move in a new direction.

Q: Will the next Bill Gates come out of Microsoft?

A: Oh, it will be somebody who's worked at the company. I mean, we could split the role into where it's actually two jobs instead of one, there's a way of doing that. It's possible they're just joining the company right now, but it's got to be somebody who has at least seven to eight years of experience with the company.

Q: How about the Bill Gates who has had such an effect on the PC industry, on technology. Do you think that next Bill Gates will come out of Microsoft?

A: I won't answer that. I mean, it just has too many assumptions about that I was so essential to various things. I mean, a company was founded that became the mover in terms of how computing was done and that kind of new company building a platform, I certainly don't see that coming along.

Now, maybe that means that I'm missing something that somebody else is seeing there, but we've got our ears to the ground pretty carefully about all the new things and investing in new things.

Q: What was your big takeaway from the trial?

A: Well, the trial had many phases to it. This last phase was the one I was most personally involved in. I went and testified. I was there for several days, and I got to talk about how advances in the platform work and the role of intellectual property. I felt very good that the judge, Judge Kollar-Kotelly, listened to what the Microsoft witnesses said in that phase and her rulings reflected that in a pretty deep way.

If you go back and think of the whole scope of the thing, there's a lot of things about the dialogue with government and the dialogue within the industry and how we get information out there that are things we've learned during these years.

Q: Has it been a good thing for you in the long run?

A: It was a tough experience. but we've made the best of it in terms of learning a lot of lessons from it.

Q: So at your house, you're planning to use Windows XP Media Center Edition?

A: Media Center doesn't have everything I have in my house because my house has many, many screens and you can coordinate things across the screens in a richer way than the first version of Media Center. The first version of Media Center controls one screen at a time.

Anyway, so when they come out with this next version of Media Center, I'm actually going to take all the software that's running and, and get rid of it and just customize on top of the next version of Media Center.

The biggest feature we've added in the last two or three years is actually the Wi-Fi capability. All the stuff about calling up music and movies, pictures has worked super well. But we're sort of waiting in terms of new features for this to do it on the Microsoft platform, instead of building it literally from the ground up.

Q: Any other comments about building your business in Seattle?

A: Well, it's been a great community. You know, we have a lot of partnerships here like the one with the University of Washington where they invested in their computer science department and we've been proud to help with that. A lot of the companies in the Northwest are among our best customers and showcasing things that we're doing. And we're very happy that we chose to be in Seattle.

Q: Did you ever expect to have 50,000 employees?

A: You know, you can name almost any number, did I expect to have 5,000 total, 10,000 total. At every point in the company's history I sort of said, boy, at most we would double in size and let's get the infrastructure in place and be ready for doubling. Then beyond that let's not make assumptions where we might skip all the things we need to do to double. So once we doubled, then I said OK, we can double again, let's do the things to make that happen.

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