Bill Gates Creating Digital Dividends Conference

QUESTION: Flying saucer and improve health might not be sustainable, because it's a one time project, improvement in living conditions demands economic improvement, therefore, the questioner suggests, shouldn't we lead with technology for economic development and watch health improve as a follow on to that, as occurred here?

MR. GATES: I'm not aware that in the U.S. we led with technological development and ignored health issues. It just happens that technology came along after the country was rich enough that the health issues that we're talking about here were not -- you know, malaria, yes, there was malaria in the United States. But it was completely gone before the microprocessor was invented. A million people a year were not dying from measles when the microprocessor was invented.

QUESTION: Yes, but not before the electric motor. We didn't wait to cure everybody's disease before we put electric motors around.

MR. GATES: Nobody is talking about everybody in something like that. The fact is that there are huge differences. If you take what's happened in China, or take Cuba, their level of life expectancy, child survival rates, literacy rates, there's a huge contrast between what they've been able to do and other countries at the same level of economic development. And there's actually been in the last two or three years, the World Bank has done a much better job about writing about development in terms of not just pure average figures, but in terms of what it's meant for equal access, what it's meant for gender equality, what it's meant for literacy and things like that.

So, even World Bank has come around to believe that there is more here than just these basic numbers that you go in and look at. So I think it would be hard to find somebody who would still say, you know, just if there's a big oil well there, and that generates a lot of income, that's it. Because then it looks like the GNP is growing.

QUESTION: Do you think the digital divide should be addressed through some sort of international strategy that companies like yours should be involved in, or is this just something that should close through the natural processes of economic development. Because I must say, this is a conference on the digital divide, and we're all very impressed and appreciative of what you're doing in the healthcare area, but it doesn't sound like you're really interested in focusing on the digital divide as a target for action per se outside of the natural processes that the Microsoft Corporation --

MR. GATES: No, I didn't say that.

QUESTION: No, I'm asking you. I didn't say you said it, I'm asking you.

MR. GATES: No, I said, about 90 percent of what Microsoft does, and about 30 percent of what the foundation does, which is a little over $300 million a year, is related specifically to the digital divide. And, you know, I tried in my remarks to be 30 percent on that, and 60 percent on the other, because that's the way I feel. You know, how I respond to these issues. And certainly there are some magical things that can be done, and because software is very low cost, getting that out to schools and libraries. There's incredible things that are going on there. The library project is just one example of that.

Helping in the classroom, helping the teacher get at that natural curiosity that's there from those students, there's some amazing things that are going on in those areas. The idea that you could have a satellite infrastructure that is basically funded by the rural areas of developed countries, and yet could provide very low cost connections to the entire world. That's partly why I got involved in Teledesic, because for the one fixed cost the whole world gets connected up. And so these hospitals that are out there in Africa, they will benefit from that even though they don't fund any significant part of what has to be done.

So, there are magical things, and countries are, actually, starting to think about competing on this basis. If they see that one country has done some good in their schools, they'll ask about that. It's not as common in the U.S., to have someone in the U.S. ask about other countries. But in other countries, they definitely ask about the U.S. and other countries, and say, you know, who has done this the best, who is doing e-government the best, who is doing social services the best. And so using these digital tools, the diversity around the world is causing people to look at the most innovative approaches, and benefit from those.

QUESTION: Your library initiative, is it international?

MR. GATES: The library thing started here in the United States. And so when I said, in the next two years, we'll be in all the libraries, that's true for the United States and Canada. We're doing it in other countries as well. We've recently done Chile, we've done some things in the UK. In some countries, you have to take the word "library" a very broad definition of the word "library." In South Africa, it's community centers that it's being done in.

QUESTION: And is there a horizon to that, or do you see 186 countries down the road for the library project?

MR. GATES: Over time, you know, we'd like to get out to everywhere that we possibly can. The scope of that problem gets to be pretty large, but that's what that program is there to do, and once you get the U.S. done, then you have the resources freed up to go on and tackle new areas.

QUESTION: Sure. People in this audience largely represent the IT industry. That industry cannot, will not, should not get into health delivery. We heard from C.K. Vahalad (sp) about core competencies. Are you saying that industry should just sit on the sidelines, the IT industry should just sit on the sidelines until these populations are healthy and literate?

MR. GATES: No.

QUESTION: What do you think the IT industry should do?

MR. GATES: No, no. Microsoft, a huge percentage of its giving, there's the employee matching, which is just whatever causes the employees believe in get matched. And then there's the additional special causes that the company takes on, and those are all related to the vision of what software can do and how software can empower people. You know, things that fit in with the particular understandings that that company has.

And so, yes, there are fantastic things that IT companies can and should be doing. I think they do have to be tempered with a little bit of reality. There was a project started by the IT industry where somebody set up a website, and literally in the announcement they said, this website will eliminate poverty. And I wasn't sure that that was really going to happen.

(Laughter.)

QUESTION: I would have invested in that one right away.

MR. GATES: So, you know, I think that we need to be realistic about what part of the chain we fit into. There are some amazing things, like Microsoft got involved in the whole refugee set of problems, where they don't have the ability to be tracked, and they can't find each other. And by creating the system in the field, very low cost PC-based system that could issue these ID cards, and track all the information about who was looking for who, who was found, and all that, there was a very dramatic impact that was created by a project like that.

So, you can do lots and lots of things that are helpful, they're not complete solutions.

QUESTION: Very interesting that you're investing in wiring up the libraries. What about training teachers? There are a great many teachers who have students who can deal with the computer much better than they can. They need help. What about the Gates Foundation, or Microsoft Corporation, or the Microsoft Foundation addressing that?

MR. GATES: Yes, there's some -- in both cases, there's reasonably extensive programs aimed at that. One of the things is, we decided that to really get school districts to organize around what they can do with computing, and should they have a levee around computing, and what does it do for their curriculum, you've got to make sure that the superintendents and the principals have all sat down and had a chance to really use this stuff hands-on.

And so those institutes which the foundation funded are now going around the country state-by-state and getting that coverage. In parallel with that, there's a summer program that was done first here in Washington State, where the teachers who are interested in this come in, spend time, and then they go away with their own laptop computers. So they're able to not only take what they learned in the event, but go off and learn more and get involved with that.

There's another program that we're involved with with Intel that has to do with making sure that they've got the latest software, that there's no expense for that. And that the first hundred thousand teachers, the 100,000 teachers who are most interested in it, can get involved and get both the hardware and software that they'll need for what they want to do.

QUESTION: Bill, this conference has focused on for-profit approaches that would use the business model to try to close the digital divide, our focus with you has been mainly on philanthropic, the giving side. From the perspective of the corporation, what about Microsoft's initiatives in this sphere, things that focus on the Third World, or extending these technologies to under-served sectors?

MR. GATES: Well, the wonderful thing about information technology products is that they're scale economic. That is, once you've done all that R&D, your ability to get them out to additional users is very, very inexpensive. Software is slightly better in this regard because it's almost zero marginal cost. So, you know, when we go into a country like India, we can not only say, okay, here's this English software, but we can take the next six most popular languages in the country and say, okay, it's not just the elite in India, the 7 percent who speak English, but all of those local populations as well. And you do that -- you know, there's no strong business case for going out and doing all those languages, it's really based on sort of the original vision that these should be tools for everybody. And so you go out, you make the software available to all the schools, to the community centers that are out there. And that starts to spread the different activities.

One of the things we've done is, whenever you do have, which you have in a lot of these countries, piracy actions, we take all the money that's recovered from that and put that back into training programs, training programs for people who are out of jobs, and training of teachers. So, we've dedicated all of that to piracy recovery, which, over the last five years has been over $50 million that's gone into the various retraining programs.

QUESTION: You talk about the fact that software is cheap and accessible. The term you used was, the cost was low.

MR. GATES: The marginal cost.

QUESTION: Yes, the marginal cost is low. But a copy of Windows costs a lot more than the average Chinese makes in, say, six months. What about special pricing for the Third World, or how do you address this issue?

MR. GATES: Well, the key expense -- there's three levels of expense in terms of using computers. The most expensive things by far is the communications. That monthly fee to be connected up. If you're going to be connected up to the Internet over a period of, say, three or four years, you're going to spend a lot more on your communications than you spend on anything else.

The second most expensive thing is the hardware. Now, you know, we did attack the high prices of the workstation companies, we did bring that down with the PC model to where those numbers are greatly reduced. But even so, you know, a personal computer today is $500-600. And so that's not within the reach of a lot of people. You know, the Chinese market, of course, has grown by a factor of 10 over the last four years. It's the fastest growing PC market in the world. It's over six million PCs a year. That's going to sort of not just to Chinese businesses, but disproportionately, particularly for a country at that level of economic development, it's going into homes because of the Chinese parents' focus and interest in education. We saw that somewhat in Japan, we saw it a lot in Korea, we're seeing it in a very dramatic way in China.

So there is, just on absolute numbers basis, a very incredible use of PCs in the home. For our Chinese language software products, we've had to have unique pricing. Partly it has to do with piracy, the respect for copyright is not well-established there, and piracy levels are still dramatically higher in China than in any large country in the world. But special pricing weighs into that, particularly as you focus on the home market with special pricing, school market with special pricing.

QUESTION: When you say special pricing because of the piracy, in other words, you kept the price low to compete with the pirated goods, or you had to put the price higher in order to make up the losses?

MR. GATES: No, no. Lower, it's normally low, and we have it be lower than that.

QUESTION: Lower than that to compete with the --

MR. GATES: As I said, the people who have a PC, they can't pirate the PC. And they can't pirate the communications. And so, you know, the software is dramatically less expensive, even at the normal prices, than those two other things. And so, by the time they've paid for those two things, they've spent 95 percent of what they're going to spend. That last 5 percent that relates to the software, even that, because it's so easy to pirate, in most cases they're not spending.

QUESTION: How is that product paying back, the OS, or other pieces of software in Chinese?

MR. GATES: Well, China is a market where we've put enough people in, support people, sales/marketing people in, it's one of the few countries in the world where our expenses of running our subsidiaries are actually greater than our sales level. That's because of our belief in the future. That is that PC sales are going up, piracy is going to come down. So, it will be a very significant market for us to be in. But right now, if you took all our activities in China as a whole, it's definitely in investment mode.

QUESTION: Any other markets like that? You said that there wasn't a good business case for going into all these different languages.

MR. GATES: Right.

QUESTION: Are there any other than Mandarin that are appealing?

MR. GATES: I was talking there about the India languages. I was talking about Kannada (sp), Tamil (sp), all the different languages in India that we're doing.

QUESTION: Oh, so that's not -- you are doing those?

MR. GATES: Yes.

QUESTION: Yes. How many languages are you writing?

MR. GATES: Well, let's see. I should know. It's about 50 languages that Windows is done in. We do Slovakian, we do Slovenia. We do a lot of different languages.

QUESTION: And, in general, do these have a positive bottom line, the investment in these languages, or is it, again, investment accounts?

MR. GATES: Most of them, you know, if you take English is up here, it does have a good return on investment.

(Laughter.)

MR. GATES: It tends to go down from there. And we take ones on the margin that you probably wouldn't do just for pure business thinking and say, look, we're in this for the long-term, we really believe in getting these things out there, and there's a lot of people who that's the only way they're going to have access.

The other thing that's important to note is that the base technology, which is this sort of universal character set called unicode that the computer industry has come up with, even if the software isn't localized, they can do creation of content in their local languages. And you have to do the fonts and the scripts and things like that. There's an even broader set of languages that you can actually create websites, create documents in, even broader than the software has been localized in.

QUESTION: So, you're writing software into about 50 languages, many of which are not really paying for themselves.

MR. GATES: Well, about 45 are probably paying for themselves.

QUESTION: About 45 are.

MR. GATES: In the net, it's still a positive number.

(Laughter.)

QUESTION: The point I want to make is, it sounds to me as though, really, you're doing quite a bit to address the digital divide, although you don't put it in those words.

MR. GATES: The most important thing that was ever done for the digital divide, just sticking to the digital thing. I'll stick to that.

QUESTION: It will make me feel better, my health will improve if you just stick to the digital divide for a minute.

(Laughter.)

MR. GATES: The creation of the PC. The creation of the PC is the best thing that ever happened. That created the virtuous cycle that we got the low prices. And the computer industry as a whole fought that, the traditional computer industry fought that tooth and nail. The PC -- this is why we can even talk about this notion of having, you know, literally hundreds of millions full screen devices out there that people can do creativity against.

QUESTION: Experts have said, says the questioner, that open architecture for software is essential to bridge the digital divide. Do you agree that open architecture is essential, and how do you define open, and what might Microsoft's role be in this sphere?

MR. GATES: Well, the word open is --

(Laughter.)

MR. GATES: -- good.

(Applause.)

MR. GATES: I don't think there's any marketing person at Microsoft who would ship a product without the word "open" on the box.

(Laughter.)

QUESTION: Wonderful.

MR. GATES: The key thing is to have open hardware.

(Laughter.)

QUESTION: Silence speaks volumes.

MR. GATES: Open communications.

QUESTION: Do you see the U.S. continuing to be the dominant technology leading country 10 or 20 years from now, or do you think another part of the world where countries are really investing in engineering education and whatnot might actually take the preeminent lead away from the U.S.?

MR. GATES: I think it's very hard to imagine a scenario even in a 20 year time frame where the U.S. is still not the leading country in the IT business, in the use of IT, any measure you want to take. Certainly, the level of dominance, the relative dominance will go down. But, a little bit when people think about that it's like seeing this as a zero sum game, like there's a winner of the war and there's a loser of the war. This is a case where if Europe gets ahead of us on wireless, and we learn from them, that's good news. If various countries want to make various chips very inexpensively, and we are open enough to import those, and mix those into our products, we benefit immensely from that.

So the world has certainly woken up, and is saying what did the U.S. do to get all those firms going there, and to get such a wide application of technology. I think there's at least one metric, which is the use of technology in government, where the U.S. would be about average compared to the countries around the world. And other people I'm sure have talked about how in wireless there's ways of looking at it where we don't look particularly advanced in that dimension.

So partly the reason the U.S. has the leadership we have today is that about 20 years ago we had a high degree of humility. That is, we looked at Japan and sort of said, wow, is their model superior, is there something about our model that could be strong. And all these great things benefitted from that approach. If during this period we don't retain at least some of that humility and look at what other countries are doing and learn from them, then our relative dominance will shrink faster than it should.

QUESTION: Bill, one of the central focuses of this meeting was the concept that the rural poor in developing countries constitute a business opportunity. What do you think about that concept? Do you view the rural poor as a business opportunity for Microsoft Corporation?

MR. GATES: Well, I don't think that -- let me just be clear. It's not a significant economic opportunity.

QUESTION: Okay. That's interesting.

MR. GATES: Let's be serious.

QUESTION: Carly Fiorina (sp) spoke to us about an enormous investment, this world e-inclusion initiative, sees it as a major opportunity. Maybe for hardware it's different.

MR. GATES: Define poor. No, people are just playing around with terms. What do they mean, poor? Poor means you live on less than a dollar a day. That's what poor means.

QUESTION: Those are the ones. That's what this conference was about, gosh, you should have been here.

MR. GATES: Okay. What percentage of HP's growth in the future will come from customers who live on less than $1 a day?

QUESTION: Right. I asked Deborah Dunn that question, the answer was, we don't know yet, it's an investment account, but we believe.

MR. GATES: Fine. We believe in doing it, it's great to do it. But, the percentage -- let's be serious. The percentage of growth that an IT firm like HP will get from people whose income is less than $1 a day is not going to be that significant. For us, mostly, those are people that if they happen to get access to the computers we'll give them the software for free, because we want to, because we think that's a good thing, not because it's a business opportunity.

QUESTION: What we discovered here is that there are governments and there are foundations, and there are local entrepreneurs who want to put Internet cafes and all sorts of community centers with computers in these villages. And experience is showing that people rush to these things, use them, they start marketing their wares on the web.

MR. GATES: It's not the people living on less than $1 a day.

QUESTION: How about less than $3?

MR. GATES: Now you're talking.

QUESTION: Exactly.

(Laughter.)

QUESTION: Honestly, this was exactly the point that was made at this conference, that there's an enormous number at less than $1, and then there's another number at less than $2, and these are very different groups.

MR. GATES: I will admit that in our business forecast we don't have a significant percentage of our future growth even coming from people who live on $3 a day.

QUESTION: Okay.

MR. GATES: I mean, do people have a clear view of what it means to live on $1 a day?

QUESTION: We do in this conference.

MR. GATES: There's no electricity in that house, none. So is somebody creating computers that don't require electricity?

QUESTION: No, but there are solar power systems.

MR. GATES: No, there are no solar power systems for less than a dollar a day, honest. You can't afford a solar power system for less than $1 a day. You're just buying food, you're trying to stay alive.

QUESTION: There are government and World Bank initiatives to place these systems in these villages. There's money coming to do this work, and buy this technology.

MR. GATES: You don't understand. When people say $1 a day, that includes every government thing that's given to them, everything they have shared across that entire village. It includes everything. And there's no solar power system in there for $1 a day. There's just not.

QUESTION: Okay. I mean -- 

MR. GATES: You live in a different world.

QUESTION: There's a term -- I'm just the moderator.

(Laughter.)

QUESTION: There's a term that we've used as the Internet has come to the fore, the question of whether this or that company leader gets it, you've heard this right, does he get it, is he ready to take his company onto the web. What this conference has taught us is that there's a new thing to get, and the question is do we get it that the less developed countries, even the least developed countries, and all these tens of thousands of villages represent an economic opportunity. And I'd have to say that based on what I'm hearing from you, you don't get that yet.

MR. GATES: You asked me whether poor people, which means people who live on a dollar a day, was a significant part, significant part of our future growth opportunity.

QUESTION: Did I say significant? I'm not sure. If I did, I take it back. Okay, Bill.

MR. GATES: These get it things are really quite faddish, I've never been a get it kind of guy. I apologize, if that's the political test, then what I get is that there are things those people need at that level other than technology.

QUESTION: Okay. Bill, thank you very much. Just a second before you go, these are all the questions that challenge your commitment to health over the closing of the digital divide, every one of these except one or two might have slipped in there, I was trying to do it on the fly. So why don't you take a look at those. It's a very literate group, and some of them wrote whole books there.

Bill Gates, ladies and gentlemen.

Thank you so much.

(Applause and end of event.)

Keynote Part 1 | Keynote Part 2