Bill Gates: Behind Microsoft, Money, Malaria

by Forbes Staff

  Which raises the subjects of the millennium, bugs and reliability. Will we ever get a crash-proof PC? Or Web server software that can’t go down during the Christmas rush?

  Microsoft’s competitors have long contended that Windows can’t satisfy big companies’ voracious computing demands. Gates is burning to prove them wrong. Instead of turning to sophisticated “big iron” machines—like those built by Sun Microsystems—to construct reliable data centers, companies will be able to use lower-cost PCs running Windows 2000, he argues. “We hardcore can demonstrate this stuff now.”

  Competitors once wistfully looked forward to the day when Gates would have children, in hopes that it would deflect his competitive spirit. Well? With the arrival of his second child this past summer, Gates says he’s simply more focused: “I’m very lucky. I don’t have to take time to mow the lawn. I have this great job that I care a lot about and my family. Those two things are 99% of what I do.” But back when Gates was single and had only one thing to take 99% of his time there was no talk of handing the company over to Ballmer.

  Gates offers some thoughts on other topics:

  On interactive television: “Who is the leader in terms of connecting the TV up to the Internet? Anybody can talk, but who is really doing anything? We’re the big believers. Go back six or seven years. … Were we ahead of our time? Were we somewhat naive thinking it would happen? You bet! [But] it’s OK for us to be early on things. It’s different than being late.”

  On Clay Christensen’s book, The Innovator’s Dilemma, which argues that successful companies can be unseated by “disruptive” new ideas: “Everybody who wants to propose a new project at Microsoft says, ‘We’re the project that should be funded because of innovator’s dilemma.’ ‘We’re the new; everybody else is the old—fund my project!’ It’s a required slide in every funding presentation.”

  On the movement by competitors to produce an inexpensive machine that doesn’t need Windows: “Remember the network computer—was that a new era in computing? There were many cover stories about [it]. Go visit those customers today, all the ones that Sun ran the ads about, and ask them what a crock of garbage that whole thing was and how screwed they felt to have been involved in reading those magazine covers that declared the new era.”

  On whether he has ever programmed in Linux, the freebie operating system: “Well, Linux is just a form of Unix, and I certainly did a lot of programming in Unix. The fact that the free-software community can take that 25-year-old thing and say, ‘OK, here it is’—there’s nothing phenomenal about that. And so, no, I’ve never actually used it on a machine. I’ve certainly had demos with it, but it’s not anything I’ve used.”

  On whether software is lagging behind hardware: “I totally disagree. Our software will be ready the minute [Intel] has the new chip [Itanium] come out of the fab. It was a great teamwork. … Do we have wireless networking the way we want? Not yet. Do we have tablet-based machines with the super-high-resolution LCDs that we want? Not yet.

  “I have no complaint about the hardware industry. They turn out miracles at a pretty phenomenal rate. But to say that they’re just kind of twiddling their thumbs waiting for some software guy to do something—that’s not the real picture.”

  On money: “Part of the reason for believing that my wealth should be given back to society—[and] not, in any substantial percentage, be passed on to my children—is that I don’t think it would be good for them. You’d like to have a situation where they really feel like they really need to get out and work and contribute to society. I think that’s an important element of a fulfilling life.”

  BILL GATES OVER THE YEARS

  Credit: Microsoft/ZUMAPRESS/Newscom

  January 1, 1978—Redmond, Wash., USA—This is a 1978 file photo of Microsoft’s Class of ’78. Shown are, top row, left to right, Steve Wood, Bob Wallace, Jim Lane; second row, left to right, Bob O’Rear, Bob Greenberg, March McDonald, Gordon Letwin; and front row, left to right, Bill Gates, Andrea Lewis, Marla Wood and Paul Allen.

  Credit: Joe McNally/Getty Images

  1986—Redmond, Wash., USA—Microsoft owner and founder Bill Gates poses outdoors with Microsoft’s first laptop in 1986 at the new 40-acre corporate campus in Redmond, Wash. In March, Microsoft held an initial public offering of 2.5 million shares. By the end of the year, Gates became a billionaire at the age of 31. Microsoft was the first company to dominate the personal computer market with its MS-DOS system and subsequently the Windows platform.

  Credit: Ann E. Yow-Dyson/Getty Images

  February 22-25, 1987—Phoenix, Ariz., USA—Paul Allen, from Asymetrix Corporation/Vulcan Inc., and Bill Gates, from Microsoft, share a laugh at the annual PC Forum.

  Credit: Dave Weaver/AP

  January 9, 1994—Seattle, Wash., USA—Bill Gates and bride Melinda French greet guests during a reception at a private estate in Seattle. The couple was married last week in Hawaii.

  Credit: Michel Gangn/AFP/Getty Images

  September 4, 1995—Paris, France—Microsoft president Bill Gates demonstrates Microsoft’s Windows 95 program from his automobile prior to a press conference. Gates was also to meet 500 top computer executives as part of his campaign to launch the company’s new software.

  Credit: Jeff Chistensen/Getty Images

  July 21, 1998—Redmond, Wash., USA—Bill Gates, chairman and CEO of Microsoft talks with Steven Ballmer, who was named president of Microsoft. Ballmer formerly was the executive vice president of sales and support of Microsoft. Ballmer’s promotion is part of Gates’ plan to broaden Microsoft’s leadership.

  Credit: Dan Callister/Newsmakers/Getty Images

  May 30, 2000—Seattle, Wash., USA—An aerial view of Bill Gates’ estate lines Lake Washington.

  Credit: Alessandro della Valle/Keystone/AP

  January 29, 2001—Davos, Switzerland—Bill Gates, chairman of Microsoft Corporation, right, talks to Nobuyuki Idei, CEO of Sony Corporation, left, after they shared a panel session on the future of software-driven devices at the Annual Meeting of the World Economic Forum (WEF).

  Credit: Jeff Christensen/Getty Images

  February 2, 2002—New York, N.Y., USA—Bono, left, lead singer of the rock group U2, and Microsoft Chairman Bill Gates sit together before a news conference at the World Economic Forum. Gates teamed up with rock icon Bono in an appeal to world leaders to substantially increase funding for global health care.

  Credit: Jon Hrusa/EPA/Newscom

  September 21, 2003—Maputo, Mozambique—Bill and Melinda Gates, cofounders of the Bill & Melinda Gates Foundation, playing with young patients on a malaria vaccine trial at the Manhiça Health Research Centre in Manhiça, 80 km north of Maputo, Mozambique.

  Credit: Jeff Christensen/Bill & Melinda Gates Foundation/Newscom

  September 22, 2003—Johannesburg, South Africa—Former South African President Nelson Mandela, left, and his wife Graça Machel talk to Bill and Melinda Gates, right, at the end of a youth forum on HIV/AIDS at the University of Witwatersrand. Mandela and Gates took part in the forum that was held to raise awareness of the AIDS epidemic in South Africa. On December 19, 2005 Melinda and Bill Gates and Bono were named 2005 Time magazine people of the year for their Good Samaritan efforts: the Gateses for their large donations to schools, hospitals and medical research, Bono for his effort in reducing the debt of developing countries.

  Credit: Michael Dwyer/AP

  June 7, 2007—Cambridge, Mass., USA—Cofounder of Microsoft Bill Gates, right, walks in the procession followed by Boston Celtics legend Bill Russell, center rear, during commencement ceremonies at Harvard University.

  Credit: Elise Amendola/AP

  June 7, 2007—Cambridge, Mass., USA—Microsoft Chairman Bill Gates, his wife Melinda, far left, his father Bill Gates Sr., and his stepmother Mimi Gates pose for a photo after he received his honorary Doctor of Laws degree and was keynote speaker at Harvard University’s 2007 commencement exercises on campus.

  Credit: STRDEL/AFP/Getty
Images

  March 23, 2011—Microsoft founder and philanthropist Bill Gates and his wife Melinda, second from right, walk during a visit to Jamsaut villages at Patna district in India’s Bihar’s state. Microsoft cofounder Bill Gates is visiting India as part of “The Giving Pledge” campaign started by Gates and investor Warren Buffett last year.

  Credit: STRDEL/AFP/Getty Images

  March 23, 2011—Microsoft founder and philanthropist Bill Gates looks on as his wife Melinda holds a toddler during their visit to a village at Patna district in India’s Bihar’s state.

  Billionaire philanthropist Bill Gates toured the impoverished Indian state of Bihar ahead of a meeting to encourage the country’s wealthiest people to give more money to charity.

  Credit: Elaine Thompson/AP

  June 2, 2011—Seattle, Wash., USA—The entry plaza of the new Bill & Melinda Gates Foundation headquarters is seen in Seattle. The foundation formally opens its new headquarters Thursday evening, moving from scattered nondescript office buildings around Seattle to an architectural showcase in the center of its hometown.

  Credit: Nati Harnik

  May 6, 2012—Omaha, Neb., USA—Warren Buffett, chairman and CEO of Berkshire Hathaway, right, and Microsoft’s Bill Gates, left, play doubles against table tennis prodigy Ariel Hsing. Berkshire Hathaway is holding its annual shareholders’ meeting this weekend.

  MAKING MICROSOFT MATTER

  By Elizabeth Corcoran

  June 2000

  YOU’VE GOT TO GIVE THE BOYS from Redmond credit: The U.S. government has them locked in a full nelson, investors have pummeled their stock, a hacker in the Philippines kicked one of their most widely used programs in the gut. But the Microsoft gang is still declaring victory.

  On June 1 Bill Gates, Steve Ballmer and a troop of other executives are slated to unveil their latest vision of the road ahead. Even before the event, executives were billing it as a new idea as fundamental as when Microsoft moved from DOS to Windows. In short, it will mean transforming the company from one that sells shrink-wrapped software into one that provides a broad array of services via the Internet. In keeping with Microsoft tradition, there will be a carefully orchestrated public-relations blitzkrieg: a week of print and Web stories, likely to be capped by a glossy portrait of the grinning duo on the cover of an obliging business magazine.

  Behind the smiles, however, is genuine nervousness. The entire software industry is going through a transformation that is shaking up its long-profitable business models. Even Gates has noted that seldom has the winner in one business era been a leader in the successive round. Not since its early days has Microsoft had to scramble to demonstrate that it is relevant.

  “Microsoft’s biggest problem is that it missed the Internet and has all the wrong products now,” declares Larry J. Ellison, chairman of Oracle. “As the PC recedes in importance, Microsoft recedes in importance.”

  Ellison, of course, is Microsoft’s noisiest competitor. Gates and Ballmer see the world differently. The PC still matters. Microsoft will still offer customers many of its products as packaged software. But like the rest of the industry, Microsoft is confronting the fact that the distinction between “productivity software” (the stuff you once bought on CD-ROMs) and “services” provided via the Web are disappearing. Even how you pay for “software” will change: You will sign up for “subscriptions” instead of paying at a cash register. Ask not what the software can do for you, but what you want done.

  This is far more radical an idea than just storing your word processing software on a distant server. Here’s one glimpse: When you buy an airline ticket on the Web, Microsoft wants your itinerary to be piped straight into your online schedule and instantly shared with whomever you’re planning to visit. If the flight is delayed, you’ll be automatically beeped or paged or contacted, as will whoever has promised to pick you up at the airport. “Integration” is the hot button. You can have your information served up and stored any way you like it: via servers, on your PC, to handheld devices and cellphones. Think of the network as your own, very clever personal assistant.

  Such glamorous scenarios, however, mask some truly hard problems for Microsoft. First, the company has to build the technology and fend off a reinvigorated army of competitors (including Oracle). Then it needs a new business model that describes how it can make money in this services world. All the while, Microsoft needs to keep convincing its customers that the government won’t really break it into pieces.

  Real products are still a ways off. “The promise is always a bit ahead of the reality,” warns Robert A. Enderle of Giga Information Group. For now, Microsoft is simply aiming to capture the imagination of consumers and software developers by outlining its future directions. But that’s not going to stop its enemies from contending that they already have products that can accomplish what Microsoft is promising to do. Ellison boasts that Oracle’s latest product, Internet File System, will manage information on servers so smoothly that customers won’t miss Windows at all.

  Microsoft executives say their vision is far broader than simply storing everything on servers. In the PC era, Microsoft turned its Windows operating system into a platform on which other companies built applications and so based their businesses. In this post-PC world, the Internet itself has become the platform on which everything else runs.

  In speeches and interviews since he became Microsoft’s chief software architect, Gates has said that he believes consumers and the industry will benefit as companies write programs that work across the Internet, providing common functions that many can use. To make its software and services work in a highly “integrated” way, Microsoft is throwing its technical prowess behind XML, a format for displaying rich information (everything from glitzy documents to MP3 files). In principle the development of XML is taking place under the watchful eye of a neutral industry group, the W3C (for World Wide Web Consortium). In practice, all companies push, enhance and fine-tune the details of such tools to make them work best for their own products and services.

  Even legitimate fiddling can lock customers into one vendor’s products. So Microsoft’s competitors will be constantly warning its customers that they are about to be locked in and should run the other way. “Microsoft thinks that everything should go to Windows. We think that things should be more modular. We’re very pro-choice,” says Ellison.

  Creating new business models is going to be tricky. Gates has long been intrigued by how Microsoft might create subscription-like revenue streams for the company. In the new world, consumers or companies might tap into services offered by Microsoft without even realizing it. For instance, there are ample complex but critical services that Microsoft could offer to carry out for others: verifying that a person is whom he claims to be, processing financial transactions or encrypting sensitive exchanges. Who and how much to charge is the unanswered question.

  Even as Microsoft plunges into the services world, it will not give up building its traditional software. “We need to continue to make the Windows client more reliable, manageable and secure both for consumers as well as for business managers,” Ballmer told an audience in January. That message is particularly important to Microsoft’s business customers, who make huge investments in software and so pay a heavy cost if a vendor radically changes course.

  Within Microsoft, one manager sees the new strategy as “Internet version 3.0”—and of course, for Microsoft, the third iteration has often been the winner. From 1995 to 1996 was the “Uh-oh!” era of the Internet. “We were late and had to react quickly,” he says. From 1996 to 1999 Microsoft scrambled to build a competitive browser, Web-server software and an AOL competitor called MSN. Now, he promises, “we’re very aggressive in leading with our own vision.”

  Keep your eyes on that twisty road ahead.

  CHUTZPAH SCIENCE

  By Elizabeth Corcoran

  July 2005

  Even the Gates Foundation would run out of money if all it did was buy vaccines. So now it�
�s going about inventing them, too.

  STEFAN KAPPE is a bug-killer. Every week in a tiny, humid room (nicknamed The Swamp) at the nonprofit Seattle Biomedical Research Institute, Kappe and his colleagues slit open between 2,000 and 3,000 mosquitoes to collect the microscopic parasites that cause malaria. By knocking out a gene essential to the parasite’s development, Kappe hopes to create a vaccine against malaria. It’s an audacious goal—no one has ever made a commercial vaccine that protects against any parasite, much less malaria, which threatens 40% of the world’s population. Half a billion get the disease every year and more than a million die of it.

  In late June Kappe was one of 43 principal scientists to win a chunk of the multiyear Grand Challenge awards, funded largely by the Bill and Melinda Gates Foundation. The Gates Foundation has set aside $450 million for the project, while the Wellcome Trust and the Canadian Institutes of Health Research are chipping in another $31.6 million. The goals for all the projects are breathtakingly grand: Give a child a vaccine without using a needle. Make vaccines that don’t need to be refrigerated. Make plants that grow in dry climates more nutritious. Genetically modify mosquitoes so they can’t spread diseases such as malaria and dengue virus. “These [projects] probably wouldn’t get funded by the National Institutes of Health,” says Richard Klausner, director of global health at the Gates Foundation and formerly director of the National Cancer Institute. “They’re too risky, too ambitious. And that’s exactly what we wanted.”

  Bill Gates’ $28.8 billion foundation is more than double the size of the runner-up, the $11 billion Lilly Endowment, and the projects it has taken on are supersize. On the top of the agenda: battling the diseases that plague developing nations. The Gates Foundation has already pledged $1.5 billion to bring routine vaccines to the poorest children around the world. Now Gates wants to push scientists to create a more powerful arsenal.