Joint Interview with Bill Gates 30 May 2007

In this historic interview, Kara Swisher and Walt Mossberg interview Steve Jobs together with Bill Gates on stage at the D5 conference. This is one of the best and most heart-warming interviews of the Apple CEO, where the rivalry as well as the complicity between the two moguls is evident. Always worth a re-watch!

Video Transcript

Note: for some videos, timestamps on the transcripts might be off by a few minutes due to theĀ original videos having been edited for YouTube (typically, sections with music playing may have been removed).

SJ (1983): I have invited here today three industry experts to have a panel discussion on software.

Speaker: And now ladies and gentlemen, the Macintosh software dating game.

SJ (1983): Welcome to the Macintosh software dating game. Software CEOs, could I please ask you to introduce yourselves?

Fred Gibbons: Hi, Fred Gibbons, president of Software Publishing Corporation.

Mitch Kapor: Hi, I'm Mitch Kapor, president of Lotus. We do a product called 123.

Bill Gates (1983): My name is Bill Gates. I'm chairman of Microsoft. And during 1984, Microsoft expects to get half of its revenues from Macintosh software.

SJ (1983): Software magnate number three. When was your first date with Macintosh?

Bill Gates (1983): We've been working with the Mac for almost two years now. And we put some of our really good people on it.

SJ (1983): Software CEO number three, will Macintosh be the third industry standard?

Bill Gates (1983): Well, to create a new standard, it takes something that's not just a little bit different. It takes something that's really new and really captures people's imagination. And the Macintosh, of all the machines I've ever seen, is the only one that meets that standard.

SJ (1983): Software CEO number three, describe your ideal relationship with Apple.

Bill Gates (1983): Well, we'll be selling our software independently. So the key thing is that Apple gets a lot of consistent standard machines out there quickly.

Speaker: Well, sorry, Steve. Time's up. We'd like to give Steve a few moments to decide today's winner.

OK Steve, who's the winner?

SJ (1983): Apples are red. IBM's blue. If Mac's going to be the third milestone, I need all of you.

SJ (1997): Now, I'd like to talk about meaningful partners, Apple lives in an ecosystem, and it needs help from other partners, it needs to help other partners. And relationships that are destructive don't help anybody in this industry as it is today. So during the last several weeks, we have looked at some of the relationships and one has stood out as a relationship that hasn't been going so well, but has the potential, I think, to be great for both companies. The discussions actually began because there was some patent disputes and rather than... I know.

Rather than repeating history, I'm extremely proud of both companies that they have resolved these differences in a very, very professional way. And I happen to have a special guest with me today via satellite downlink. And, if we could get him up on the stage right now,

Bill Gates (1997): Some of the most exciting work that I've done in my career and has been the work that I've done with Steve on the Macintosh. Whether it's the first introduction or doing products like Mac Excel. These have been major milestones. We're very excited about the new release we're building, this is called Mac Office 98. We do expect to get it out by the end of this year, and I think it's going to really set a new benchmark for doing a good job with performance and exploiting unique Mac features. In many ways it's more advanced than what we've done on the Windows platform. We're also excited about Internet Explorer, and we've got a very dedicated team that's down in California that works on that product. And the code is really specially developed for the Macintosh. It's not just a port of what we've done in the Windows environment. We look forward to the feedback from all of you as we move forward, doing more Macintosh software. Thanks.

SJ (1997): The era of setting this up as a competition between Apple and Microsoft is over, as far as I'm concerned. This is about getting Apple healthy. This is about Apple being able to make incredibly great contributions to the industry, to get healthy and prosper again.

Speaker: So thank you all for coming. I look forward to hearing the grilling in the chair tonight and in the days to follow.

Before we

Walt Mossberg: get started, I think you know, there were some pioneers - of course we have the pioneers here on stage, but there were some other really important pioneers in the video we just saw. And a couple of them are here in the audience. So, Mitch Kapor, who is a regular D could you just stand up and, wherever you are - there he is.

And, and Fred Gibbons who has not come to D before, but is here tonight. Fred? Here is Fred, right there.

And I don't know if he's in the room, but I do want to recognize our fellow journalist, Brent Schendler from Fortune who did the last, to my knowledge, the last joint interview these guys did. It was not on a stage, but it was a Fortune Magazine interview. Brent, I don't know if you're in the room. If you are, can you stand? Maybe he's... Way over there.


Kara Swisher: let's get started. I wanted to ask. There's been a lot of like mano a mano, catfight kind of thing in a lot of the blogs and the press and stuff like that. And we wanted to, the first question I was interested in asking is what you think each has contributed to the computer and technology industry, starting with you, Steve, for Bill, and vice versa.

SJ: Hmm, well, you know, Bill built the first software company in the industry. And I think he built the first software company before anybody really in our industry knew what a software company was, except for these guys. And that was huge. That was really huge. And the business model that they ended up pursuing turned out to be the one that worked really well, you know, for the industry. So I think, but the biggest thing was Bill was really focused on software before almost anybody else had a clue that it was really the software. That's what I see. I mean, a lot of other things you could say, but that's the high order bit. And I think building a company is really hard and it requires - it requires your greatest persuasive abilities to hire the best people you can, and keep them at your company, and keep them working, you know, doing the best work of their lives, hopefully. And Bill's been able to stay with it for all these years. So

Walt Mossberg: Bill, how about the contribution of Steve and Apple?

Bill Gates: Well, first I want to clarify, I'm not Fake Steve Jobs.

What Steve's done is quite phenomenal. If you look back to 1977, that Apple II computer, the idea that it would be a mass market machine. The bet that was made there by Apple uniquely, there were other people with products, but the idea that this could be an incredible empowering phenomena, Apple pursued that dream, you know. Then one of the most fun things we did then, was the Macintosh. And that was so risky. And people may not remember that Apple really bet the company. Lisa hadn't done that well, and some people were saying, okay, that general approach wasn't good. But the team that Steve built, even within the company, to pursue that, even some days, it felt a little ahead of its time. I don't remember, that Twiggy disk drive

SJ: 128 K

Bill Gates: Yeah, and...

Kara Swisher: Ha, the Twiggy disk drive.

Walt Mossberg: Ha yes.

Bill Gates: Steve gave a speech once, which was one of my favorites where he talked about, in a certain sense, we build the products that we want to use ourselves. And you know, so he's really pursued that with incredible taste and elegance that has had a huge impact on the industry. And his ability to always come around and figure out where that next bet should be, has been phenomenal. You know, Apple literally was failing when Steve went back and reinfused the innovation and risk-taking that have been phenomenal. So the industry has benefited immensely from his work. We've both been lucky to be part of it, but you know, I'd say he's contributed as much as anyone.

SJ: We've also - we've also both been incredibly lucky to have had great partners that we started the companies with and we've attracted great people. I mean, so everything that's been done at Microsoft and at Apple has been done by just remarkable people. None of which are sitting up here, you know, today

Kara Swisher: Not us.

Walt Mossberg: In a way, you're sort of the - not us - and you're sort of - so you're in a way, you're the stand-ins for all those other people.

SJ: Yeah. In a way we are, in a very tangible way.

Walt Mossberg: So Bill mentioned the Apple II and 1977 and 30 years ago, and there were a couple of other computers with - which were aimed at the idea that average people might be able to use them. And looking back on it, a really average, average person might not have been able to use them by today's standards, but it certainly broadened the base of who could use computers. I actually looked at a at an Apple ad from 1978. It was a print ad that shows you how ancient it was. And And it said thousands of people have discovered the Apple computer. Thousands of people. And it also said, you don't want to buy one of these computers where you put a cartridge in. I think that was a reference to one of the Atari or, something. No, you want a computer, you can write your own programs on. And so the world, and obviously...

SJ: We had some very strange ads back then. We had one where, it was in a kitchen. And there was a woman that looked like the wife; and she was typing in recipes on the computer with the husband looking on approvingly in the back, stuff like that.

Walt Mossberg: How did that work for you?

SJ: I don't think well.

Walt Mossberg: So, but just think back to, I know that you started Microsoft prior to 1977. I think Apple started the year before in 76. Microsoft in

Bill Gates: 74 was when we started. Then we did, we shipped the Basic in 75.

Walt Mossberg: Okay. Most people I, some people here, but I don't think most people know that there was actually, some Microsoft software in that Apple II computer. Do you want to talk about what happened there? How that, how that occurred?

Bill Gates: Yeah, there'd been the Altair and a few other companies, actually about 24, that had done various machines. But the 77 group included the Pet, TRS 80.

Walt Mossberg: Commodore.

Bill Gates: Yeah, the Commodore Pet, TRS 80, and the Apple II. The original Apple II Basic, the integer Basic, we had nothing to do with. But then there was a floating point one, where - and I mostly worked with Woz on that, I made...

SJ: Let me tell the story.

So Woz. Woz, my partner we started Apple with, this guy Steve Wozniak, brilliant, brilliant guy. He writes this Basic, that is like the best Basic on the planet. It does stuff that no other Basic's ever done. You don't have to run it to find your error messages. It finds them when you type it in and stuff. It's perfect in every way, except for one thing. Which is, it's just fixed point, right? It's not floating point. And so we're getting a lot of input that people want this Basic to be floating point. And like we're begging Woz, please, please, make this floating point.

Walt Mossberg: Who's we? How many people are in Apple?

SJ: Well, me. We're begging Woz to make this floating point. And he just never does it. You know, he wrote it by hand on paper, I mean, you know, he didn't - he didn't have an assembler or anything to write it with. It was all just written on paper and he typed it in. He just never got around to making it floating point.

Kara Swisher: Why?

SJ: Well, this is one of the mysteries of life. I don't know, but he never did. And so, you know, Microsoft had this very popular, really good floating point Basic, that we ended up going to them and saying, Help!

Walt Mossberg: And how much was the? I think you were telling this earlier.

Bill Gates: It was $31,000...

Walt Mossberg: ...that Apple paid you for the...

Bill Gates: ...for the floating point Basic. And I flew out to Apple, I spent two days there, getting the cassette. The cassette tapes were the main ways that people stored things at the time.

Walt Mossberg: Right.

Bill Gates: And, you know, that was fun. I think the most fun is later, when we worked together.

Walt Mossberg: And what was the most fun? Tell the story about the most fun that was later.

Kara Swisher: And maybe later, not the most fun.

Walt Mossberg: Let them talk, let them...

Kara Swisher: I'm teasing.

Bill Gates: Well, Steve can probably start it better. The team that was assembled there to do the Macintosh was a very committed team/ and there was an equivalent team on our side that just got totally focused on this activity. Jeff Harbors, a lot of incredible people. And we really bet our future, because we - on the Macintosh being successful, and then hopefully graphics interface in general being successful, but first and foremost, the thing that would popularize that being the Macintosh. And so we were working together, the schedules were uncertain, the quality was uncertain, the price. When Steve first came up, it was going to be a lot cheaper computer than it ended up being. But that was fine.

Kara Swisher: So you worked in both places? In both...?

Bill Gates: Well, we were in Seattle and we'd fly down there.

Walt Mossberg: Well Microsoft, if I remember correctly, from what I read; wasn't Microsoft one of the few companies that were allowed to even have a prototype of the Mac at the time?

Yeah. What's interesting, what's hard to remember now, is that Microsoft wasn't in the applications business, then. They took a big bet on the Mac because they - this is how they got into the apps business. I mean, Lotus dominated the apps business on the PC back then.

Bill Gates: Right. We had done just MultiPlan, which was a hit on the Apple II. And then Mitch did an incredible job betting on the IBM PC. And 123 came in and, you know, ruled that part of the business. So the question was, what was the next paradigm shift that would allow for an entry? WordPerfect - we had Word, but WordPerfect was by far the strongest word processing, dBase in database.

Walt Mossberg: And Word was - that was a kind of a DOS text editor.

Bill Gates: All of the - all of these products I'm saying were DOS-based products. Cause Windows wasn't in the picture at the time. That's more in the early nineties that we get to that. And so we made this bet that the paradigm shift would be a graphics interface, in particular that the Macintosh would make that happen. With 128K of memory, 22K of which was for the screen buffer, 14K was for the operating system. So it was...

Walt Mossberg: 14K?

SJ: Yeah.

Walt Mossberg: The original Mac operating system was 14K.

Bill Gates: 14K that we had to have loaded when our software ran. So when the shell would come up, it had all the 128K.

SJ: The OS was - the OS was bigger than 14K. It was in the twenties somewhere.

Walt Mossberg: I see.

SJ: So when we ship these, now we ship these computers now with, you know, a gigabyte, two gigabytes of memory, and nobody remembers. 128K.

Walt Mossberg: I remember that. I remember paying a lot of money for computers with 128K in those days. So, the two companies worked closely on the Mac project, cause you were, maybe not the only, but the principal or one of the principal software creators for it, right. Is that right?

SJ: Well, Apple did the Mac itself, but we got Bill and his team involved to write these applications. And we were doing a few apps ourselves, we did MacPaint and MacDraw and stuff like that. But Bill and his team did some great work.

Kara Swisher: Now in terms of moving forward, after you left, and your company grew more and more strong. How did you, what did you think was going to happen to Apple after sort of the disasters that occured after Steve left?

Bill Gates: Well, Apple's fate hung in the balance. We continued to do Macintosh software and you know, Excel - which Steve and I introduced together in New York City, that was kind of a fun event - that went on and did very well. But then, you know, Apple just wasn't differentiating itself well enough from the higher volume platform and...

Walt Mossberg: Meaning Windows, right? I mean...

Bill Gates: DOS and Windows.

Walt Mossberg: Okay. But especially Windows in the nineties began to take off.

Bill Gates: By 1995, Windows became popular. The big debate wasn't sort of Mac versus Windows. The big debate was character mode interface versus graphics mode interface. And when the 386 came, and we got more memory, and the speed was adequate, and some development tools came along, that paradigm bet on GUI paid off, for everybody who had gotten in early and said, you know, this is the way that's going to go.

Walt Mossberg: But Apple wasn't able to leverage its products.

Bill Gates: They... after the 512K Mac was done, the product line just didn't evolve as fast... Steve wasn't there... as it needed to. And we were actually negotiating a deal to invest and make some commitments and things with Gil Amelio. And... (laughs) No, seriously. And we...

Kara Swisher: Don't be mean. Don't be mean to him.

Bill Gates: I'm sorry?

Kara Swisher: When you're saying the word "Gil Amelio", you can see him just...

Bill Gates: And so I was calling him up on the weekend, and all this stuff. And next thing I knew Steve called me up and said, Don't worry about that negotiation with Gil Amelio. You can just talk to me now. And I said, wow.

SJ: Gil was a nice guy, but he had a saying, he said, Apple is like a ship with a hole in the bottom, leaking water. And my job is to get the ship pointed in the right direction. (laughs)

Walt Mossberg: So, and meanwhile, through all this, I mean, I want to get back to the thing we saw in 1997 at Macworld there, but Windows was just going great guns. I mean Windows 95, to whatever extent earlier versions of Windows had not had all the features, all the GUI stuff that the Mac had, Windows 95 really was an enormous, enormous leap.

Bill Gates: Yeah. Windows 95 is when graphics interface became mainstream. And when the software industry realized, wow, this is the way applications are going to be done. And it was amazing that, it was ridiculed sort of in 93, 94, was not mainstream. And then in 95, the debate was over. It was kind of just a common sense thing. And it was a combination of hardware and software maturity getting to a point that people could see it.

Walt Mossberg: So, I don't want to go through every detail, the whole history of how you came back. But.

SJ: Thank you.

Bill Gates: You had - but you, in that video we all saw, you said you had decided to - that it was destructive to have this competition with Microsoft. Now, obviously Apple was in a lot of trouble and I presume that there was some tactical or strategic reason for that as well as just wanting to be a nice guy, right, I mean.

SJ: You know, Apple was in very serious trouble and, what was really clear was that, if the game was a zero sum game, where for Apple to win, Microsoft had to lose, then Apple was going to lose. But that's - a lot of people's heads were still in that place.

Kara Swisher: Why was that from your perspective?

SJ: Well, a lot of people's heads were in that place at Apple, and even in the customer base. Because, you know, Apple invented a lot of this stuff and Microsoft was being successful and Apple wasn't, and there was jealousy and this and that. There was just a lot of reasons for it that don't matter. But the net result of it was, there were too many people at Apple and in the Apple ecosystem playing the game of, for Apple to win, Microsoft has to lose. And it was clear that you didn't have to play that game. Because Apple wasn't going to beat Microsoft. Apple didn't have to beat Microsoft. Apple had to remember who Apple was, because it'd forgotten who Apple was. And so, to me it was pretty essential to break that paradigm. And it was also important that, you know, Microsoft was the biggest software developer outside of Apple developing for the Mac. And so, you know, it was just crazy what was happening at that time. And Apple was very weak. And so I called Bill up and we tried to patch things up.

Bill Gates: And since that time we've had a team that's fairly dedicated to doing the Mac applications and they've always been treated kind of in a unique way so that they can have a pretty special relationship with Apple. And that's worked out very well. In fact, every couple years or so, there's been something new that we've been able to do on the Mac and have... It's a great, great business for us.

SJ: And it's actually - the relationship between the Mac development team at Microsoft and Apple is a great relationship. It's one of our best developer relationships.

Kara Swisher: And do you look at yourself as rivals now, today? As this landscape has evolved, and we'll talk about the internet landscape and everything else and other companies that have come forth, but how do you look at yourselves in this landscape today?

Walt Mossberg: Cause you, I mean, you are competitors in certain ways, which is the American way, right?

Kara Swisher: We watched commercials, we watch the commercials, right?

Walt Mossberg: And you get annoyed at each other from time to time.

Kara Swisher: And you know what? I have to confess, I like PC guy better.

SJ: Yeah. He's great.

Kara Swisher: The other guy is kind of a...

SJ: You know, the art of those - the art of those commercials is not to be mean, but it's actually for the guys to like each other.

Bill Gates: Thanks!

SJ: PC guy's - PC guy's great. He's got a big heart.

Bill Gates: His mother loves him.

SJ: His mother loves him.

Kara Swisher: I like PC guy totally much better.

Bill Gates: Wow.

Kara Swisher: I do. I'm not lying. He's endearing. The other guy's a smart ass.

SJ: PC guy is what makes it all work. Actually. It's worth thinking about.

Kara Swisher: How do you...

Walt Mossberg: I mean - let me just ask you Bill. Obviously Microsoft is a much larger company, you're in many more markets, many more types of products than Apple is. You know, when you were running the company or when Steve Balmer is running the company, you think obviously about Google, you think about, I dunno, Linux in the enterprise, you think about a lot of - I mean, Sony with, in the game area. How often is Apple on your radar screen at Microsoft in a business sense?

Bill Gates: Well, they're on the radar screen as an opportunity. And in a few cases, like the Zune, if you go over to that group, they think of Apple as a competitor. They love the fact that Apple has created a gigantic market and they're going to try and come in and contribute something to that.

SJ: And we love them, cause they're all customers.

Walt Mossberg: I have to tell you, I was actually told by Jay Howard, I'm serious, that because of the nature of the processor, the development platform they use to develop a lot of the software for the Xbox 360 was Macs. And he claimed that at one point they had, like, placed the biggest order for whatever the Mac tower was at the time, of anybody. And it was Microsoft.

Bill Gates: I don't know if it was the biggest, but yeah, we had the same processor, essentially that the Mac had. This is one of those great ironies, as they were switching away from that processor, while the Xbox 360 was adopting it, but for good reasons, actually in both cases. Because we're not in a portable application, and that was one of the things that that processor roadmap didn't have. But yes, we did - it chose pragmatism, but we try and do things that way. So that was the development system for the early people, getting their software ready for the introduction of Xbox 360

SJ: And we never ran an ad on that.

Walt Mossberg: I see. Admirable restraint. That's wonderful.

SJ: There were hundreds of them.

Bill Gates: Steve is so known for his restraint. (laughs)

Kara Swisher: Well, I mean it's - how do you look at Microsoft from an Apple perspective? I mean, you compete in computers and iPods.

Walt Mossberg: I mean, you can say you don't compete, you know, the era of destructive whatever that, whatever you said in 1997. But, you think, you're consciously aware of what they're doing with Windows, you follow this closely, I think, you know?

SJ: What's really interesting is, and we talked about this earlier today. If you look at the reason that the iPod exists and that Apple's in that marketplace, it's because these really great Japanese consumer electronics companies who kind of owned the portable music market for a long, long - invented it and owned it, couldn't write, couldn't do the appropriate software. Couldn't conceive of and implement the appropriate software. Because an iPod's really just software. It's software in the iPod itself, it's software on the PC or the Mac, and it's software in the cloud for the store. And it's in a beautiful box, but it's software.

If you look at what a Mac is, it's OS X. It's in a beautiful box, but it's OS X. And if you look at what an iPhone will hopefully be, it's software. And so the big secret about Apple, of course, not so big secret maybe, is that Apple views itself as a software company. And there aren't very many software companies left. And Microsoft is a software company. And so, you know, we look at what they do and we think some of it's really great. We think some of it's - a little bit of it's competitive and most of it's not.

You know, we don't have a belief that the Mac is going to take over 80% of the PC market. You know, we are really happy when our market share goes up a point. And we love that, and we work real hard at it. But, Apple's fundamentally a software company, and there's not a lot of us left, and Microsoft's one of those.

Walt Mossberg: You may be fundamentally a software company, but you've been known at least to your customers, and to most journalists, as the company that kind of pays a lot of attention to integrating software and hardware.

SJ: You know, Alan Kay...

Walt Mossberg: Microsoft has made some recent moves to be a little more like that. Obviously not in your core, biggest businesses, but with Xbox and Zune, and you know, the Surface computing device we saw today is another example. These aren't markets that hold up in size to Windows or Office, but there are some of your more recent initiatives. Are the companies' approaches to this...

SJ: Alan Kay had a great...

Walt Mossberg: ...merging a little, or?

SJ: Alan Kay had a great quote back in the seventies, I think. He said people that love software want to do their own hardware, you know.

Walt Mossberg: Well, Bill loves software.

Bill Gates: I can resist that. The question is, are there markets where the innovation and variety you get is a net positive? The negative is that, in the early stage, you really want to do the two together. So you want to do prototyping and things like that, you know, really as one thing. And then, just take the phone market. We think - we're on 140 different kinds of hardware. We think it's beneficial to us that even if we did a few ourselves, it wouldn't give us what we have through those partnerships. Likewise, if you take the robotics market. Very undeveloped. We have over 140 all tiny volume robots using Microsoft software. And the creativity, building toys, security things, medical things - we love the innovation and the ecosystem that's going to grow up - who knows when, but we're patient - around that, and we'll have a great asset with this robotic software platform.

So there are things like PC, phone, and robot where I - the Microsoft choice is to go for the variety. It's Apple's - it's great. There, you know, for them, they do what works super well for them. And there's a few markets like Xbox 360, Zune, and this year we have two new ones, the Surface thing, and this round table, which is the meeting room thing, where we'll actually - through subcontractors, but it's our - the P&L on the risk and all that for the hardware, the design is completely a Microsoft thing.

Walt Mossberg: The round table, is that something you've announced or were you just

Bill Gates: We've shown prototypes of it. That's the thing where it's got the 360 degree cameras, and all those...

Walt Mossberg: Alright. Cisco has something in that market, and HP too, right?

Bill Gates: Oh, HP has a very high-end thing, that's a tiny bit like it, but anyway.

Walt Mossberg: All right. Do you ever regret? Was there something you might've wanted to do differently? And maybe this all - you feel like this happened after you left Apple - something you might've done differently that, where you could have had a much bigger market share for the Mac?

SJ: Well, before I answer that, let me make a comment on Bill's answer there, which is: it's very interesting, in the consumer market, and the enterprise market, there they're very different spaces. And in the consumer market, at least I think one can make a pretty strong case that outside of Windows on PCs, it's hard to see other examples of the software and hardware being decoupled, working super well yet. It might in the phone space over time. It might. But it's not clear. It's not clear. You can see a lot more examples of the hardware, software coupling working well. And so I think this is one of the reasons we all, you know, come to work everyday is because nobody knows the answer to some of these questions, and we'll find out over the coming years. Maybe both will work fine.

Bill Gates: Yeah.

SJ: And maybe they won't.

Bill Gates: Yeah, it's good - it's good to try both approaches. In some product categories, take music players, the solo design worked better. And in the PC market, the variety of designs at this stage, has a higher share

Walt Mossberg: it has a higher share? Yeah, it has a lot higher share.

Bill Gates: It's not that much different. Music player's the other way around.

Walt Mossberg: Is there some moment you feel like, I should have done this, or Apple should have done that, and we could have had...

Kara Swisher: Not this idea of these hardware/software integration and it's working very well now.

SJ: There's a lot of things that happened that I'm sure I could have done better when I was at Apple the first time. And a lot of things had happened after I left that I thought were wrong turns. But it doesn't matter. It really doesn't matter. And you kind of gotta let go of that stuff, and you know, we are where we are. So we tend to look forward. And you know, one of the things I did when I got back to Apple ten years ago was I gave the museum to Stanford, and all the papers, and all the old machines, and kind of cleared out the cobwebs and said, let's stop looking backwards here. It's all about what happens tomorrow. And, cause you can't, you can't look back and say, well, gosh, you know, I wish I hadn't gotten fired, I wish I was there, I wish this, I wish that. It doesn't matter. And so, let's go invent tomorrow, rather than worrying about what happened yesterday.

Kara Swisher: Let's talk about - we're going to talk a little bit about tomorrow, but let's talk about today, the landscape, of how you see the different players in the market, and how you look at what's developing now. What has surprised both of you, since having been around for so long, and still very active in everything. I mean, your companies are still critically key companies, but there are many, many companies that are becoming quite powerful. How do you look at the landscape at this moment, and what's happening, especially in the internet space?

SJ: I think it's super healthy right now. I think there's a lot of young people out there building some great companies, who want to build companies, who aren't just interested in starting something and selling it to one of the big guys, but who want to build companies. And I think there's some really exciting companies getting built out there, some next generation of stuff that, you know, some of us play catch up with, and, you know, some of us find ways to partner with, and things like that. But there's a lot of activity out there now, wouldn't you say?

Bill Gates: Yeah, I'd say it's a healthy period. The notion of what the new form factors look like, what natural interface can do, the ability to use the cloud, the internet to do part of the task in a complimentary way to the local experience. There's a lot of invention that the whole approach of startups, the existing companies who do research...We will look back at this as one of the great periods of invention.

SJ: I think so too. There's a lot of things that are - that are risky right now, which is always a good sign, you know? And you can see through them, you can see to the other side and go, yes, this could be huge, but there's a period of risk that, you know, nobody's ever done it before.

Kara Swisher: Can you give an example that would, for example...?

SJ: I do, but I can't say

Kara Swisher: Okay.

SJ: And so, but - but I can say, when you feel like that, that's a great thing. That's what keeps you coming to work in the morning, and it tells you there's something exciting around the next corner.

Walt Mossberg: Okay. But so the two of you have... Certainly, you're involved every day with the internet. You have internet products. You have a whole slew of stuff on the internet. You have iTunes and .mac, and all of that. But on another level, you're the guys who represent the rich client, the personal computer, the, you know, big operating system and all that. And there is a certain school of thought, and I'm sure it's shared by some people in the room, that this is all migrating to the cloud and you'll need a fairly light piece of hardware that won't have to have all that investment, all the kind of stuff you guys have done throughout your careers. So as much as people I think of you as rivals, one way to think of you as the two guys based

SJ: We're both dinosaurs? That we're both dinosaurs?

Walt Mossberg: Dinosaurs or whatever. I can talk about that? No. Seriously. Is there - in five years, is the personal computer still going to be the linchpin of all this stuff?

Bill Gates: Well, you can say that it'll be predicted that it won't be. You know, the network computer took us over about what, five years ago, then disappeared. Remember the single function computer. There was somebody who said that these general purpose things are kind of a dumb idea. So that as well. The mainstream is always under attack. The thing that people don't realize is that you're going to have rich local functionality, I mean, at least our bet, where you get things like speech and vision, as you get more natural form factors. It's a question of using that local richness together with the richness that's elsewhere. And if you look at the device, say that it's connecting to the TV set or connecting in the car, there are lighter-weight hardware, internet connections. But when you come to the full screen, rich, you know, edit the document, create things. You know, I think we're nowhere near where we can be on making that stronger.

SJ: I'll give you a concrete example. I love Google Maps, use it on my computer, you know, in a browser. But when we were doing the iPhone, we thought, wouldn't it be great to have maps on the iPhone? And so we called up Google and they had some, they'd done a few client apps in Java on some phones, and they got an API that we worked with them a little on.

And we ended up writing a client app for those APIs, they would provide the backend service. And the app we were able to write, since we're pretty reasonable at writing apps, blows away any Google Maps client. Just blows it away. Same set of data coming off the server, but the experience you have using it is unbelievable. It's way better than the computer. And just in a completely different league than what they'd put on phones before. And you know, that client is the result of a lot of technology on the client, that client application. So when we show it to them, they're just blown away by how good it is. And you can't do that stuff in a browser.

So people are figuring out how to do more in a browser, how to get persistent state of things when you're disconnected from a browser, how do you actually run apps locally using apps written those technologies, so they can be pretty transparent, whether you're connected or not. But it's happening fairly slowly, and there's still a lot you can do with a rich client environment. At the same time, the hardware is progressing to where you can run a rich client environment on lower and lower cost devices. On lower and lower power devices. And so there's some pretty cool things you can do with clients.

Walt Mossberg: So are you - okay - so you're saying rich clients still matter, but maybe I misunderstood you, but your example was about a rich client that is not a personal computer, as we have thought of a personal computer.

SJ: What I'm trying to say is, it's, I think, the marriage of some really great client apps with some really great cloud services is incredibly powerful. And right now can be way more powerful than just having a browser on the client.

Kara Swisher: You're talking about a software company being a software and services company, rather than a...

SJ: I'm saying the marriage of these services, plus a more sophisticated client, is a very powerful marriage

Bill Gates: Architecturally, the question is, do you run just in the cloud and all you have downloaded locally is the browser. And that is the same question for the phone as it is for the full screen device. They'll always be different screen sizes because these are, you know - the eight, the five inch screen does not really compete with the 20-inch screen, does not compete with the big living room screen. Those are things that, there'll be some type of computing behind all of those things, all connected to the internet. But the idea that locally you have the responsiveness, immediate interaction, without the latency or bandwidth limitations that you get, if you try and do it all all behind. That's what leads to the right balance.

Kara Swisher: What does that device look like in five years? What would you be your principal device? Is there one or? [00:42:19]Walt Mossberg: Is it - is it, I think you use, I could be wrong, I think you carry a tablet, right?

Bill Gates: Right.

Walt Mossberg: Which has not necessarily stormed the world yet.

Bill Gates: Yeah, this is like Windows 1992, I think. That is, I'm unrepentant on my belief.

Walt Mossberg: OK. But to go back to Kara's point, what would you each imagine that you would carry as your principal, let's say, thing to do the web, email, and all that kind of stuff? Yeah. I don't know if you guys saw, but Jeff Hawkins showed a Linux-based, a very small, I think he called it a companion to a smartphone today.

Kara Swisher: A phone companion. It sounded a little naughty, frankly.

Walt Mossberg: It doesn't matter, you weren't there, but, what would you think you got - each would be? I assume you carry a tablet PC, I don't know what brand it is. Maybe you change them up, I don't know. You obviously carry a MacBook Pro I would guess. Or a Mac.

SJ: Yeah, well, and an iPhone.

Walt Mossberg: And an iPhone.

Kara Swisher: You have one?

SJ: I do

Kara Swisher: Right here?

SJ: Yes.

Walt Mossberg: Oh, he has one, he took it out before. Really, he flashed his iPhone earlier today.

Kara Swisher: Anyway, go ahead, so what is your device? Where do you see the device that you should be carrying?

Walt Mossberg: What's your device in five years that you rely on the most?

Bill Gates: I don't think you'll have one device. I think you'll have a full-screen device that you can carry around, and you'll do dramatically more reading off of that. Yeah. I mean, I believe in the tablet form factor. I think you'll have voice, I think they'll have ink, you'll have some way of having a hardware keyboard and some settings for that. And then you'll have the device that fits in your pocket, which the whole notion of how much function should you combine in there? You know, there's navigation, computers, there's media, there's phone. Technology is letting us put more things in there, but then again, you really want to tune it so people know what they expect. So there's quite a bit of experimentation in that pocket size device, but I think those are natural form factors. And then it will have the evolution of the portable machine, and the evolution of the phone, will both be extremely high volume, complimentary. That is if you own one, you're more likely to own the other.

Kara Swisher: And then at home, you'd have a setup that they all plug into.

Bill Gates: Well, home you'll have your living room, which is your 10 foot experience, and that's connected up to the internet. And there you'll have gaming and entertainment, and there's a lot of experimentation in terms of what content looks like in that world. And then in your den, you'll have something a lot like you have at your desk at work. You know, the view is that every horizontal and vertical surface will have a projector, so you can put information. You know, your desk can be a surface that you can sit and manipulate.

Walt Mossberg: Can I please have a room in my house that doesn't have a screen and a projector in it?

Bill Gates: You bet.

Walt Mossberg: Thanks.

Bill Gates: The bathroom.

Kara Swisher: That's a perfect place for it, actually.

Walt Mossberg: What's your five-year outlook at the devices you'll carry?

SJ: You know, it's interesting. The PC has proved to be very resilient, because as Bill said earlier, I mean, the death of the PC has been predicted every few years.

Walt Mossberg: And you're saying PC you mean personal computer in general, not just Windows PC?

SJ: I mean personal computer in general. And, you know, there was the age of productivity, if you will, you know, the spreadsheets and word processors, and that's kind of got the whole industry moving. And it kind of plateaued for a while, was getting a little stale and then the internet came along, right. And everybody needed more powerful computers to get on the internet, browsers came along, and it was this whole internet age that came along access to the internet. And then some number of years ago, you could start to see that the PC that was taken for granted, things then kinda plateaued a little bit and - innovation wise, at least. And then I think this whole notion of the PC, we called it the digital hub, but you call it anything you want, sort of the multimedia center of the house, started to take off with digital cameras, and digital camcorders, and sharing things over the internet, and kind of needing a repository for all that stuff. And it was reborn again as sort of the hub of your digital life. And, you can sort of see that, there's something starting again. It's not clear exactly what it is, but it will be the PC, maybe used a little more tightly coupled with some backend internet services and some things like that. And of course, PCs are going mobile in an ever greater degree. So I think the PC is going to continue, as general purpose device, is going to continue to be with us and morph with us, whether it's a tablet or a notebook or a, you know, big curve, desktop that you have at your house or whatever it might be. So I think that'll be something that most people have at least in this society, in others, maybe not, but certainly in this one. But then there's an explosion that starting to happen in these, what you call post PC devices, right? And you can call the iPod one of them. There's a lot of things that are not...

Walt Mossberg: You'll get into trouble for using that term. I want you to know that.

SJ: What?

Walt Mossberg: I'm kidding. Post PC devices.

SJ: Why?

Walt Mossberg: People could - people write letters to the editor? They complain about it. Anyway, go ahead.

SJ: Okay. Well, anyway, I think there's just a category of devices that aren't as general purpose, that aren't, that are really more focused on specific functions, whether they're phones or iPods or Zunes or what have you. And I think that category of devices is starting - is going to continue to be very innovative. And we're going to see lots of them.

Kara Swisher: Can you give examples of whatever would that be?

SJ: Well, an iPod is a post-PC device. As the phone is a post-PC device.

Walt Mossberg: Is the iPhone, and are some of these other smartphones. And I know you make - you believe that the iPhone is much better than these other smartphones at the moment. But are these things - aren't they really just computers in a different form factor? Yeah, I mean, when you say you the phone, it sounds like...

SJ: We're getting to the point where everything's a computer in a different form factor. So, so what? Right? So what, if it's built with a computer inside it? It doesn't matter. It's what is it? How do you use it? You know, how does the consumer approach it? And so, who cares, what's inside it anymore?

Walt Mossberg: What are the core functions of the device formerly known as the cell phone? Whatever we want to call it, the pocket device. What would you say, the core functions, like five years out, what are the core functions of that pocket device?

Bill Gates: How quickly all these things that have been somewhat specialized, the navigation device, the digital wallet, the phone, the camera, the video camera. How quickly those all come together, it's hard to chart out. But eventually you'll be able to pick something that has the capability to do every one of those things. And yet, given the small size, you still won't want to edit your homework, or edit a movie, on a screen of that size. And so you'll have something else that lets you do the reading and editing and those things. Now, if we could ever get a screen that would just roll out like a scroll, then you might be able to have the device that did everything.

Walt Mossberg: Well, you know, in the very first D conference, we had these guys from E Ink here. I'm sure you've both talked to them. They were talking about that. That was five years ago. It's always five years out. Do you...?

Bill Gates: Yes, we can't - there's some advances in projection technology that are more likely to deliver it, I think, than the flexible material guys, but it's not even on the horizon, no matter which of the two approaches are pursued. We have some Microsoft research, people work on that and there's a lot of investment, but it's at least in the five-year timeframe.

Walt Mossberg: You? Five years from now, what's going to be on that pocket device?

SJ: I don't know. And the reason I don't know is because I wouldn't have thought that there would have been maps on it five years ago. But something comes along, gets really popular, people love it, get used to it, you want it on there. So people are inventing things constantly. And I think the art of it is balancing what's on there, and what's not on there. It's the editing function. And, clearly, most things you carry with you are communications devices. You want to do some entertainment with them as well, but they're primarily communications devices and they're going to - that's what they're going to be.

Kara Swisher: Outside of the computing area, what are the exciting areas in the internet space at all that you're looking at, that you find, that's interesting to each of your companies and in general, and for you? Any kind of - social networking, any kind of - wikis, those kinds of things, things we've talked about in the past couple of - today, essentially.

SJ: You know, we're working on some things that I can't talk about, but

Kara Swisher: Again.

SJ: Again, yeah, but they're used to be...

Kara Swisher: It's very beautiful.

SJ: There used to be a saying isn't it, at Apple...

Walt Mossberg: That will blow us away though you can't talk about it.

SJ: There used to be a saying at Apple. Isn't it funny, a ship that leaks from the top. So.

Kara Swisher: That's kind of like a sweater without sleeves is a vest. I don't get that.

SJ: That was what they used to say about me when I was in my twenties.

Walt Mossberg: Okay.

SJ: There's a zillion interesting things going on on the internet. The most interesting things to me are these incredible new services that people are bringing up.

Kara Swisher: Surrounding entertainment, or...?

SJ: There's a lot of them surrounding entertainment. But there's a lot of them that have to do with just sort of figuring out how to navigate through life a little more efficiently. And I think, you know, it's really great when you show somebody something and you don't have to convince them they have a problem that this solves, they know they have a problem, you can show them something, they go, Oh my God, I need this. And I think you're going to see a lot of things like that happen over the next year.

Walt Mossberg: Do you - you obviously have a very large internet business with iTunes and you sell a lot of stuff in the Apple Store, but you know, you were early with this idea that when you bought a computer from Apple, you had this kind of internet service backend, and it was called .mac, and I think a lot of people feel, you haven't developed it very much.

SJ: I couldn't agree with you more and we'll make up for lost time in the near future.

Walt Mossberg: And in your case, you obviously have huge things like Hotmail for instance, which is I guess is -and Windows Messenger, which are both widely used, and I don't even know how many users, but huge numbers. But on the other hand, you haven't, as Steve Ballmer was talking about today, you know, other people have much stronger positions in things like search and other parts of the of the internet. So are you guys, because you are the personal computer companies that are best, you know, best associated with that, not as nimble as some of these competitors at this point. Do you worry about not being as nimble, both of you? I mean, obviously Microsoft's a much bigger company, but you're a big company, Steve, Apple is. Do you worry about not being as nimble as somebody sitting out there with, you know, the kind of 10 employees that you guys had in 1977.

Bill Gates: Well, there's always going to be great new things that come out of other companies and you want to be in a position to benefit from those, to have those inventions drive demand for Windows and personal computers. And then some of those upstream things you want to participate in. I hope Steve mentioned we are going to participate in search hopefully to a higher degree in the future...

Walt Mossberg: He did mention that.

Bill Gates: ...than at present, so we'll see what we can do there. A lot of the applications are more specialized, so they're not areas we'll go into, you know. Take what can happen with education now that video is mainstream and all these tools that let you do rich interactions are very mainstream. I'm very excited about that. You know, the idea of empowerment, it goes back to the very beginning of our industry. And some of those dreams that this would be used by students or the teachers could get better and learn from each other in these new ways. We're just at the threshold where some of those things can happen. And yes, our companies can contribute to that. But as a whole, it's the ecosystem jumping on and building on each other where you can finally say, finally, technology did something for education.

SJ: See, I look at this a little bit differently, which is, we're not trying to do a lot of this stuff. Cause it's not what we do. We don't think one company can do everything. So you've got to partner with people that are really good at stuff. Like we're not, I mean, maybe Microsoft is great at search, we're not, we're not trying to be great at search. So we partner with people that are great at search. And we don't know how to do maps on the back end. We know how to do a great, the best maps client in the world, but we don't know how to do the back end. So we partner with people that know how to do the backend. And what we want to do is be that consumer's device, and that consumer's experience wrapped around all of this information and things we can deliver to them in a wonderful user interface in a coherent product. And so in some cases, you know, we have to do more work than others. You know, in the case of iTunes, there wasn't a music delivery service that was any good. And we had to do one, so we'll do one. But in other cases, there's companies doing a way better job because we're not as good at this stuff as other people are. And we'd love to partner with them. And so, you know, we selectively do that. And, I think it's really hard for one company to do everything. Life's complex.

Kara Swisher: You're both in entertainment, entertainment is important to both your companies. For yours, music right now, and as you get into Apple TV. Microsoft has been within the Hollywood area. Where do you see that going in the era of YouTube? We've had a couple of network people here, talking about changes that are happening in Hollywood and everything else. What is happening now to entertainment delivery and where do you all play? Because you'll be the delivery mechanism in one way or the other for most people.

Bill Gates: Well, the big milestone is where the delivery platform is the internet. And so you bring the richness and the interactivity. I think you can get a little bit of a glimpse of the future of TV, more from looking at community type things like Xbox Live, where people are talking to each other, finding friends, you know, watching things together, talking about those things. That, as you map that onto John Rose-like educational shows or sports shows or watching the Olympics or the elections, that ability to navigate becomes very, very powerful. And we're not an entertainment company. Yes, we do Halo, which is this big video game. But by and large, we're a platform. And so it's the tough software things, whether it's the speech or the ink or the deep graphics. That's where things that take 10 years to get done - the IPTV stuff, the foundation there, you know, it took 10 years to get it done, now it's finally coming to fruition and we have people like AT&T betting their company on putting that together. So we're just at the start of having a scale entertainment delivery vehicle both through PCs, unfortunately not connected up to the TV set in most cases, but that's a point of innovation, and now things like IPTV and Xbox, that are connected up in the living room.

Walt Mossberg: Steve, today - Bill, you weren't here, but Steve showed a new function of Apple TV that brings YouTube directly to the TV. Is there going to be more of that from you? Do you see yourself the way Bill says, as an enabler of entertainment or, well, I mean, putting aside your Disney role.

SJ: I think people want to enjoy their entertainment when they want it, and how they want it, on the device that they want it on. So ultimately that's going to drive the entertainment companies into all sorts of different business models. And that's a good thing. I mean, if you're a content company, that's a great thing. More people wanting to enjoy your content more often in more different ways, that's why you're in business. But the transitions are hard sometimes.

And you know, the music industry, it turned out that the internet got fast enough to download songs pretty easily. There was no legal alternatives and maybe they made some bad choices in how they reacted to that. But, you know, they're still trying to make the transition to a very different way of doing business, or ways of doing business while they're under attack from piracy. And we can all highlight some of the mistakes that have been made, but still it's a tough job. And Hollywood, I think watched what's happened in music, learned some things to do, some things not to do, but you know, they're still trying to map this out. How do they make some of these transitions, some new business models, different platforms, allowing their customers way more freedom on when they want to watch stuff and how they want to watch it. And I think there's a tremendous amount of experimentation and thought going on, that's going to be good. It's going to be really good. If you're a content owner.

Walt Mossberg: Can I ask about the user interface of the personal computer for a minute? Vista has just come ou, which is your best version of Windows you've done, has some UI improvements in it. You're about to do yet another version of the Mac OS called Leopard in the fall, which, from what you've shown publicly, at least so far, has some improvements. But fundamentally, these are still the kind of file icon, folder icon, dropdown menu. I know I'm minimizing, there's a lot of other things, there's gadgets and widgets and all kinds of other cool things in there now. But it, you know, there, you can see that it's still all built on, what you started with, what Xerox did research on. Is there, in the offing, in the next four or five years, is it possible there's a new paradigm for organizing the user interface of the personal computer. Let's leave cell phones and things out for a minute, but just the personal computer. Bill?

Bill Gates: One of the things that's been anticipated for a long time is when 3D comes into that interface. And there was a lot of experimentation sites on the internet where you'd kind of walk around and meet people. But in fact, the richness, the speed, it just didn't sustain itself. Now we're starting to see with some of the mapping stuff, a few of the sites, that the quality of that graphics, the tools and things are getting to the point where 3D can really come in. So I definitely say that when you go a store, a bookstore, you'll be able to see the books lined up, you know, the way you might be interested in, or lined up the way they are in the real store. So 3D is a way of organizing things, particularly as we're getting much more media information on the computer, a lot more choices, a lot more navigation than we've ever had before. And we can take that into this communications world where the PC is playing a much more central role, kind of taken over what the buzz, the PBX, sort of one of the last mainframes in the business environment. That'll be a big change that'll come to it. And as we get natural input that'll cause a change.

Walt Mossberg: And what about this multi-touch stuff? It's really interesting. Obviously Steve showed some of it on the iPhone when he introduced the iPhone, Steve Balmer today showed a bunch of it with the surface computing device. It happens, although it's not part of our program, that HP, which is a sponsor of this conference, has a multitouch sort of display over here out in the foyer. Is this, will this make its way into, maybe you call it direct manipulation of objects with your hands and your fingers, will this make its way into mainstream, let's say, laptop computers, as a new UI or an additional part of the UI, or is that just a thing for specialized devices.

Bill Gates: Well, but go beyond - vision. Software is doing vision. And so, you know, imagine a game machine where you just can pick up the bat and swing it or the tennis racket and swing it.

Walt Mossberg: We have one of those.

Bill Gates: No, no, that's not it. You can't pick up your tennis racket, and swing it. You can't sit there with your friends and do those natural things. That's a 3D positional device. This is video recognition. This is a camera seeing what's going on. And, you know, in a meeting like you're on a video conference, you don't know who's speaking when they're audio, only things like that. The camera will be ubiquitous. Now of course, we have to design the way that people's expectations about privacy are handled appropriately, but software can do vision and it can do it very, very inexpensively. And that means this stuff becomes pervasive. You don't just talk about it being in a laptop device, you talk about it being part of the meeting room or the living room or

Walt Mossberg: But, on the laptop, the way that - and, you know, maybe I'm wrong, maybe what we have is great and we don't need any new, big, radical change. But when I turn on my laptop, whether it's my Vista laptop or my a Mac laptop, you know, it's kind of - there've been improvements, but it's a lot, like it was 10 years ago. It's much better. The graphics are better, and all that. You know, you have the mouse, you have the icons, you move around, you have the - I mean, and you talked about what a big gamble it was in 84, to do that, and then follow on with Windows. We still essentially have that approach, and I'm just wondering, is that going to change?

Bill Gates: Touch, ink, speech, vision. Those things come in, but they don't come in as a radical substitute. I think you're also underestimating the degree of evolution because you've lived with it year by year, you know. Say we'd sent you away for 10 years and you came back and he said, wow, there's a search paradigm. And that's more at the center of how you find these things. There's tagging. That's more at the central path, how you find these things. There's, you know, the evolution is a very good thing. In fact, even in that evolution, the stuff we did with Office, there's this balance you strike where when you make a change, in that case the ribbon, you're going to have some users who feel like, Oh, geez, I have to,spend a little bit of time to be brought along to that, you know. But there has been good evolution, but these natural interface things are the revolutionary change. And there'll be very revolutionary. That, together with the 3D that I talked about.

Kara Swisher: Steve? I know you're working on something it's going to be beautiful. We'll see...

SJ: Yeah, you know...

Walt Mossberg: And he can't talk about it, but

SJ: The, um...

Walt Mossberg: Bill discusses all his secret plans, you don't discuss any of that.

SJ: I know it's not fair, but it's... I think the question is a very simple one, which is, how much of the really revolutionary things people are going to do in the next five years, are done on the PCs? Or how much of it is really focused on the post PC devices? And there's a real temptation to focus it on the post PC devices, because it's a clean slate, and because they are more focused devices and because they don't have, you know, they don't have the legacy of these zillions of apps that have to run and zillions of markets. And so I think there's going to be tremendous revolution in the, you know, the experiences of the post PC devices. Then the question is how much to do in the PCs. And I think I'm sure Microsoft is, we're working on some really cool stuff. But some of it has to be tempered a little bit because you do have, you know, these tens of millions in our case or hundreds of millions in Bill's case, users, that are familiar with something that, you know, they don't want a car with six wheels, they like the car with four wheels. They don't want to drive with with a joystick, they like the steering wheel. And so, you know, you have to, as Bill was saying, in some cases you have to augment what exists there, and in some cases you can replace things. But I think the radical rethinking of things is going to happen in a lot of these post-PC devices.

Kara Swisher: Can I - I'm going to ask a more personal question. We have just a minute before we're gonna open up for questions. What's the greatest - I'm not going to call this the Barbara Walters moment, and ask you what tree you'd like to be, but, well you...

Walt Mossberg: She would love to be Barbara Walters, let me just tell you.

Kara Swisher: No, I would not. What's the greatest misunderstanding...

SJ: Ding.

Kara Swisher: Ding, right. But thank you, Steve. About your relationship. I mean, you're obviously going to go down in history, right, history books already set kind of thing. But what's the greatest misunderstanding between you and your relationship, and about each other. What would you say would be? This idea of catfight, this idea of - which one of the many?

SJ: We've kept our marriage secret for over a decade now,

Kara Swisher: Canada, that trip to Canada. Was there?

Bill Gates: I don't think either of us have anything to complain about in general. And I know that the projects like the Mac project, you know, it was just an incredible thing, a fun thing where we were taking a risk. We did look a lot younger in that video.

SJ: We did.

Kara Swisher: You look 12 in the first one.

Bill Gates: That's how I try and look.

SJ: He was 12.

Bill Gates: But no, it's been fun to work together. I actually kind of miss some of the people aren't around anymore. You know, people come and go in this industry. It's nice when somebody sticks around and they have some context of all the things that have worked and not worked and... The industry gets all, we're all crazy about some new thing, you know. There's always this paradigm of the company that's successful is going to go away, and stuff like that. It's nice to have people seeing the waves and waves of that, and yet been willing, when it counted, to take the risk to bring in something new.

Walt Mossberg: Has it been important? One last question, and then we'll go to the audience.

SJ: I have an answer for that too.

Kara Swisher: He's only talked about his secret gay marriage.

Walt Mossberg: OK, yeah, I thought that was your answer.

SJ: No, that wasn't my answer. You know, when Bill and I first met each other and worked together in the early days, generally we were both the youngest guys in the room, right? Individually or together. I'm about six months older than he is, but roughly the same age. And now when we're working at our respective companies, I don't know about you, but I'm the oldest guy in the room most of the time. And... That's why I love being here. And (laughs)

Walt Mossberg: Happy to oblige, happy to oblige.

SJ: And, you know, I think of most things in life as either a Bob Dylan or a Beatles song. But there's that one line in that one Beatles song, you and I have memories longer than the road that stretches out ahead? And that's clearly true here.

Kara Swisher: That's so sweet.

Walt Mossberg: Well, you know what? I think we should end it there. Let's just end it there.

Kara Swisher: I'm gonna have a little tear right here.

Walt Mossberg: Thank you. Thank you very much.

Kara Swisher: Okay. So, some audience questions.

Walt Mossberg: Questions. Can we have the lights?

Roger McNamee: Roger McNamee, from Elevation Partners. Hey guys, that was incredible. Thank you very much. We've got a big election coming up next year. I'm curious if there are any issues that you see in Silicon Valley that we all ought to be focused on communicating effectively to the next potential president of the United States, that has any common ground that we share. Because it's weird, you don't actually hear any issues that people are talking about right now, and I'm curious if you guys have any in mind.

Bill Gates: Yeah, well, certainly education is one that I'd put at the top of the list you know.

Roger McNamee: Are there technological solutions right now that they could do something about? Or is that just sort of like...

Bill Gates: No, the pro... - technology is going to be helpful, and more and more. But the way that teachers are measured and made excellence, the way that the high schools are designed, the expectations they have, it's not just a pure technology thing. It's more an institutional practice where the opportunity is. And, you know, there should be a lot of debate about the different ways of doing that.

Walt Mossberg: Steve?

SJ: Boy, we've got some pretty big problems. And I think most of them are much bigger than anything Silicon Valley can contribute right now to solve. So hopefully some of those will get solved. I also think we underestimate how much all of our industry depends on stability. We've enjoyed it, you know, a long period of stability and we've been able to focus on technology and growing our businesses and stuff. And I think we take that for granted sometimes.

One of the more interesting areas that we all suffer from, of course, is in the area of energy dependence. And there's a lot of work going on, I know a lot of investing going on anyway, I don't know if the results are there, but a lot of investing going on in alternative energy. And maybe, maybe Silicon Valley can play a small role.

Kara Swisher: Are you guys investing in that area? Personally, or...

Bill Gates: Some.

Kara Swisher: Which might be a lot.

Bill Gates: A billion here and there.

Walt Mossberg: Steve, are you investing in that area?

SJ: No. Just appreciating.

Walt Mossberg: Over there.

Don Eklund: Hi, Don Eklund, Sony Pictures. My question is really, at what point is there too much diversity? It was talked about a few times in the discussion, the fact that now microprocessors are very low cost, memory's low cost, software is ubiquitous. But you know, my life has been made better by standards, like coding standards, network standards. And it seems like we're reaching a point where diversity is starting to take hold to a point where we're not going to be able to have the kinds of convergence devices that I think everyone would really be able to appreciate. And I'm wondering, you know, is this going to be like healthcare or mass transit where you just can never put it back in the bottle again? And I'd like to get your perspective on that. If there's still an opportunity to have some grand convergence devices that can really simplify people's lives and and enrich their lives.

Walt Mossberg: Steve?

SJ: Well, I think Bill and I would agree that we can get it down to two. No, I think there's a - it's hard to limit imagination and innovation. I think there's always going to be a bunch of new, great things, but I think that's part of what we put up with to get the innovation. We put up a little bit of aggravation to get the innovation.

Bill Gates: And I think the marketplace is awfully good at allowing diversity when it should, and then getting rid of it when it shouldn't. I mean.

SJ: And then letting it come back sometimes.

Bill Gates: Yeah. (laughs)

I mean, in terms of standards and things. And there's - the internet standards have been incredibly powerful, you know, video formats, things like this. And so I don't see things that are gonna really hold back a convergence device. You know, sure, there's a lot of wireless approaches, but that's pretty healthy right now. They each have various merits. A few of them end up overlapping the other ones and kill the other ones out. But I think the industry has done very well at latching on to standards for the things that there were no longer any innovation in. And then focusing on the places where it wasn't clear which approach was best.

Walt Mossberg: Jesse?

Jesse Kornbluth: Hi, I'm Jesse Kornbluth, Because you're not the youngest guys in the room anymore, it's perhaps appropriate to ask you a question about legacy. Each of you. Bill, even your harshest critic would have to admit that your philanthropy work is, you know, planet shaking, incredible, and could be, if you make it, a second act so amazing that it would dwarf what you've actually done at Microsoft.


If you had to choose a legacy, what would it be? And Steve, do you look at Bill and you think, gee, that guy is so lucky, he had a company so rich with talent that he didn't have to personally, you know, come in every day and save it. And, you know, I wish I had the opportunity to...

Kara Swisher: OK. He's not gonna answer that one.

Bill Gates: Well, the most important work I got a chance to be involved in, no matter what I do, is the personal computer. You know, that's what I grew up, in my teens, my twenties, my thirties, you know, I even knew not to get married cause I was so - into later - cause I was so obsessed with it. That's my life's work.

And I it's lucky for me that some of the skills, and resources, but I'd put skills first, that I was able to develop through those experiences can be applied to the benefit of the people who haven't had technology, including medicine working for them. So it's an incredible blessing to have two things like that.

But the thing that all my, if you look inside of my brain, it's filled with software and you know, the magic of software and a belief in software and, you know, that's not going to change.

Kara Swisher: Okay.

SJ: So, your question was, about whether I wish I didn't have to go into Apple every day?

Bill Gates: No, if you envy Bill a bit, the second act that he has.

SJ: No, I think it's great. I think the world's a better place because Bill realized that his goal isn't to be the richest guy in the cemetery. Right. That's a good thing. And so he's doing a lot of good with the money that he made. You know, I'm sure Bill was like me in this way. I mean, I grew up fairly middle class, lower middle-class and I never really cared much about money. And Apple was so successful early on in life that I was very lucky that I didn't have to care about money then. And so I've been able to focus on work and then, later on, my family. And I sort of look at us as two of the luckiest guys on the planet. Cause we found what we loved to do and we were at the right place at the right time. And we've gotten to go to work every day with super bright people for 30 years, and do what we love doing. And so it's hard to be happier than that, you know. Your family and that, what more can you ask for? And so I don't think about legacy much. I just think about being able to get up every day and go in and hang around these great people and hopefully create something that other people will love as much as we do. And if we can do that, that's great.

Walt Mossberg: I think the middle. Yeah.

Rob Kelly: Thanks. Steve and Bill, Rob Kelly. Here with my business partner, we've got a hundred person internet media business. I'm wondering what would be the single most valuable piece of advice you'd give us, to even attempt to create some of the value that you guys have done in both of your very impressive companies?

Bill Gates: Well, I think actually, it may be in both cases, correct me if I'm wrong, the excitement wasn't really seeing the economic value. You know, even when we wrote down at Microsoft in 1975, the computer on every desk and every home, we didn't realize, Oh, we'll have to be a big company. Every time I thought, Oh God, can we double in size? Jeez, can you manage that many people? Will that feel fun still, you know? And so every doubling was like, okay, this is the last one. And so the economic thing wasn't for, at the forefront, the idea of being at the forefront and seeing new things and things we wanted to do, and bringing in, being able to bring in different people who are fun to work, with eventually with a pretty broad set of skills. And figuring out how to get those people, those broad skills to work well together has been one of the greatest challenges. You know, I've made more of my mistakes in that area maybe than any, anywhere. But you know, eventually getting, some of those teams worked very well together. So, you know, I think it's a lot about the people and the passion. And it's amazing that the business worked out the way that it did.

SJ: Yeah. People say you have to have a lot of passion for what you're doing and it's totally true. And the reason is, because it's so hard that if you don't any rational person would give up. It's really hard. And you have to do it over a sustained period of time. So if you don't love it, if you're not having fun doing it, you don't really love it, you're going to give up. And that's what happens to most people actually. If you really look at the ones that ended up being successful, unquote, in the eyes of society, and the ones that didn't, oftentimes, it's the ones that are successful, loved what they did so they could persevere, when, you know, when it got really tough. And the ones that didn't love it, quit, because they're sane, right? Who would want to put up with this stuff if you don't love it? So, it's a lot of hard work, and, it's a lot of worrying, constantly. And if you don't love it, you're going to fail. So you got to love it. You got to have passion, and I think that's the high order bit.

The second thing is, you've got to be, you've got to be a really good talent scout. Because no matter how smart you are, you need a team of great people, and you've got to figure out how to size people up fairly quickly, make decisions, without knowing people too well and hire them and, you know, see how you do and refine your intuition, and be able to help, you know, build an organization that can eventually just, you know, build itself, cause you need great people around you.

Walt Mossberg: Lise?

Lise Mayer: Lise Mayer, a question, I guess it's historical curiosity. You approached the same opportunity, so very differently. What did you learn about running your own business, that you wished you had thought of sooner or thought of first by watching the other guy?

Bill Gates: I'd give a lot to have Steve's taste. He has natural - not a joke at all. I think in terms of intuitive tastes, both for people and products. You know, we sat in Mac product reviews, where there were questions about software choices, how things would be done, that I viewed as an engineering question, you know, and, you know, that's just how my mind works. And I'd see Steve make the decision based on a sense of people and product that was even hard for me to explain , the way he does things, it's just different. And, you know, I think it's magical. And in that case, wow.

SJ: You know, because Woz and I started the company based on doing the whole banana, we weren't so good at partnering with people. And, you know, actually the funny thing is Microsoft's one of the few companies we were able to partner with, that actually worked for both companies. And we weren't so good at that, whereas Bill and Microsoft were really good at it, because they didn't make the whole thing in the early days.

And they learned how to partner with people really well. And I think if Apple could have had that, a little more of that in his DNA, it would have served it extremely well. And I don't think Apple learned that until, you know, several - a few decades later.

Walt Mossberg: Last question. Oh, is there? I'm sorry, over here.

Charlie Brenner: Yeah, hi. Charlie Brenner from Fidelity Investments. In our financial services industry, we are focusing very strongly on aging and retiring baby boomers, a huge demographic.

SJ: We're not that old yet.

Charlie Brenner: The question is different from what it sounds like it's going to be here. But, most of the innovation that we see coming from computer and internet companies is kind of youth oriented. And I'm just wondering if there are activities going on, in your companies, acknowledging what's going to be happening generationally.

SJ: Not true. I'll give you one example. So we started building in video cameras in almost all our computers a few years ago, and the response by people of all ages, but in particular seniors, has been off the charts because they're buying these things now, and they're buying them for their grandkids, their sons and daughters with their grandkids. So they can stay in touch with their grandkids. And they're video conferencing more than younger people are. And it's incredible what this has done. So that's just one simple example, but there's like dozens of them that have clicked with, you know, seniors that are living independently that want to stay in touch with extended families and do other things like that.

Bill Gates: Yeah. I think that it's a very good point when you look at the size of the market. And that's partly why it's great that there are all these companies out there who can see, okay, what would you do for seniors? I think natural user interface is particularly applicable here, because the keyboard, you know, we're sort of warped in that we grew up using the keyboard, and so it's extremely natural to us. But things like - and that's partly why when we showed the surface computer, I showed it privately to a bunch of CEOs a couple of weeks ago, I was kind of stunned by how blown away they were. But, their ease of navigation is just not the same. And when they saw that, the idea that they could organize their photo album, it meant more to them than it did to me.

SJ: I'll give you another example. We've got a little shy of 200 retail stores now. And one of the things the stores are doing is personal training now, it's called one-to-one. And we are up to now a run rate of a million personal training sessions, they last an hour, per year. A million per year.

Walt Mossberg: You only started a little while ago, right?

SJ: Yeah. We started about a year ago. And we're up to a million training sessions a year run rate right now. And a lot of those folks, some of them anyway, many of them are seniors. And they're coming in and they're spending an hour learning how to use Office, and they're spending an hour learning how to video conference, and they can basically come in as much as they want and they can schedule these things throughout a year, and they pay $99, I think, a year for it. And it's been great.

Kara Swisher: Last question.

Walt Mossberg: Now, the last question over there.

Audience member: We all share our common science fiction experience of the metaverse or the matrix where we all could communicate without being in the same place. And by the way, thank you both for providing us the best platform so far to go to chat rooms or at all go to a MySpace. It's a far cry from these things that we see on Star Trek and the holodeck. What kinds of things can you imagine, there are partway there, that could be much better than the three window iChat that we might see in the next five or ten year?


Bill Gates: I don't think Steve's going to announce his transporter.

SJ: I want Star Trek. Just give me Star Trek.

Bill Gates: No, I think short of the transporter, most things you see in science fiction are, in the next decade, the kinds of things you'll see. The virtual presence, the virtual world that both represents what's going on in the real world and represents whatever people are interested in, this movement in space as a way of interacting with the machine. I think the deep investments that have been made at the research level will pay off with these things in the next ten years.

Walt Mossberg: Steve?

SJ: I don't know. And that's what makes it exciting to go into work every day. Because there's, as we talked about earlier, this is an extraordinarily exciting time in the industry and, lots of new stuff happening. So I can't even begin to think of what it's going to be like ten years from now.

Walt Mossberg: Thank you so much. Thank you. .

Kara Swisher: Thank you so much. It's great.