[1] MR. GATES: Good afternoon. I’ve been excited to have a chance to speak here, because this conference touches on a lot of things that I think a lot about, and I think are incredibly important. The last 25 years have been really amazing in terms of the advances that have taken place, and I think it’s easy to underestimate how far we’ve come. As was said, the idea of a tool for an individual that lets you really find information and create things on your own, where you would have the tools to share with other people, to track data, to learn things in new ways, that was really only a glimmer in a few people’s eye. And the idea that not only has that been created, but it’s also now become something that’s very low cost UH in developed country terms it’s really quite, is really quite amazing.

[2] Just in the last few weeks, we crossed the milestone of over 50 percent of households have PCs. Now, household penetration passed 50 percent more than a year ago. But the way that number was done, if you had two PCs in one house, it counted for two houses. So, my house counted for 40 houses. And there’s a real digital divide between my house and other houses. And that’s what we’re here to talk about.

[3] But the idea that we’re up at 50 percent in the U.S., and very close to that in lots of other countries, that means we’ve come a long way. These devices in the workplace haven’t just created more productivity; they’ve made jobs more interesting. They’ve taken things that economists have a hard time measuring in terms of speed of innovation, quality of service, and really performed wonders there. And you could say we’ve gotten far enough that we need to think about computing and access to computing in the same way we’ve thought about literacy, say, 100 years ago. Now, the campaign to have universal literacy is not yet complete. If we look on a worldwide basis, of course, there’s still a huge gap there. Particularly if you looked, look, on a gender basis, and looked in the poor countries, there’s a lot that hasn’t been done. But we have made progress and every decade that goes by, there’s improvements there.

[4] What are the mechanisms that really allowed us to make so much progress on that? Well, it was the involvement of public institutions, primarily schools but also libraries in that effort. And so, in this PC and software quest, those same institutions are going to play a pretty large role. One of the things that Microsoft and my foundation have gone with is the idea of saying, okay; every kid who can get to a library should be able to get at these tools. Just go down and have an up-to-date access, high-speed access there, all the latest software.

[5] And when we first came up with that idea, there were a lot of concerns, you know, would the librarians be interested, would the kids even come, and if they came, would they do anything worthwhile with that nice tool that was there. Would this really gel and come together, and that’s one project that’s been really fun to be involved in, going out, meeting these librarians, seeing who is actually coming in, what kinds of things they’re doing, it really does make a difference. And it sort of goes back to reinforce a very optimistic premise that I have, which is, that if you give people tools, their natural ability, their curiosity, they will develop it in ways that will surprise you very much beyond what you might have expected. And so, here in this country, over the next couple of years, we’ll get to every single library with those tools, and so every kid will have that opportunity.

[6] And schools, of course, even in the U.S., which by some measures is the furthest along, isn’t that far along. Computers are still kind of in the laboratory; they’re not central to the curriculum. The really high-reach projects, where you get a laptop in the hands of every child, they get to take it home, they get to use it as they want, that’s only in about 600 schools right now. So a really infinitesimal percentage. And yet, the costs of that are coming down, and people are seeing what that can do in terms of reducing textbook costs, and some of the hardware costs coming down means that we should be able, over a period of years, to actually apply that model on a fairly broad basis.

[7] And so these new products, which have very low marginal costs, software, chip technology, and new medicines, fit this category as well. These are almost miracle-type products, because once the billions and billions have been spent to create these things, they can become available at very low cost to the entire world at large. And that’s partly why we are seeing these rapid improvements. We are seeing these great booms.

[8] I’m a great believer that any tool that enhances communication has profound effects in terms of how people can learn from each other, and how they can achieve the kind of freedoms that they’re interested in. You know email in Russia was very key in allowing people to get together and think about, did they want to revert back to the previous mode of government? In country after country, you can see that having these tools, there has really made a pretty incredible difference. Even if it’s simply to compare what’s going on in another country and understand that the aspirations in your country for, say, government operations, or for educational excellence, that they should be much higher than they have been, and try to understand what the models are, who is doing the best work.

[9] On a worldwide basis, it’s not just sharing about software and medical advances; it’s sharing about every type of advance that are taking place through this technology. Now, as we think about world equity, though, just focusing on access to computers is a fairly narrow way to look at these problems. I know there was a conference that Ted Turner went to a few months back, and they were talking about, okay, let’s get computers out to everybody, let’s get computers out to everybody. And Ted was kind of a troublemaker. Ted was true to form. Ted said, come on, I mean, these people don’t have medicines, they’re dying, they don’t have electricity. Why are we just sitting here talking about computers? And it was very disruptive, because, you know, the whole assumption had been, look, you get computers to these people. It’s almost like saying, well, what about, how about the auto divide, people who don’t have cars. So what if they don’t have roads, we’ve got to get them cars. So, there’s a context to view this in, and where a number of things deserve to be prioritized.

[10] When I first started thinking about philanthropy, I looked back and studied what some of the foundations had done over history, and looked at what kind of things could really make a difference, what kind of things could have a very dramatic impact. And one of the first causes I got attracted to was the issue of population growth, making sure that families had the information to decide exactly how many children they want to have, and with the goal there that if population growth is lower than it would be otherwise, the follow-on effect of that in terms of being able to have resources for education, for the environment, for every element of quality of life that you can imagine, that that would be a fundamentally advantageous thing.

[11] And so, a lot of my first efforts were focused in that area. And the more I learned about it, the more I found out that I was very naive, very naive about what the health situation was around the world. And for a little bit I thought, okay, this is terrible, you know, something more has to be done about these health issues. But then isn’t that a contradiction? If we do better with health, if we, say, reduce infant mortality very dramatically, isn’t that going to create a problem on the other side? Isn’t that going to increase population growth, and isn’t that, therefore, just going to cause many of those other problems?

[12] Well, there’s something really fantastic that was unexpected that over the last 20 years has emerged from literally every country. And that is, that as you improve health conditions, as you lower infant mortality, actual population growth goes down. So, there’s about a seven or eight year lag between the two things taking place. But it’s really kind of a virtuous connection that’s quite phenomenal.

[13] Certainly, in the developed countries, we see it in a dramatic way where actually population size has been stabilized in most of those countries. But it really has to do with sort of a mental model of a parent in a developing country thinking, “I need to have two or three healthy children who grow to be healthy adults who can support me in my older age.” And, that’s why you get this connection that if they can assume that those kids will grow up healthily, then they don’t need to have UH five or six or seven kids in order to have a high probability of being supported in their old age.

[14] At first, learning about world health, it’s another thing, kind of like computers and software, there have been some incredible miracles. The elimination of small pox, which got a lot of private support back in 1977, that was the first disease that was completely eradicated. Right now, we’re very close to the end of the campaign to eliminate polio. And there are groups like Rotary International around the world — Rotary in particular, who has done an unbelievable job to support that effort. And that’s a disease that people in this country can still remember when it was present here. And so they can think about, boy, that’s a good thing to get involved in. A lot of the diseases that are still a huge problem in the world at large aren’t on the radar screen here at all, and that is a problem in terms of getting people to put the research in, and get involved in those things.

[15] The real miracle in the medical areas mostly comes from vaccines. Vaccines that cannot only eliminate, but in many other cases, greatly reduce disease. And in the 1970s, there was some incredible work in a program called EPI to get vaccination levels around the world for the six basic vaccines up to significant levels. They got up to about 70 percent. Now, the effort lost energy at that point in terms of adding new vaccines and getting the percentage coverage up. And so today, we can say that there are about eight million children who die each year who shouldn’t die. That is, if their access to medicines UH was the same, and I’m not talking about expensive treatments, anything that involves a hospital, simply very basic medicines, including vaccines, if those were there, those children would live.

[16] It’s one of those numbers that’s almost hard, are a little hard to appreciate. If somebody got up and spoke about, you know, “We could save eight lives, it would be very direct, we could put eight pictures on the screen and say, come on, we should save those eight lives.” But, when it gets to 80, or 8,000, or 80,000, or 800,000 or 8 million, as you get those orders of magnitude increase it’s almost like you really can’t directly relate to it. It’s always interesting, you read the newspaper and you say, okay, and it will say there was a bus crash and 37 people died in some country in the world. But, every day of the year they could also run an article that says, today 15,000 children died who shouldn’t die. And you know, that’s a huge, huge number, but because it’s constant, it’s not news, it’s just the way things are.

[17] And so in some ways, it’s sort of below the surface. You might think, well, what about these great advances in medical technology, all the new biotech companies and the advances in these pharmaceutical companies. Well, in fact, the 95 percent of the money spent on health research is spent on the problems of the richest 1 billion of the 6 billion, and only five percent is spent on the other. So you might say, well, we must be increasing that. Well, in fact, over the last decade, the U.S.’s giving to world health causes, world health research has actually gone down. And in the last five years AS since we’ve had these budget surpluses and really the greatest prosperity we’ve ever had, those numbers have continued to go down.

[18] And so it is a very challenging thing. It’s one of these things that when you dig into it and see where it is, you begin to think, wow, this is a little depressing. But, in fact, the opportunity to improve it is still very dramatic. There are other elements that are pretty challenging. AIDS, you probably know, has lowered the life expectancy in a lot of these countries very dramatically. A country like Botswana is now down to about 45 years life expectancy and still going down, from about 60. And once the epidemic has spread, it’s very difficult; there really is no great solution.

[19] Most of the money that’s been spent on AIDS research, over 90 percent, has been spent on treatment and not the vaccine. And the vaccine effort is just getting going, and even with good luck, it will take over a decade of work, although there are some people more optimistic than that. The average consensus, even optimistic view would be that. So the 12 million people a year who are contracting HIV won’t be able to avoid–all those people will eventually die of the disease. And for many of these countries, what that means in terms of infrastructure is pretty dramatic.

[20] In any case, let me not dwell on that, although there are many books that are very good that write about these things. Nowadays when people ask me what I’m reading, it’s not quite exciting to tell them, oh, I’m reading about the evolution of infectious diseases, or the history of malaria. I haven’t gotten many people enthused about reading these things, but once you get into it it’s really quite fascinating. So what’s the outlook here? Well, the outlook is that particularly as people become aware of what the real situation is, the incredible disparity you know, the gap, the gaps in terms of living conditions are much more dramatic than I think at least on a daily basis we think about, or that we prioritize our activities around.

[21] But, it certainly is true that advances in technology, that is getting–being able to survey the information better, being able to get information out to doctors, being able to train doctors in new ways, being able to make these breakthrough medicines, if we increase that five percent on poor world diseases to, say, 10 or 15 percent, there’s no doubt that over time, which means a 20 or 30 year time frame, for all of those diseases of the poor world, we can come up with vaccines or medicines that will greatly reduce them, and have the kind of health equity that we talked about, where the richest 1 billion and the other 5 billion are, from a health point of view, from having children that are able to achieve their potential, that that’s equal around the world.

[22] This is not something that there’s any one quick solution to, or any simple solution to it. People talk about very clever ideas, of tapping entrepreneurialism and having economic incentives go after some of these problems. That is very, very important. But, it alone won’t deal with these problems. We’re going to have to have a lot of government involvement, we’re going to have to have a lot more philanthropy than we’ve ever had in the past, giving whether it’s at the individual level or the corporate level, that’s going to be critical.

[23] Jeffrey Sachs talks about the idea that if you could raise that richest 1 billion to give something like OH $20 to $40 each per year, which is a dramatic increase over what goes on today. If you survey people in the U.S., what they think the U.S. government is doing versus what they’re actually doing, there’s about a factor of 10 difference there. But, at $20 to $40 per year that could raise that research level and the delivery systems and do some incredible things. And so it would all come together, if you get health, then you have opportunity for literacy. Health first, then literacy, once you have literacy then you have a chance to bring in the new tools of communication. Let people reach out and have access to the latest advances.

[24] It is really gratifying, for example, to visit India now and see that because they’ve had good educational institutions, and they’ve had a focus on it, there are more and more people in India–participating in the world economy. And the fact that the world has had this shortage of people with great IT training, the Indian institutions have stepped up to that. I was there about four weeks ago, and it was amazing the chief ministers of the various state governments all came to lunch and they were all basically competing to say which of them was doing the most advanced work. And it’s a very healthy form of competition, governments actually doing rational, forward looking things, taking short term sacrifices in order to really shape things up. And particularly in the case of India, that’s a dynamic that I think is going to have an absolutely huge impact.

[25] So I have a very positive view of where all this will go, including the health elements, including the digital elements. I want to say thanks to all of you who are here talking about this, thinking about this. It’s through events like this that we’re going to get the kind of attention and therefore the progress that these topics really deserve.

[26] So thank you.

Question and Answer Period that Followed the Speech:

[A1] QUESTION: Thank you very much, Bill. And your questions for Bill Gates welcome, using our card system that we’ve been using throughout the conference. Bill, very interesting that you’re interested in health now, and that you were so taken by what Ted Turner said about, you know, we need health more than we need PCs in these places. It reminds me of a village I visited once on the southwest coast of India, where 10 percent of the people had elephantiasis, which is a hideous, mosquito borne disease; similar to malaria in the way it’s transmitted.

[A2] And it turned out that the reason they had this malaria was because they were soaking coconuts in a pond in order to spin that coconut husk into this hairy kind of rope that you see made in India in hardware stores all over the world. And so it turned out there was an economic solution to their health problem, drain the pond and find something else for them to do, and this could greatly improve their health. I was a journalist, I wrote that story. I went on my way. I don’t know if they ever drained the pond or not.

[A3] But, the point is that in a world where you have a new sort of economy developing that is in orbit around the PC, isn’t there a health enhancing aspect to introducing the PC, and helping people step away from this you know, tote and bare kind of lifestyle that is so inimical to health, and helping them to achieve a higher standard of living through being involved in a higher quality of effort in their life than what they’ve been used to? I’m suggesting that the closing the digital divide has significant health improving aspects.

[B] MR. GATES: Let’s say you’ve gone to that village. People who have lymphatic filariasis, which is the name for elephantiasis, they’re not going to be using the PC. I mean, they’re not. You really have to deal with the basic issue of their health, and their ability to just have you know–they’re not going to become literate if they don’t have good health. So, yes, the PC fits into that. But, whenever you come up with a specific disease problem, and the number of people affected by it, that certainly has got to take priority over saying, you know, for that particular person, let’s get them a PC.

[C] QUESTION: Okay. First of all, suggesting that unless they have good health they’re not going to be literate, this has been discussed in spades at this conference the past couple of days. That doesn’t seem to be the case.

[D] MR. GATES: What doesn’t seem to be the case?

[E] QUESTION: That unless they have good health they will not be–they must have good health in order to become literate. We discussed that here, and that–

[F] MR. GATES: And you solved that one?

[G] QUESTION: Well, we haven’t exactly solved it, but it’s just not true.

[H] MR. GATES: What about death?

[I] QUESTION: And the idea–

[J] QUESTION: And the idea that they won’t use PCs, we’ve also discussed at some depth. And the discovery is that UM provided with access and an economic purpose, you’d be surprised who will use PCs. I hope you see the special report on this we’re going to put in Business Week, because you’ll be surprised at who is using PCs, and who is very desirous of using your technology out there.

[K] MR. GATES: I think I am a big believer in PCs.

[L] QUESTION: Why do we have to choose between investing in malaria, a malaria cure as opposed to working to close the digital divide? I mean, especially in your case, you’ve got the foundation, you’ve got the company foundation, you’ve got your personal foundation, your company foundation, and then also corporate activity on a for-profit basis, all of these things could be turned to both of these purposes, couldn’t they?

[M1] MR. GATES: Well, certainly if you take–there can be parallel investments, and there should be parallel investments. I am suggesting that if somebody is interested in equity that you wouldn’t spend, you know, more than 20 percent of your time talking about access to computers, that you’d get back to literacy and health and things like that. So the balance that makes sense is that more money should be spent on malaria. I mean, it’s almost criminal that more money isn’t spent on new drugs for that. A million children a year die from it. The affect on people’s lives is quite dramatic for about 20 million people.

[M2] So I think what we’ve done in the foundation is, we’re putting about 60 percent of our resources into world health, and about 30 percent into things like the education and library programs that are also very important. But, it’s a different balance than someone might have expected, or I would have expected that I would be involved before I got reading about this stuff and thinking about this stuff I would have thought, okay, let’s just give everybody a computer, and that’s it.

[N] QUESTION: So many questions. A lot of these are ideas for you to invest in.

[O] MR. GATES: Good.

[P] QUESTION: The idea that you need literacy to benefit from technology, the questioner asks about icon-based interfaces, and whether Microsoft might be interested in creating such.

[Q] MR. GATES: Well, I think that’s a good thing. But, I you need literacy. I mean, yes. Yet, there are certain things you can get out of a device by having speech recognition and all that. But, if somebody is saying, okay, now it’s time we can just skip this whole literacy thing, you know, I really disagree with that. The fundamental benefits of having a tool like this, 99 percent of the benefits come when you’ve provided reasonable health and literacy to the person who is going to sit down and use it.

[R] QUESTION: The questioner has helped me to say what I was trying to say earlier. Economic development is the precursor to health. To come in as some sort of flying saucer–

[S] MR. GATES: That’s not true.

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

[U1] MR. GATES: I’m not aware that in the U.S. we led with technological development and ignored health issues. It just happens that technology came along after the country was rich enough that the health issues that we’re talking about here were not–you know, malaria, yes, there was malaria in the United States. But it was completely gone before the microprocessor was invented.

[U2] A million people a year were not dying from measles when the microprocessor was invented.

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

[W1] MR. GATES: Nobody is talking about everybody in something like that. The fact is that there are huge differences. If you take what’s happened in China, or take Cuba, their level of life expectancy, child survival rates, you know, literacy rates, there’s a huge contrast between what they’ve been able to do and other countries at the same level of economic development. And there’s actually been in the last two or three years, World Bank has done a much better job about writing about development in terms of not just pure average figures, but in terms of what it’s meant for equal access, what it’s meant for gender equality, what it’s meant for literacy and things like that.

[W2] So, even World Bank has come around to believe that there is more here than just these basic numbers that you go in and look at. So I think it would be hard to find somebody who would still say, let, you know, just if there’s a big oil well there, and that generates a lot of income, that’s it. Because then it looks like the GNP is growing.

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

[Y] MR. GATES: No, No I didn’t say that.

[Z] QUESTION: No, I’m asking you. I didn’t say you said it, I’m asking you.

[AA1] MR. GATES: No, I said, about 90 percent of what Microsoft does, and about 30 percent of what the foundation does, which is a little over $300 million a year, is related specifically to the digital divide. And, you know, I tried in my remarks to be 30 percent on that, and 60 percent on the other, because that’s the way I feel. You know, that’s how I respond to these issues. And certainly there are some magical things that can be done, because software is very low cost, getting that out to schools and libraries. There’s incredible things that are going on there. The library project is just one example of that.

[AA2] Helping in the classroom, helping the teacher get at that natural curiosity that’s there from those students, there’s some amazing things that are going on in those areas. The idea that you could have a satellite infrastructure that is basically funded by the rural areas of developed countries, and yet could provide very low cost connections to the entire world. That’s partly why I got involved in Teledesic, because for the one fixed cost the whole world gets connected up. And so these hospitals that are out there in Africa, they will benefit from that even though they don’t fund, any significant part of what has to be done.

[AA3] So, there are magical things, and countries are, actually, are starting to think about competing on this basis. If they see that one country has done some good in their schools, they’ll ask about that. It’s not as common in the U.S., to have someone in the U.S. ask about other countries. But in other countries, they definitely ask about the U.S. and other countries, and say, you know, who has done this the best, who is doing e-government the best, who is doing social services the best. And so using these digital tools, the diversity around the world is causing people to look at the most innovative approaches, and benefit from those.

[BB] QUESTION: Your library initiative, is it international?

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

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

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

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


[HH] QUESTION: What do you think the IT industry should do?

[II1] MR. GATES: No, no. I, Microsoft, a huge percentage of its giving, there’s the employee matching, which is just, whatever causes the employees believe in get matched. And then there’s the additional special causes that the company takes on, and those are all related to the vision of what software can do and how software can empower people. You know, things that fit in with the particular understanding that that company has.

[II2] And so, yes, there are fantastic things that IT companies can and should be doing. I think they do have to be tempered with a little bit of reality. There was a project started by the IT industry where somebody set up a Web site, and literally in the announcement, they said, “This Web site will eliminate poverty.” And I wasn’t sure that that was really going to happen.

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

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

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

[MM1] MR. GATES: Yes, there’s some–in both cases, there’s reasonably extensive programs aimed at that. One of the things is, we decided that to really get school districts to organize around what they can do with computing, and should they have a levee around computing, and what does it do for their curriculum, you’ve got to make sure that the superintendents and the principals have all sat down and had a chance to really use this stuff hands-on.

[MM2] And so those institutes, which the foundation funded, are now going around the country state-by-state and getting that coverage. In parallel with that, there’s a summer program that was done first here in Washington State, where the teachers who are interested in this come in, spend time, and then they go away with their own laptop computers. So they’re able to not only take what they learned in the event, but go off and learn more and get involved with that.

[MM3] There’s another program that we’re involved with Intel that has to do with making sure that they’ve got the latest software, that there’s no expense for that. And that the first 100,000 teachers, the 100,000 teachers who are most interested in it, can get involved and get both the hardware and software that they’ll need for what they want to do.

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

[OO1] MR. GATES: Well, the wonderful thing about information technology products is that they’re scale economic. That is, once you’ve done all that R and D, your ability to get them out to additional users is very, very inexpensive. Software is slightly better in this regard because it’s almost zero marginal cost. So, you know, when we go into a country like India, we can not only say, okay, here’s this English software, but we can take the next six most popular languages in the country and say, okay, it’s not just the elite in India, the 7 percent who speak English, but all of those local populations as well. And you do that–you know, there’s no strong business case for going out and doing all those languages, it’s really based on sort of the original vision that these should be tools for everybody. And so you go out, you make the software available to all the schools, to the community centers that are out there. And that starts to spread the different activities.

[OO2] One of the things we’ve done is, whenever you do have, which you have in a lot of these countries, piracy actions, we take all the money that’s recovered from that and put that back into training programs, training programs for people who are out of jobs, and training of teachers. So, we’ve dedicated all of that to piracy recovery, which, over the last five years has been over $50 million that’s gone into the various retraining programs.

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

[QQ] MR. GATES: The marginal cost.

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

[SS1] MR. GATES: Well, the key expense–there’s three levels of expense in terms of using computers. The most expensive things by far is the communications. That monthly fee to be connected up. If you’re going to be connected up to the Internet over a period of, say, three or four years, you’re going to spend a lot more on your communications than you spend on anything else.

[SS2] The second most expensive thing is the hardware. Now, you know, we did attack the high prices of the workstation companies, we did bring that down with the PC model to where those numbers are greatly reduced. But even so, you know, a personal computer today, is $500-600. And so that’s not within the reach of a lot of people. China, the Chinese market, of course, has grown by a factor of 10 over the last four years. It’s the fastest growing PC market in the world. It’s over 6 million PCs a year. That’s going to sort of not just to Chinese businesses, but disproportionately, particularly for a country at that level of economic development, it’s going into homes because of the Chinese parents’ focus and interest in education. We saw that somewhat in Japan, we saw it a lot in Korea; we’re seeing it in a very dramatic way in China.

[SS3] So there is, just on absolute numbers basis, a very incredible use of PCs in the home. For our Chinese language software products, we’ve had to have unique pricing. Partly it has to do with piracy, that the respect for copyright is not well established there, and piracy levels are still dramatically higher in China than in any large country in the world. But special pricing weighs into that, particularly as you focus on the home market with special pricing, school market with special pricing.

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

[UU] MR. GATES: No, no. Lower, it’s normally low, and we have it be lower than that.

[VV] QUESTION: Lower than that to compete with the–

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

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

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

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

[AAA] MR. GATES: Right.

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

[CCC] MR. GATES: I was talking there about the India languages. I was talking about Kannada, Tamil, all the different languages in India that we’re doing.

[DDD] QUESTION: Yeah. Oh, so that’s not–oh, so you are doing those?


[FFF] QUESTION: Yes. How many languages are you writing?

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

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

[III1] MR. GATES: Most of them, you know, if you take English is up here, it does have a good return on investment.

[III2] MR. GATES: It tends to go down from there. And we take ones on the margin that you probably wouldn’t do just for pure business thinking and say, look, we’re in this for the long-term, we really believe in getting these things out there, and there’s a lot of people who that’s the only way they’re going to have access.

[III3] The other thing that’s important to note is that the base technology, which is this sort of universal character set called Unicode that the computer industry has come up with, even if the software isn’t localized, they can do creation of content in their local languages. And you have to do the fonts and the scripts and things like that. There’s an even broader set of languages that you can actually do, create Web sites, create documents in, even broader than the software has been localized in.

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

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

[LLL] QUESTION: About 45 are.

[MMM] MR. GATES: In the net, it’s still a positive number.

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

[OOO] MR. GATES: Oh look. The most important thing that was ever done for the digital divide–just sticking to the digital thing. I’ll stick to that.

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

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

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

[SSS1] MR. GATES: Well, the word open is–

[SSS2] MR. GATES: good.

[SSS3] MR. GATES: I don’t think there’s any marketing person at Microsoft who would ship a product without putting the word “open” on the box.

[TTT] QUESTION: Wonderful.

[UUU] MR. GATES: The key thing is to have open hardware. Uh…

[VVV] QUESTION: Silence speaks volumes.

[WWW] MR. GATES: Open communications.

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

[YYY1] MR. GATES: I think it’s very hard to imagine a scenario even in a 20-year time frame where the U.S. is still not the leading UH country in the IT business, in the use of IT, any measure you want to take. Certainly, the level of dominance, the relative dominance will go down. But, a little bit when people think about that it’s like thinking, this as a zero sum game, like there’s a winner of the war and there’s a loser of the war. This is a case where if Europe gets ahead of us on wireless, and we learn from them, that’s good news. If various countries want to make chips very inexpensively, and we are open enough to import those, and mix those into our products, we benefit immensely from that.

[YYY2] So the world has certainly woken up, and is saying, what did the U.S. do to get all those firms going there, and to get such a wide application of technology. I think there’s at least one metric, which is the use of technology in government, where the U.S. would be about average, compared to the countries around the world. And, other people I’m sure have talked about how in wireless there’s ways of looking at it where we don’t look particularly advanced in that dimension.

[YYY3] So partly the reason the U.S. has the leadership we have today is that about 20 years ago, we had a high degree of humility. That is, we looked at Japan and sort of said, wow, is their model superior, is there something, isn’t there something about our model that could be strong. And all these great things benefited from that approach. If during this period we don’t retain at least some of that humility and look at what other countries are doing and learn from them, then our relative dominance will shrink faster than it IT should.

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

[AAAA] MR. GATES: SNICKERS, Well, I don’t think that–I wouldn’t say–let me just be clear. It’s not a significant economic opportunity.

[BBBB] QUESTION: Okay. That’s interesting.

[CCCC] MR. GATES: Let’s be serious. I mean…

[DDDD] QUESTION: Carly Fiorina spoke to us about an enormous investment, this world e-inclusion initiative, sees it as a major opportunity. Maybe for hardware it’s different. Than for…

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

[FFFF] QUESTION: Those are the ones. That’s what this conference was about. Gosh, you should have been here.

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

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

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

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

[KKKK] MR. GATES: Let’s be serious. It’s not the people living on less than $1 a day.

[LLLL] QUESTION: How about less than $3?

[MMMM] MR. GATES: Now you’re talking.

[NNNN1] QUESTION: Exactly.

[NNNN2] QUESTION: Honestly, this was exactly the point that was made at this conference, that there’s an enormous number at less than $1, and then there’s another number at less than $2, and these are very different groups.

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


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

[RRRR] QUESTION: We do in this conference.

[SSSS] MR. GATES: There’s no electricity in that house, none. Now, so is somebody creating computers that don’t require electricity?

[TTTT] QUESTION: No, but there are solar power systems.

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

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

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

[XXXX] QUESTION: Okay. I mean–

[YYYY] MR. GATES: You live in a different world.

[ZZZZ1] QUESTION: There’s a term–I’m just the moderator.

[ZZZZ2] QUESTION: There’s a term that we’ve used, as the Internet has come to the fore, the question of whether this or that company leader gets it, you’ve heard this right, does he get it, is he ready to take his company onto the Web. What this conference has taught us is that there’s a new thing to get, and the question is, do we get it that the less developed countries, even the least developed countries, and all these tens of thousands of villages represent an economic opportunity? And I’d have to say that based on what I’m hearing from you, I’d say, you don’t get that yet.

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

[BBBBB] QUESTION: Did I say significant? I’m not sure. If I did, I take it back. Okay, Bill.

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

[DDDDD1] QUESTION: Okay. Bill, thank you very much. Just a second before you go, these are all the questions that challenge your commitment to health over the closing of the digital divide. Every one of these except one or two might have slipped in there, I was trying to do it on the fly. So why don’t you take a look at those. It’s a very literate group, and some of them wrote whole books there. So…

[DDDDD2] Bill Gates, ladies and gentlemen.

[DDDDD3] Thank you so much.

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