Fun stuff to do on the computer

Byline: Steven Levy

In a draft of an upcoming white paper, Bill Gates acknowledges that "computing today is at a crossroads." But he's got no doubt about the ultimate destination: more innovation, with his own company leading the way, of course. NEWSWEEK's Steven Levy recently sat down in New York City with Microsoft's chairman and chief software architect to discuss technology, security and even a bit of politics.

LEVY: What's Microsoft's next big push?

GATES: There's a lot of breakthroughs we see coming in software to solve some of the boundary problems we think exist today: the boundary between you and your machine... in terms of how you use speech, do you use ink, does the machine remember how you like to do things, the boundary between the different devices. There's never been a software company spending $6.9 billion a year tackling these problems. And so either [the critics] are right and those breakthroughs won't take place and I'll have to tell shareholders I'm sorry. Or they will in large part take place, in which case it's a big win for people using this stuff and a great thing that Microsoft is willing to take the risk to drive it forward.

What do you define as a breakthrough, as opposed to an incremental improvement in software?

A breakthrough is something that changes the behavior of hundreds of millions of people where, if you took it away from them, they'd say, "You can't take that away from me." Breakthroughs are critical for us. All we get paid for are breakthroughs, because people who have our software today can keep using it forever and not pay us another dime.

Do you fear that your customers no longer believe that there's a need to keep spending at previous levels?

No. I think there's necessarily a more conservative attitude towards new investments, particularly IT investments, because of the economic cycle and because there was so much hype in the late '90s. But the notion that there's nothing ahead, that this is it in terms of how much effectiveness you get out of the workers in your business, I think that's a very dangerous notion.

In January 2002 you put out a memo saying you were going to devote a major part of your efforts to making your products secure. Does the number of problems still appearing in your software mean that the program isn't working?

No. These things are cases where we had fixes. If people had done one of two things, if they'd either had the firewalls applied uniformly or if they'd been keeping systems up to date with security patches, those people, of which there were many, would not have had these problems. Now, that doesn't shift the burden. We have to make it easier to get a very high percentage of people to scan to make sure they've got their firewall set up right, and that is both consumers and businesses, and to connect up so that the critical updates are getting onto those systems in a very broad way. Getting that message out there about the firewalls and the updating services, we need to do more on that.

Maybe instead of your current TV commercials you could tell people about what they can do to keep their software secure.

Well, you've certainly seen print ads that do that. I'm trying to think what the TV ad would look like.

Tobacco companies now tell you how horrible smoking is.

This is not quite that bad. We have to change the basic security of the infrastructure. We've got our smartest people who are doing it as our top priority, and that's everything we can do. We'll be measured over the next several years with how we address the issue.

Where are we in the fight to control spam, and what role is Microsoft taking to help?

This is a great area for software advances, making it very easy for you to only get mail from people you're interested in getting it from. The most straightforward solution is [a "white list"] where it only comes from people in your address book and you really make sure it actually is from those people. That's not good enough because you still want mail from somebody you're not anticipating to be able to get through. So there's the idea of a proof that there's really a person there as opposed to a spammer. The strongest solution is white list plus proof, and making it super-easy for that proof to be provided. Those are things we're working with other companies on, and we will be rolling out next year.

Your next big product is the new Windows operating system code-named Longhorn. Why are you saying that it's a bigger step than anything in the last 10 years?

Well, the system today is in some ways quite fragmented. The way that you deal with your files is different than the way you deal with your e-mail, which is different than the way you deal with your address book, and you have to be pretty smart to understand how you navigate each of those, how you move them around between different machines or devices. And so [we're] getting rid of a lot of the specialized systems that have grown up on the PC that make it just a lot harder to work with. And then we're saying, hey, the photos will be there, so the way that you navigate photos and the way you navigate music will all be very rich and very common. That is the new storage system code-named Win FS, Windows File System. And that is probably the most ambitious, the most shocking advance that we've got in the system. You can find your stuff, search your stuff, share your stuff, and once people have gotten used to that they won't want to go back to the fragmented, fairly simple world that they have right now. We [also] have a lot of things about real-time collaboration, peer to peer, the graphics richness of the system, the fundamentals of knowing when you install a piece of software it won't mess anything else up. But I'd say Win FS is probably the biggest advance.

Win FS -- how do you come up with those sexy names?

Well, Win FS is actually more logical than many names we've come up with, which are kind of random. Even the term Longhorn is a bit random.

Microsoft Research has done a lot of work in search technology. So how did you let Google become synonymous with search?

Because we mistakenly didn't apply a lot of our advanced ideas to do a Web-scale search engine. We were relying on an outside supplier for part of our search. That's our mistake. There's lots of need for improvement and I think you'll see us innovate. We didn't make it as much of a priority as we should have, and a year ago we recognized that and we're on the job.

Microsoft recently announced a bigger dividend. You personally, as a big shareholder, get a big chunk of that, and now a change in tax law means your taxes on that will be lower. I'm curious how you feel about the government's giving you that break.

I don't consider myself an expert on tax policy. I certainly wasn't lobbying for taxes to be changed up or down. I pay a lot of taxes every year. I pay enough that the numbers don't fit on the normal IRS computer system, but I'm glad to do it.

Your father has spoken out in favor of maintaining the estate tax, but you haven't publicly commented, even though you could be the person who gets the biggest benefit from such a break.

My case is a bit unusual, though, because any increment to my wealth goes to my foundation, and I hope those are resources going back to society in an effective way, so that means health and education. It's not like I'm going to buy more hamburgers or something.

Do you worry about the direction that this country is going?

My biggest concern for the country is the renewal of the K-12 educational system, and that's why it is one of the foundation's priorities. I think that's far more important and more of a challenge than tax policy. And we may have that right or wrong, but generally you can come back and fix those things, whereas if you mess up your educational system you're really taking away from the uniqueness of the country.

Yes, you've given New York City $51 million for smaller high schools. That put you on the same side as the city's schools chancellor, Joel Klein, who was your nemesis in the federal antitrust case. How is that?

I'm glad to be working with Joel. I think it's great that he was willing to take that job, and he's got an unusual background for it. I like the direction he's taking. He and I both believe that there's a lot to be done in education, and I think he's a very effective person. I didn't agree with everything that went on [during the case], and I'm pleased that that dispute with the federal government is settled and Microsoft is out building Longhorn and dealing with all the challenges we face. Software innovation is what we need to provide to solve those problems.

My sister, who is a sociologist, believes that in America even some of the wealthiest people think of themselves not as rich, but middle class. You grew up well-off but now you're the richest person in the world. Do you feel rich?