Remarks by Steve Ballmer
Commonwealth Club of California
Feb. 15, 2000
San Francisco, Calif.
JOE EPSTEIN: Good afternoon, ladies and gentlemen, and welcome to today’s meeting of the Commonwealth Club of California, brought to you live from the Fairmont Hotel on San Francisco’s Nob Hill.I am Joe Epstein, past president of the Commonwealth.We also welcome the listeners of KMTT, The Mountain, in Seattle, Washington, joining us for America’s longest-running radio program.I would also like to acknowledge the technician and camera-person from Flexus Net Broadcasting Corporation.The Flexus Net crew is going to digitize today’s program for later viewing on the Commonwealth Club’s Web site at www.commonwealthclub.org.We invite all our listeners and viewers to visit the Club’s Web site and to leave us your email addresses for news of upcoming programs.And now for today’s program.It gives me great pleasure, at this time, to invite Dr. Laura Tyson to the podium.
Dr. Tyson is dean of the Hawes School of Business at the University of California in Berkeley, and is the former chair of the Council of Economic Advisors for the Clinton Administration.Dr. Tyson will introduce our special guest today.Dr. Tyson.
DR. LAURA TYSON: Thank you, everyone.It’s an honor to be here to introduce today’s distinguished speaker for the Commonwealth Club, Steve Ballmer, the president and CEO of Microsoft.In that capacity, Steve is responsible for the overall management of probably the world’s most famous company — a company that is estimated to be worth as much as the entire country of Spain.A company that perhaps more than any other company has built the information technology revolution that has fueled the unprecedented expansion and prosperity of the American economy during the last decade, so Steve has much to be proud of and much to be challenged by.
He’s worked at Microsoft for the last 20 years on various challenges ranging from dealing with IBM on software relations in the 1980s to forging a brand new service model focusing on comprehensive, long-term relationships between Microsoft and its customers in the 1990s.In all of these activities, he has worked closely with his long-time business partner and friend, Bill Gates.He and Bill were college friends together at Harvard, and they have worked together to build this most amazing company, which has contributed to the new economy transformation not just of the United States, but of the world.Today’s a very exciting day for Microsoft with their announcement of their new Windows 2000 release.Steve Ballmer is in town to talk to us about that, but also to talk to us more generally about how the innovations of Microsoft will continue to lead the transformation of our business lives, and our personal lives in this amazing technological journey that we are all embarked upon together.So it’s a great honor to introduce Steve Ballmer.
STEVE BALLMER: It’s my privilege to have this opportunity today to talk with you, and looking out in the audience I’ve got a tough bill from the folks who told me what the audience make up would be, and I think they were right.It’s about half high-tech and about half not, so I’m going to try and run the gamut here and try to give you a little bit of a sense — I hope — of where some of the real excitement will come over the course of the next several years out of the information industry.
I want to start, though, with just a comment or two about Microsoft.Microsoft is a company that, in my opinion, is not very well understood.For some people, we’re the Windows company, and I’m a little bit evangelical and I have many times talked to groups of developers about Windows, Windows, Windows.I can certainly understand why we would be perceived that way.For many people — and I might say fortunately or unfortunately — we’re known mostly by our stock market success, and, particularly given the stock market today, I’m not sure anybody wants to be known in that sense.Everything is kind of transient.We’re known as a company that is or is not part of Silicon Valley, and despite the fact that we have over a thousand people down here, we have partnerships with companies big and small, hardware companies — Intel, HP, Apple — software companies, Internet companies.We’re also, I think, to some extent viewed as the scourge of Silicon Valley, and so a little bit of interest there.Unfortunately, and this is without reservation, I’ll say unfortunately, we’re known as a legal defendant.People have come to chronicle that more than I would like.We’re a company that is a PC company that people thought was hopelessly mired in the PC world and we remade ourselves a few years back to really focus in on the Internet and the Web.Today we’re one of the top…really, I guess now top three R & D spenders of all companies in the world.We’ll spend almost $4 billion in Research and Development in the next twelve months, which puts us up really with IBM, Ford and General Motors in the elite group of R & D spenders.
If you were to ask us what are we, I’d say we’re probably two things.Number one, we’re a group of people in a company that passionately loves software technology — what it can do, what it can be made into, what opportunities it permits.We’re not a media company.We’re not a cable company.We’re not a hardware company.We’re people who love software and see software as the key to transforming things in the so-called digital economy.The second thing I would say we are is a company who has lived and will continue to live by creating opportunities for others, for partners.If you go back to the founding of Microsoft, it was founded on basically these two principles — Bill Gates believed that microprocessors and software were different businesses, and he believed that software was very important.So this notion of separation, of people being able to focus on their expertise — we’re experts in certain kinds of software.Other companies are expert in content, or travel, or banking, or financial services, or hardware, or printing.We only succeed if the software that we build literally gets leveraged by tens and tens of thousands…hundreds of thousands of companies around the world.When we started out, that was people making hardware.Today there’s literally over ten thousand companies around the globe that make PCs professionally.As we evolved, software developers became a whole new class of the software industry that grew up around Microsoft’s Windows.Today those partnerships focus in on system integrators, people who build websites, businesses that are trying to take their so-called
businesses and bring those businesses forward into the world of the Internet.Our company can only succeed at building the kind of base infrastructure software we build if we really work in partnership with many, many other companies.I ran into an old friend from business school and he was talking about an opportunity, a company they’re invested in France, has with us.The range and nature of the partnerships are amazing, and the opportunity not only for other businesses, but the opportunity for consumers to benefit from these technology shifts, are absolutely tremendous.I’ve been at Microsoft 20 years, as Laura said.Twenty years is a long time, yet as I look forward, I can say with -100 percent certainty that there will be more change, more transformation, more new business opportunity created, and consumers’ lives will be more affected by the transformations of the next 20 years than the last 20 years.The only mistake that we or anybody else can make in this business is to think that things are starting to get static, that they’re staying the same.The ways in which people use computers, the ways in which people use the Internet, the ways in which people use televisions and telephones — it will just continue to morph tremendously over the next several years, and I want to talk a little bit about that transformation.I want to talk about the ongoing important role of the PC and its transformation.I want to talk about some of the great things that will happen on the Internet, and I want to talk about the unique, new things that will happen as the PC and the Internet more fully embrace each other.Some people in our business, maybe even some people who watch our business, think that browsers and the way we use the Internet today is the end of the rope.It’s barely the start.The transformation that will occur as the PC and the Internet come together is incredible.
The thing that has characterized the PC over the last nineteen years since it was introduced is its amazing flexibility and the amazing capabilities that it gives to individuals to arm them to be creative.It’s a creativity machine, and, you know, I think back to when the first PC was introduced and it had 1-2-3 on it, and people thought well, maybe this will be a spreadsheet machine, or a word processing machine.Particularly back then, these standalone, dedicated word processors were kind of a big deal.Wang was a big deal doing that stuff, and it was only a few years earlier that word processors had been introduced.Today we think of the PC not only as a productivity machine, but also as an education machine, something that helps us with our finances, our communications, helps us with our entertainment, with music, with video.You can watch this presentation on video and our PCs.We can play games.We can do homework.The PC doesn’t have a static definition.That’s its incredible power.It’s also, by the way, one of its incredible weaknesses.For everybody in the room who’s had a problem getting their PC to work, the good news is the PC does everything.The bad news is, although with our launch this week we’re working hard on it, the bad news is you can get things that will cause your PC not to work as well.The world in some sense has voted.There are dedicated special purpose machines — game machines, Nintendo machines, PlayStation machines.There’s dedicated set top boxes.The world has found real value in this kind of amazingly flexible, general-purpose device, and I think it will continue to evolve, with help from companies like ours and others.It will continue to evolve, and morph, and stay relevant, no matter what happens in the future, because it has the most capability of any machine around.This year, there will be over a hundred and ten million personal computers sold worldwide.I don’t know if that sounds like a big number to anybody else, but it still blows my mind.I remember about six years ago, seven years ago, Andy Grove was talking to Bill and I about how there’d be a hundred million PCs sold some year, and Bill and I, noted pessimists when it comes to numbers, said no.That won’t ever happen, not while we’re working at Microsoft.A hundred and ten million, and the market’s still growing in the teens each year, and, I don’t know.Just to give you a little perspective — the PC market in unit volume is bigger than the world-wide bicycle market, and PCs cost…well, they used to cost a little bit more than bicycles.They don’t so much any more.The PC…when you think about it that way, it seems like a pretty good value to me, but anyway.The PC for us is an incredibly important thing because we feel, along with partners like Intel and others, that we are the stewards of the PC.We have to not do all of the important work that goes on, but we’ve got to continue to be part of the infrastructure that evolves to let the PC remain this kind of general-purpose creativity machine, if you will.
Windows 2000 is a product we’re introducing this week, and I’m going to give you a small political announcement, I’d guess you’d say, for Windows 2000, but what I really want to do is use it in a way to help you understand the trends and the changes that are happening today.The PC, as I said, has been and will continue to be very important.Windows 2000 is simply the PC at its very best, and while we haven’t tuned Windows 2000 for home applications yet, things like Reader Rabbit that are mission-critical amongst the Ballmer children don’t work, but for business uses, it simply represents the best the PC has ever been and it’s really an amazing step forward.For a lot of today’s activity the most important thing on business peoples’ minds when it comes to information technology is e-commerce, the Internet.How do we get there?How do we move quickly?How do we get our site up?How do we provide richer services to our users?How is this going to wind up affecting our business model?In some senses, it’s with Windows 2000 I think I can fully say that the Windows platform can also…the PC platform will have morphed to really be able to be the backbone for the way people create Internet and e-commerce sites.We’ve had certainly…we, the PC industry, have had some good success in that.I think that with the kind of innovation in hardware that you see going on at Intel, at Unisys, at Compaq, at Dell, at Hewlett Packard, coupled with some of the kinds of things that we’re doing in software, you’ll see that some of the same amazing flexibility that we’ve seen at the PC, at the client side, will start to affect and transform and improve the kinds of electronic commerce websites that people are building.But perhaps the most important thing about Windows 2000, and something that I want to spend a little bit of time on today, would be the way in which it opens up what I would consider the next realm, the realm where the PC and the Internet, and other new devices — telephone, television, etc., really all come together and meet.There’s a whole raft of new technologies.Just as everybody’s getting used to web browsers and knowing to type
we’ll get the next generation of technology.
There’s a new set of standards based around something called XML emerging on the Internet, which will change the way we think about it forever.It’ll change the way we think about e-commerce.For most people today I think there’s a view that your e-commerce relationship is the strongest relationship you could have with your customer.You
your customer — that’s because today’s Internet is owned by the people who build Web sites.Users can’t tailor them, and change them, and morph them much themselves.The Internet of the future will be an Internet in which the consumer is more in charge than he or she is today, and that that metamorphosis will come about because of some fundamental new technology, which are already being introduced on the Internet as we speak.
The other thing that will bridge to this next generation, or what we call
“the generation of the Internet user experience,”
is the continuing incredible benefit we all get out of what’s called Moore’s Law.Moore’s Law, as everybody knows, says processing power will double at the same cost every eighteen months.Here’s a projection of what that means — that essentially says we’ll have about a hundred and twenty-five times as much processing power ten years from now as we have today, and we’ll have it all at the same cost.How will we use that power?Some people will use it to get bigger bandwidth, more information moving.Some people will use it to put a cheap processor in everything from the smallest devices on to the very largest.Some people will use it to make sure there’s intelligence in every television set.Some people will use it to build huge, incredible servers. But it will be these opportunities to do new hardware devices and to have a set of software that can be deployed across these devices in a flexible way, that I think is really amazing.These devices will all be connected to the Internet, all connected to the Internet.We joke around, but it’s true, even the little network, which will exist in most homes twenty years from now, will just be a part of the Internet. When you think of it that way, it’s kind of amazing — my telephone’s on the Internet, my TV set is on the Internet. But that’s, in fact, how we can think of these things.Some of you are probably panicking about that right now with all the cyber hacking in the news, but at least in a technology sense, these things will be very uniform and that will open up this new window of opportunity.
This next generation of Internet user experience will be able to be different from today, and it will exist on the PC, on the phone, on the handheld device, on the server, in the microwave set, which can be attached to the same darn Internet if you want it, and it will enable new scenarios.Let me give you some examples of the kind of scenario that I think about most closely in this regard.
Let’s talk about reservations.Today, when you book a reservation online, you book it and that’s about all that happens.In a few years, you’ll book the reservation.You’ll automatically…the travel reservation site will put it on your calendar for you, and, by the way, it’ll put it on your mother or father’s calendar also if you ask it.It’ll ask you,
“If your flight’s late, what do you want us to do?”
“If my flight’s late, please contact my mother.”
My mother created a set of rules that says,
“If it’s Steve who’s contacting me, page me,”
“don’t page me,”
“don’t bother me,”
or whatever the case may be.That’ll be up to my relatives.They will be able to say,
“Here’s how I want to control my time here so you can contact me;Here’s how I want to be notified about things.”
That’ll just be a standard kind of feature that we’ll expect out of the Internet user experience.It won’t be acceptable for websites to not provide that kind of flexibility, and it will be your calendar, with your giving permissions to people you want to give permission to, who will put things on it.Home video entertainment where people say everything will be stored out on the Internet, and you’ll just get video on demand.Hogwash.You’ll have a disk.Today you can buy…one of my guys was teasing me about this today.You can buy a disk for two thousand dollars at CompUSA today that could hold the entire audio history of your entire life.So turn on a tape recorder when you’re born, shut it off when you die and it fits on a two thousand dollar hard disk that you can buy today at…you can laugh.That’s not the scenario, but what it tells us about the range of audio, and video, and how we’ll store that locally, how we’ll be able to mix and view things when we want to view things, is very important.
Health care.In the health care field, as I talk to people in that business, the Holy Grail is how do we get a unified patient record?Everybody has lost their medical records.Everybody knows the problems of insurance and getting second opinions, etc.People always ask, who is going to be in charge?Everybody thinks they’re going to own your health care records.Hog wash. You will have a spot on the Internet where you keep your health care records, and you’ll tell the doctors and the insurance companies what to put there, when they can put it there, when they can look inside, when they can’t look inside, and that place, that safety deposit box — electronic, anyway — it’ll be smart.It’ll know this is an x-ray.This has these properties, has this characteristic, so that you won’t have to be a rocket scientist when you want to say
“I want to release this for Dr. X for a second opinion.”
No problem.It just happens.
Supply chain engineering.Think about the way things get manufactured today, particularly.I’m from Detroit, so I think of the auto industry.The auto industry, roughly, today I’d say about ten percent plus, maybe as much as twenty percent of the price of every car, is generated by the inefficiency in the manufacture, build, distribute process of the car.It doesn’t come from the physical manufacturing.It comes from companies having to guess how many to build and where to put them.They can’t build to order, so to speak, the way Dell can build computers.There’s not a rich enough connection between the dealers, the freight companies, the manufacturers, the first line suppliers, the second line suppliers.It turns out there’s about seven layers of supplier in the auto industry.How will we ever get visibility across that?In the next generation, these Internet things will talk to one another in a very, very seamless way.
As a company, we think it will require a next generation software platform.I won’t say operating system, because I think if I say operating system, everybody will think about the thing that runs just in their PC, but it really will take a next generation set of infrastructure software to enable these kinds of scenarios — not only the software that runs in your PC, or in your company server, but also software that runs in the Internet, software that runs in the television set.It’ll require a new paradigm for how users interact with these systems.New ways to share information, to store information, to write programs.But if all this work is done well by us, by other companies, it’ll still require the work of thousands of businesses who know about travel, or health care, or video, or automotive, to really unleash this next generation power that will come out of the Internet for all of us.If this is done well, virtually every aspect of information will be affected.I might say every aspect of life by that statement.
The workplace will be changed — paperless office.How many people in the room here would say their office is paperless today, despite the fact that that jihad has been talked about for a number of years?I’ll admit I can almost say it, but only almost, and our company has kind of made it a real principle to drive in this direction.How many people use their PCs to help their meetings?Do you actually go to a meeting and share anything?Can you make notes on your PC, or do you have to print, and put things back in?How many people really know every day what’s going on with their customers because they’re getting real-time interaction coming out to the Internet that they can analyze and understand?How many of us can find most of the things that we know exist out in our company, but we can’t remember where they are?I was talking to a customer the day and they had done a big RFP for somebody two years ago, and they knew they must have it someplace out there, but they couldn’t find it.Heck, my own father can’t find things on his own hard disk most of the time.So there’s a set of changes that will happen in the workplace.
In the home, this will be a pervasive thing.Interactive television.My interactive television example — five years from now, I will yell at my television set, which will have a built in microphone —
“Hey, Dad, did you see that put?”
I’m going to look Dad up in my instant messaging list. It’ll recognize Dad, look him up, give him the message and allow him to respond.That much intelligence will just be built into the TV and into the Internet.All of our photos and all of our video images will be stored online.The most precious things that I have are the slides from when I was a kid.Getting all of that kind of stuff digitized and online and easy to sort through.
Gaming.I have an eight-year-old.The eight-year-old is a prime target Nintendo customer today, but if you think about the way gaming will be changed as we go, in about four or five years.Some parents in the audience might not be happy about this, but it will be even more engaging than it is today.
Communication.All of these of aspects will morph with this new technology.The PC will need to change.The PC has been great as a tool offline, and it’ll be a better and better online tool.The PC’s performance, the level of control that it gives you, the rich user interface.People like the PC because they control it. You may not control that Web site, or this, or that, but you control your life on your PC.Some of you may not feel like that every day, but I already talked about Windows 2000.
With these next generation services that will come, we get additional value if the PC integrates correctly.You get applications that can take advantage of the richness of the Internet and the PC.You get this notion of people being able to roam, to go up to any machine, any place in the world, and find their information, their preferences, their stock portfolio.You have a world in which almost every connection that a business wants to have with its customers can be electronic, can provide real-time feedback about what’s going on and how things work, and the PC will morph as the Internet technologies will morph to bring together these richer, home, office and business scenarios in probably, I think, the richest of ways.For us, this will…the key is to make sure that this transformation creates opportunity — opportunities for users, opportunities for people who build components of infrastructure that make it come alive, people who build websites for their existing businesses, new businesses that get in, that grow up to provide web services, some of our own services.Hardware vendors building servers, building PCs, building phones through relationships like the ones we have with Nokia and others.Televisions through relationships — the kind we’ve had with Thompson and others, but it’s only by getting everybody to build in some kind of consistent way that we can open up this opportunity for all.If this opportunity doesn’t get opened up in a way that literally thousands and thousands of companies can innovate, we will all be the poorer for it.That’s why we focused on building a software infrastructure on top of which each and every business represented here in the room can do its best, its most creative, its most exciting work.
As a company, we’re a company trying to focus in on trying to anticipate these consumer needs, work on the quality of what we do, and make sure that we produce products that enable the best ideas and the best contributions of the world to really very, very much flourish, and for me to have a chance to talk to you a little bit today about where I think the future is, and some of how I think the industry needs to get there, and why the consumer will benefit — that’s been an incredible opportunity for me.I’ll look forward to a chance to take some of your questions, and it’s certainly been a great honor to be here.Thanks very much.