Bill Gates: Microsoft CEO Summit 2007

BILL GATES: Well, good morning. I have the honor of getting to talk about where technology is going, and not just the breakthroughs in technology, but also the changes in how it’s being used. If you look at things like how people think about the Internet and video, over the last couple of years it’s dramatically different. It’s really become the mainstream of how people think about creating, distributing, and getting video, and that has some implications that are pretty profound.

Now, part of the reason that that things keep changing is that the pace of innovation is very, very rapid. We see that at the chip level where we still have the ability to double the number of transistors on these chips every two years or so, and it looks like there’s another decade where that will continue; so no limitation in terms of the kind of power that’s coming out of these devices.

So, you’ll hear people talk about, for example, 64-bit memory. Well, what that means is that we’ve really gotten rid of the limitations that would have prevented us from doing business intelligence, and really analyzing things and seeing patterns. Historically, those were either things that were not easy to do or they required unbelievable expense, only a few companies could do them. Today, analyzing customer behavior is something that should be standard even for small companies that have very modest IT budgets. It’s all within reach because of the extra power that is in these chips.

Now, the size of the hardware also makes a very big difference. We continue to reduce the number of components, reduce the size, and so we’re getting even some new form factors. You can think about, where do PCs stop if you take smaller and smaller PCs, and how far up do phones go, and is there a gap there in the middle? Media devices like the iPod or navigation devices or dedicated reading devices, will there be specialized things in between or will these two more horizontal platforms that run many applications come down and even overlap each other? I tend to believe that the phone will move up and the PC will move down and there won’t be any special device categories, because the power of being able to run any application, whether it’s media, reading, navigation, is very strong.

These are actually some full-blown Windows PC devices that can even run the latest Windows, Windows Vista. So, you see this is one you take in your hand and it’s just a touch screen device, or this is more traditional in terms of the input where you have a nice keyboard but the screen can be this way or you can flip it around and use it just with a touch, say to watch video or to play with pictures.

And so as we get down into these form factors and you think about some phones that are coming out with bigger screens and motion video, you can see that they really are meeting and then just taking on the applications like still photography, motion video, incredible maps where you can see data about commercial establishments or traffic or even your friends that are nearby showing up on that map.

So the broadband connectivity, the speed with which these wireless networks work, and the small devices are really changing the patterns of use. Broadband penetration continues to go up. In a lot of developed countries it’s well over 50 percent, and the growth per year has actually been accelerating there. The United States actually is about 15 in the rankings on this penetration, so this is not a U.S.-centric phenomenon. In fact, if we look at things like use of mobile devices, the U.S. would rank even lower than it does on broadband penetration.

So, the adoption of technology is pretty much a worldwide phenomenon. It’s no longer the case you can just at one market and say, OK, if I catch the trends there, that’s what’s happening in other places two or three years hence; it’s happening largely at the same time. And that’s why we can talk about the world being a smaller place, because all the empowerment is there at the same time.

People often have an assumption that the power of the average personal computer would be different in say the United States than in China, but that’s actually not the case. The average machine is the same between those two countries, and so the same kind of software, same type of applications.

Of course, as this technology is getting out there, the usage of it goes out. We call this probably the digitization of the economy. It means getting rid of forms, it means catalogs being online, it means applications like education where the idea of finding the world’s best lectures would have been virtually impossible in the past; now on the Internet it’s more and more there, it’s more and more organized in a way that’s going to make that just common sense. Of course you can go out and get the world’s best lectures, and of course you can go out and test your knowledge and see if you’re confident, even go to a Web site whose reputation is that if you pass their test you’re accredited with that skill set, so even something like education, the value-added pieces of teaching and accrediting being that somewhat unbundled because of what the technology can do.

Now, when we think about this, the way people work is changing because of it. Historically, a few things like a copying machine, PBX phones, they came in and changed the workplace a little bit, but it’s only in the last 15 years where the idea of how do you organize schedules, what does an administrative assistant do, those have changed dramatically. The access to information, knowing what’s going on inside your business or the competitor’s business, being able to collaborate with partners literally during the course of the day, working with people in five different countries and changing plans, that’s all possible because of the interconnection.

And so in this new world of work you can work at home, you can work on the road, and if you have a company with many locations, the overhead, the problems that that creates, the need for trips and things is reduced by using the technology in the right way.

I’ve taken this idea of the Digital Work Style and I’ve got three slides here to talk about typical things that people do. And I’m not going to dive into every one of them, but I’ve split it so I have the Digital Work Style Basic. These are the things that basically everybody is doing now. Then I have digital work style empowered, which is the next level of benefit and ambition. And then I have advanced, which are things that only say 10 or 20 percent of companies are doing today, but I’d be so bold as to say that those things will all move on to the other tier where they become kind of commonsense, and then a new set of things will emerge that will become the advanced activities.

The basics, a worker with a fairly up-to-date PC, connected to the Internet, standard Office suite, electronic mail, ability to send mail to groups, to do attachments, to correspond with people inside and outside the company, you know, all pretty straightforward stuff in terms of basic.

In terms of empowered, then you see a separation of companies, some of whom have jumped in and done these faster than others. For example, at Microsoft, training used to mean signing up for a course, going off to some nice place — I always wondered why they picked such nice places — being gone four or five days. And there are still a few types of things, like our leadership courses or thinking about our business model, where that type of format works. But if you take something like learning a new skill set or the diversity training that we do for everyone, that’s moved completely online. You go up, you watch the video, you can do it at work, at home, you can split it into segments, and after you watch those segments, you are tested on whether you understood what you watched, and we track that to make sure that for the ones that are required, people are actually going through those things, and your manager will know when you have or have not completed those things, but very, very flexible. And so this idea of putting the video online, and putting the knowledge-testing there, that’s over 80 percent what used to be face-to-face training is done that way.

There’s also a class of training that we just wouldn’t have done at all, it wouldn’t have been worth the trouble in the old format that is now possible to do, and those are optional courses, but it’s pretty amazing how much people take advantage of that. Typically people are doing three or four courses during the year to add to their knowledge.

If you look at human resource activities, we’ve been able to get rid of paperwork altogether on this. If you change your address, you do it once, and even somebody like our 401(k) provider gets notified and it’s all just a straightforward thing there.

This also comes up when you’re doing reviews: Can you get lots of input, can you understand the history of the person there? A digital system can not only raise the efficiency but also the quality of those activities. And so it’s quite different than it would have been in the past, the employee understanding their options, understanding what the status of the things are.

We also look at what can people initiate themselves. Let’s say there’s a metric you want a group to be tracking. How easy is it for somebody without IT involvement to create a site that has that metric, kind of graphs it, shows the progress, has people commenting on it? Can a project schedule or a quality drive, can you create a site that draws everybody in, gives them complete up-to-date information without any overhead, without getting a developer or approval or any of that process? And so making these things end user creatable makes a huge difference.

Take something like a survey. I think it’s very helpful to go out and poll employees anonymously or attributed about how they feel about the project they’re on and their management. We actually create a leadership index where we get the answer from everybody who works for someone, and that’s a very interesting diagnostic that as we see it change over time, as we compare between the different groups it helps us know where we’re doing the right things.

Because of the ability to create these surveys digitally and send them out and then over a period of a week somebody has that in their e-mail, and they can find the right time to answer it, we can get very, very high returns. In fact, if we insist on returns, we get up to 100 percent. And it’s very easy to do. And so we find whether it’s top management having some key metrics or individual groups just creating these things, sending them around, that that just becomes a standard thing because it’s so easy to do.

Creating workflows for approval that will vary by group, making that so again there’s no code involved in it, this type of collaboration helps facilitate the things that need to go on in workgroups. Seeing sales information so it’s live, I know over the years we’ve talked about this ability to dive into data and see the detail and share that with other people, and not just be surprised by the numbers but actually seek the best practice or the problem that that reveals, and not just have it be the executives who are using a certain way of interacting with the data, but having that be pervasive so everybody is on the same page, same conversation, that’s become a lot more straightforward.

We talk about reducing trips, and some of this is the new things in communications, connecting up the screen to edit documents together. If you have a meeting that you can’t get your employees all in one place, not only can they see the video but they can interact, they can send questions in. The tools that let you set this up and do it over the Internet mean that the cost now is less than a tenth of what it would have been in the past.

One new thing is taking the phone that you carry around and putting some of the business information there. Electronic-mail has become pretty standard, the calendar sharing, but also documents about customers that you might be going to visit or metrics that you might need to be updated on because there might be something urgent to be done about that; having the software platform expand the information empowerment out even to that small screen device is becoming far more typical and the environments are making that far easier to do.

Now, that does bring us to something I have over in advanced, which is when you have all this information out there you have to worry about where is it going, is it leaking out. If somebody leaves their portable machine behind, if they leave their phone behind, is it easy for somebody to go in and get salary data or things that are confidential about your business plan?

And so more and more the idea of rights management, that when you initiate an e-mail that’s about the close of the quarter or related to a lawsuit, you can mark and say who can get at this document, and even figure out what sort of time period that document should be accessible, that’s called rights management.

It’s been tricky to implement because if you want to do that across company boundaries, say with your law firm or a company you work with, setting this up has been too difficult and it’s just changing. That’s why it’s in this advanced category.

With communications, we’re going to see a demo of some of that, but the extreme form is where you actually no longer have a PBX at all, and it’s all completely software-driven. That means that as people move offices, they want things forwarded, it’s all easy to do, and the interface of these things is far simpler than the buttons on those classic desktop phones.

Group meetings: We’ve got a thing called Roundtable that gives you a 360-degree view of a meeting room that we actually showed here in years past. That’s actually in a broad beta today and ships later this year. And there are a lot of people taking advanced camera technology and allowing a meeting either to be participated in remotely or easily recorded somebody can go back and then take, say the transcript and find the part that they’re interested in.

Things where you improve meetings, the efficiency, reduce the number of people who need to go, things like that have a surprisingly big impact on digital work style productivity.

Forecasting using models, that’s kind of a new thing. The tablet computer that you’ve all got a chance to play around with, those are emerging things. In areas like medical insurance we’re starting to see it really catch on, but over time we see that as mainstream.

The last thing here I wanted to mention is that with video arriving on the Internet, it’s possible for a company to create essentially their own TV channel. And it’s actually better than a TV channel in that people can come in and watch at any time video on demand.

A great example of this for Microsoft is that there’s a special customer group which are software developers, and having them excited about our work and getting their feedback is critical to our success. And historically while we would do face-to-face events, our ongoing communication with them was through the trade press. And of course we still do that, but what we have now is just a couple of employees who walk around with handheld cameras and interview individual developers, ask them what they’re working on that’s fun or hard, and they put hours of that video, new video up every week, and then we have over 4 million unique developers coming in and watch those videos on our Web site. That’s not buying advertising, it’s just buying that little handheld camera and having the right interviewer create a sense of dialogue, and then we use that channel for people to say did you like what you heard, do you think we should give that more priority, do you see something we’re not doing, and so it’s really changed the nature of our relationship with those developers. And so it’s actually a TV channel that if you compared it, it would actually have more viewership than most of the cable TV channels, and yet it’s a very targeted activity we’re engaged in there.

We’re also starting that up for our broader set of users, people who use Microsoft Office, learning about some of these best practices, and we’re just at the beginning of that. And so I think we’ll see lots of examples of where that can be done, whether it’s simply staying in touch with employees around the world or particular groups of customers.

Now, communications, when we say it’s changing, you might ask, well, why? What’s so unique about this timeframe? Well, historically the networks limited what could be done. The quality of the voice was quite limited. You were working the phone numbers. You had no idea who was where. And so that hardware piece limited the creativity of what you could do.

As that’s changed to just be the very high-bandwidth Internet with great optic fiber cables and great competition and making those costs constantly going down even for a global network, now it’s much more a case of the software. How do you make it easy to set up a conference call or forward? When you come back to your office, shouldn’t you be able to see who called in? Or if certain people are calling in when you’re busy, shouldn’t they have options to do things at that time? Shouldn’t you be able to see before you try and call somebody their presence information, and if you have a close relationship with them see in some detail not only what they’re doing now but the part of their schedule that they want to come and share with you?

And so the split where the phone world and this Windows PC world have been two separate worlds. that’s changing utterly. In fact, on the desktop it would be our view you won’t have that desktop phone. You’ll have the PC with a phone peripheral, and then you’ll have your mobile phone. And the mobile phone and that PC will be working together in a rich way. So your call log will be unified between those things, your calendar, so a big change from what we have today.

This is something I think actually seeing at work will give you a clear sense of what I’m talking about. So let me ask Paul Duffy, who works in our Unified Communications Group, to come up and show us a little bit about how communications is changing.

PAUL DUFFY: Good morning. So, I’d like to take a few minutes to show how the power of software really has the ability to change the way that people inside your organization can communicate. I’m going to do this demonstration in two parts. To start with I’m going to show some products: Office Communicator 2007 and Office Communications Server 2007, which are getting ready near to ship, and they’re going to be releasing in the first half of this calendar year. Then I’m going to move over to show something that’s a little bit more futuristic based on some of the advances we’re particularly making in the area being able to interact with PCs using speech.

So, I’m going to start off here by showing you my Outlook inbox. So, in here, as many of you may be used to seeing, I have a collection of e-mails. I also have here a voicemail as well, and in this case this has come from Exchange Server, and our unified messaging capability. So, right now as well as having e-mail in their inbox, people can also see fax messages, voice messages, and really have a central place to communicate across all different kinds of modalities, whether that’s asynchronous things like e-mail or more real-time types of communications like instant messaging or video or voice, some of which you’ll see in a moment.

So, when I open up this e-mail now that I got my colleague Jim, you see the things that you might be used to seeing in an e-mail, who it’s from, something about the content, but we also see something that Bill was just talking about before I came on stage, these little colored icons that are next to the names of all these people. And these are representing their presence. The colors are fairly simple, like kind of the human red is bad or red means someone is busy, ranging away all the way from red to green. And these icons are getting me information that tells me — if I hover over Jim there, it says that he’s busy, and it’s taking that information automatically from his calendar. So, I know now looking at these people some more about their availability if they’ve chosen to share that with me before I make a communication decision, which helps me understand what might be the right way to communicate with them or whether it’s the right time.

I’m sure you’re used to seeing people giving business cards out that have many different forms of communication on them: an e-mail address, a phone number, a fax number. It’s very difficult to know which is the right type of communication to use for many people. This concept of presence, and giving people more information that automatically shows if I’m in a meeting, depending on my calendar, shows if I’m in a phone call, based on whether I’m on the phone or not.

We can also see this from the context of what we’re doing. I’m showing this right now in Outlook. I could switch over here to a SharePoint site using our Business Productivity Server here. Where I see people’s names who have contributed to this site I see those same familiar icons. I can see that Thomas here, that icon is green, which means he’s available, and I could communicate with him. But if it’s about something that’s in this site I can do it from that context.

I can go to a Word document here. If I look at just status this here I can see another icon in that Word document. So, directly from this Word document where I see this little icon I get a range of different ways to communicate with him. I can schedule a meeting, I can send an e-mail, or I could start, because I know he’s available, a real-time a form of communication.

So, I’m going to go back now to this e-mail, and it looks like Jim has told me that the project is going to be ready. So, I’m going to reply to this e-mail now with an instant message. I could also have chosen to reply with a voice call and conference everybody on that distribution into a voice call, much simpler than many people are used to conducting conference calls.

So, we’ll reply now with an instant message. At the top of this window here the subject line of that e-mail is now inside the instant message conversation so that when Jim gets this message he has more context of what it’s about so he can better prioritize it.

I’ve got some data here in this spreadsheet that I want to share with him, because it’s slightly garish, and I can just copy this now and paste this straight into that instant message conversation. So, instead of having to go and do something different and transfer a file or send an e-mail, I can share the context of what I want to discuss with him in that message.

Now, instant messaging is real time, but maybe it’s not enough for the form of communication I want. So, I’m just going to click on one icon here, and add video to this call, so we’ll be able to see Jim and hear him, as well as just being able to type.

JIM: Good morning, Paul.

PAUL DUFFY: Morning, Jim. How are you doing?

JIM: Good.

PAUL DUFFY: Good. So, tell us about the project status.

JIM: Well, you know, we were late on our last project, but this time with our global engineering team and the video conferencing, and a bit of money, we’ll be right on time.

PAUL DUFFY: And how much money?

JIM: Ten bucks.

PAUL DUFFY: Excellent. Thanks for that, Jim.

So, what I was trying to show there with the slight joke about the $10 is this is very, very high quality video, something that could easily be deployed to many people in an organization, it’s not the super high-end thing, this is an off the shelf Web cam, and I can have a very rich conversation wherever I am with my laptop with Jim.

Now, I’m going to bring a colleague into this conversation now, my colleague Ed. Now, typically adding someone else to the conversation might mean users have to do some complex stuff. Here all I need to do is find Ed, I can see that he’s green, he’s available, and I can just drag him in here to this conversation.

Now, we’re going through a very complex procedure now from a peer-to-peer conversation to a multi-party server-based complex conversation, but the thing is to the user that’s all abstracted. All they have to do is decide they want one more person in and it happens seamlessly.

So, Ed, are you there?

ED: Yes, I am.

PAUL DUFFY: How’s the project?

ED: I did a few customer visits last week, and based on their feedback it looks like we’re in a great place with the project.

PAUL DUFFY: Great. And, Jim, that sounds good for you?

JIM: That’s right. Hey, Ed, I would like to know more about your customer visit. Let’s schedule a meeting afterwards.

ED: Sounds good.

PAUL DUFFY: OK, well, I’ll leave you guys to have a talk there.

Now, this presence information is all very good, but it’s not good without the right kind of control. So, we have a concept of allowing a very granular way to use it to share different levels of presence. So, if I was to search in our directory here for Bill, find out that he — is he offline? Yes, he’s offline, he’s a bit busy at the moment, and I can see that.

I can also choose to assign him to a different level of access just as he could for me. So, he could share lots of information about what he’s doing and what kind of a meeting he’s in, all the way to the other end of the spectrum of blocking him, and I can do the same, although there might be impacts on my career if I chose one end of that spectrum. (Laughter.)

Now, Bill had talked earlier also about how communications in terms of the phone are changing. Now, I’m using here this Office Communicator client to control my incoming voice calls, to make and receive calls. I can choose here to not forward my calls at all. I could choose to forward my calls to another number, to a cell phone, or even do it to a compact. And this is much easier to use than having to fiddle around with a complex PBX desk phone.

So, if Bill is willing again, I can enlist his help here. I could have my calls forwarded to him just by finding someone in the directory, and clicking on him. Obviously that relies on him granting that level of access to me.

Now, one thing Bill said at a conference earlier this week was the PC will become the phone, the phone will become the PC. We have this on the PC here. I also want to show another device that we’ve got here. So, this device that you can see on stage in front of me that looks rather like a phone, I’ll just wait for us to see this on the camera as well.

Now, unlike most phones that people are used to, which have an extension number associated with them, this phone runs a version of the Office Communicator software. I can unlock this using my fingerprint. So, we now see this iterative scroll wheel. I have the same contact list that I have on my PC. My presence information here I can easily access on the phone to say that I’m available. I can choose to forward my calls with a very simple interface here.

So, it’s really changing the experience of me using the phone. I can either use the PC, as I was showing before, or we also have a really changing phone experience for users as well.

So, I want to go back to my PC now and just show how real this experience is. This is not smoke and mirrors.

So, I’m going to search for a colleague of mine, Charlie Wood. It looks like he’s offline. So, I’m going to make a call now to his cell phone. This will just take a moment to set up. And Charlie actually we placed him in the room just to prove how real this is. We’ll ask him to walk out just to avoid any feedback issues, but he’ll answer that call in a moment.

CHARLIE: Good morning. Charlie speaking.

PAUL DUFFY: Hi, Charlie. How’s the Contoso proposal going?

CHARLIE: Hey, everything is looking good. We checked the CRM system, but I think maybe we should get an update from Ed.

PAUL DUFFY: So, setting up a conference call is something people often have difficulty with regular PBX phone systems. It’s a complex button, and you hear people say, you know, if I lose you I’ll call you back. What we can do here again is I’m going to bring Ed, my colleague, back into this call, this time just with voice, someone on a cell phone, ED on his PC. I just drag him over into that window, take a moment while that call is set up, and let’s just see if he joins.

Hey, Ed, are you there?

ED: Yes, I am.

PAUL DUFFY: You have some news about the Contoso project I believe.

ED: Yeah, I was going to tell you it’s looking good, but I think I need to follow-up with Charlie about a few details. Can we do that now?

PAUL DUFFY: Charlie, are you still there?

CHARLIE: Yes, I am.

Hey, Ed, I’ll tell you about that.

PAUL DUFFY: OK. Well, I’ll leave you guys to have that conference call on your own; I’m busy at the moment.

And that’s going to finish this first part of the demonstration, so really showing how the power of software and using the PC in this case to make and receive phone calls, to integrate all of these different forms of communication from the context that your users might be working in is really going to change their communications experience.

To conclude the demonstration, many of you in the audience are lucky enough to have assistants who help you with managing your busy schedules. I’m not someone who’s that lucky, so I’m going to show how we’re using, with some of our deep investments in natural forms of interaction with computers, how I can use speech.

So, I’m projecting an example of a calendar on screen here. I’m just going to make a phone call. I’ll have my microphone muted while I do this just to avoid any feedback.

VOICE SYSTEM: Hi. Thanks for calling Microsoft. To reach a specific person, just tell me their name.

PAUL DUFFY: Bill Gates.

VOICE SYSTEM: Bill Gates. Calling now.

VIRTUAL ASSISTANT: Hello. I’m the virtual assistant for Bill Gates. May I ask who’s calling?

PAUL DUFFY: Paul Duffy.

VIRTUAL ASSISTANT: Hi, Paul. Bill isn’t available right now. Is this an urgent call?

PAUL DUFFY: No.

VIRTUAL ASSISTANT: OK. Would you like to make an appointment, try the cell phone, transfer your call, or leave a voicemail?

PAUL DUFFY: Make an appointment.

VIRTUAL ASSISTANT: Sure. When would you like to meet?

PAUL DUFFY: Tomorrow at 8:00 a.m..

VIRTUAL ASSISTANT: Bill is busy at that time. Would you like to meet on Friday at 4:00 p.m. instead?

PAUL DUFFY: Yes.

VIRTUAL ASSISTANT: OK. What is the appointment about?

PAUL DUFFY: My promotion. (Laughter.)

VIRTUAL ASSISTANT: And where would you like to meet?

PAUL DUFFY: How about Bill’s office?

VIRTUAL ASSISTANT: Great. Your appointment is all set for Friday at 4:00 p.m., location Bill’s office, subject Paul Duffy’s promotion. Thank you for using the personal virtual assistant. Goodbye.

PAUL DUFFY: Goodbye. (Laughter.)

Now, obviously you can hopefully use your imagination to see how this might apply to people who don’t have real assistants, but hopefully that was a useful demonstration to show how the power of software in offerings from Microsoft which is very near to release can really change the communications experience for users in your organization.

And then also as we move forward with some of the other investments in research and development we’re making in natural technologies like speech, that really provides the ability to give some of these rich capabilities to a lot more people in your organization.

So, with that, thanks very much, and back to Bill, and I’ll be seeing you on Friday. Thank you. (Applause.)

BILL GATES: So, that’s an update on Digital Work Style.

I want to talk now a little bit about media and how that’s changing. Historically, only very high volume media had a simple distribution channel. So, if you had something that was interesting only to a few hundred people, and those people were spread out all over the world, it just wasn’t economic to print something or get a channel, to be able to carry on that type of communication.

Well, the Internet has really changed that. No matter what device you’re connecting up with, the ability to find people with a common interest, the ease and low cost of authoring means that even these small groups now can effectively have shows and newsletters or any type of thing that only worked for mass media in the past.

And as we drive this forward, it’s interesting how it’s changing behaviors. This is an article that was in Variety just this last week, and it talks about how these young writers and producers actually meet at night and play videogames. They don’t go to the same house and play poker, they don’t meet on the golf course; they’re sitting there in these games talking to each other with the headset, and it’s actually considered you have a strong relationship with somebody if they are willing to give you their gamertag, which is the thing that lets you connect up and play with other people.

Some people like to play with strangers, most people know who they’ve given their tag out to and just stick to that. So, it’s a way of staying in touch that’s actually finding its way into the mainstream as a way of engaging.

The phone itself is changing quite rapidly. We have a big investment in doing software that runs on the platform. We work with a wide variety of hardware manufacturers, including people like Samsung, Motorola, HTC, doing different devices. We’re way beyond this just being a voice communication device. I talked a little bit about how maps and photos are coming into this. Media storage will be one of the things that works very well, particularly as the capacities go up there.

Speech interaction that you saw in Paul’s demo will make it a pretty simple device. We actually just bought a company called Tellme that does directory assistance, and so think in the future that as you go to your phone looking for a specific business or a type of business, you just say what you want and then the screen will give you the results. And that way that where you talk for the input but then you have the screen for the output is actually quite efficient; it’s better than the keyboard for the input or trying to use speech for the output. Where he just had a handset, he was having to listen to a lot of choices, well, when you have a screen, which virtually every mobile phone and future desktop phones connected to the PC will have, that’s even better.

Some of the things are in the early stages. The idea of how you do payment with this device, it’s actually interesting given the pervasiveness of mobile phones to think about this being a device that can actually bring banking and financial services to people where it wasn’t economic to do it. So, actually even my foundation is looking at this as an empowering tool. As the technology allows you to see your savings account and transfer money and those types of things, it’s going to make a very big difference.

The innovation in terms of form factors is pretty incredible. You know, every year I see a lot of new devices out there, certain ones of them catch on, but richer and richer in terms of what they’re doing and very much a software driven device.

Now, this is changing all the mobility and the Internet is changing media in quite a dramatic way. Historically a typeset document was a sign that a big company had made the document or the brochure. Well, personal computers changed that some time ago. The printers that you have, you can use those rich fonts, and everybody can make great documents.

Well, it still wasn’t the case for things like video. The kind of editing tools and bringing things in, sound editing really required pretty large budgets. But now what you can do on a standard PC is actually almost as good as the most expensive system. So creating is different, distribution is different, and consumption is changing.

Most large TV sets still are not connected up to the Internet, but more and more with things like Xbox and seeing the variety of videos that are out there, they will be. And, in fact, we have partners, people like Verizon and AT&T in this country, and other major companies, often the phone companies in many countries around the world now delivering TV over the Internet. It’s called IPTV, Internet Protocol TV. And here’s where you don’t just get rid of channel limitations, but you bring in interactivity so that watching something rich like learning about an election or watching the upcoming Olympics, it’s a much more engaging experience.

For the Olympics last year, people had to choose whether to go to their PC screen where they would get the interactivity, choose the highlights, the sports they wanted, or go to the TV and be in their living room where it was a more comfortable viewing experience. Now as we connect that TV up more and more, which is the way that these phone companies are coming in and challenging the cable companies to create a better TV viewing experience, now you can have the best of both worlds. It can be where that large TV set is, but with a few simple navigation commands you can see exactly what it is you want, so the creativity, the benefits of both brought together.

So, when we think about the future of what’s a game show or watching sports, that’s being invented today on the Internet as people are putting out video of all types and having the full flexibility of software and no barriers to entry. And many of those things will move the mainstream, and make it to the broadcast environment, but then again the broadcast environment is also going to have those rich capabilities.

One of the aspects of this that changes, of course, is advertising. The ability to target the ads, to have somebody indicate an interest, and even for the advertiser to have a better understanding of who’s there viewing the ads, and easily see what impact they’re having, do people click on it, what immediate action do people take, this is a real change.

And because advertising is so key to the whole mechanism of capitalism where you’re matching buyers and sellers, the revolution in these markets really is quite an impactful thing. After all, advertising funds a lot of the great content creation that gets done. And so now we see this in the world of software where some things will have these ads brought in as well.

We’ve got a lot of companies investing very heavily in this: Yahoo!, Google, Microsoft, many others on a global basis. And your ability as an advertiser to understand who you’re getting to, and to pick a particular audience will be dramatically different in this new world. Even as reading goes online, what would have been print-type advertising gets targeted, and as TV goes to the Internet, like that AT&T platform, you’re getting this same capability. And so a lot of change in the ads themselves and how you think about getting those out there.

One fun example of this is that advertising is moving to be more embedded in certain ways. A little bit of that is because the skipping that people are seeing, but it’s also just creative ideas. We bought a company called Massive that’s the leader in putting ads into a videogame experience, and so when you’re watching the baseball game those ads come up, where you’re racing around the track. We’ve also got now with what we call Virtual Earth where you can go and see a city and that’s the photo on the right there is a view of the 3-D buildings — that’s actually downtown Seattle. As you navigate around, we actually put up these virtual billboards, and you can see that little orange ad that’s there in the distance. That doesn’t really exist but we can put that up without interfering with your walking around, seeing the buildings, click a building you want to go into. And so there’s advertising inventory in that Virtual Earth experience.

Well, that’s going to take some time before people understand is that really valuable real estate, does it cause people to do something different, but our guess is that if you come in and said, you know, I want to find a restaurant, I’m going to a movie nearby, that the idea that that billboard can come up and suggest something to you, that’s a context of great value.

And so the types of advertising are quite different, and we have the flexibility to experiment with a lot of things. We can put video onto that virtual billboard. It’s not limited to just seeing a static display like a typical real world advertisement.

And we’ve seen great results from the in-game type thing. The car manufacturers are a great example of people who even introduce new vehicles in that format and driven a lot of excitement there.

So, what do we see looking ahead? No slowdown in the rate of innovation. Even if the innovation stopped, of course, there would be a lot that would change as people were taking advantage of what we have today, but that innovation curve is creating new opportunities all the time.

Some of the change agents of this are often the younger people who are so immersed in these digital activities in their entertainment activities, the way that they think about college, their courses, connecting up to their friends, they come into the workplace with an expectation they’re going to use these tools in a rich way, and that companies that they are going to do business with will be state of the art in how these things are done. So, year by year things will move into the place where it’s really the productivity and the information empowerment will simply be expected.

The digital media revolution, that’s just getting underway. And there’s probably more questions about that than there are answers. What will a network be in this environment? How will the advertising models change?

All sorts of activities are now starting to be changed. Communication you saw examples, collaboration I talked about; reading is one that we’re just scratching the surface, but even that, these smaller form factors will start to change; TV itself, advertising: All of those things create opportunities for people who can jump in and involve themselves in the new ways of presenting information.

And one thing that comes on top of that is that various software breakthroughs, things like speech recognition or software that sees what you’re typically doing, whether it’s your buying behavior or who you get in touch with, and is more adaptive than software has been in the past can make these things way easier to use and far more natural.

We’ve got a long way to go on these things, but the reason we’ve got our R&D up at record levels, and the industry as a whole is investing in record levels is there are so many opportunities to take the hardware platform that has gotten so much better, and build software on top of that that can create far more natural experiences. And so that’s why it’s a very exciting thing to be involved in, and I’m sure it will create opportunities for all of you.

Thank you.