Bill Gates: Japan — Nippon Keidanren

PARTICIPANT (Via translator): We would like to commence the meeting of the Board of Executive Directors. Today we have the honor to welcome the speakers, Chairman of Microsoft Corporation Mr. Bill Gates, as well as from the National Institute of Infectious Diseases, Dr. Ariel Goda. I would like to extend my heartfelt gratitude and welcome to Nippon Keidanren. Also, for the Executive Directors, I would like to thank you all for your participation despite your busy schedules.

First of all today, we would like to ask Mr. Bill Gates, Chairman of Microsoft Corporation, to talk to us on Digital Revolution and Innovation. Without further ado, Mr. Gates, please. (Applause.)

BILL GATES: Good morning, and thank you for the honor of being able to speak here today. I’m very excited to be in Japan, and to have a chance to share with you my optimism about the future. I understand that later today you’ll also hear from President Hu of China, and so today you’ll be thinking about, I think, the two great change agents in the world today. I’ll focus on the Internet, and the continuing innovation there, and the changes that creates; and I’m sure as you listen to President Hu, you’ll be thinking about globalization because, of course, China has emerged as the leader in taking advantage of and participating in globalization. And I would say the Internet and globalization are the two most important things going on as Japan plans for its future.

I’ve come to Japan now about 50 times, and it’s always been a great pleasure. From the very beginning of Microsoft, Japan has been a very important country. It’s always been our number two country in size after the United States, and it’s also been the place where we’ve formed our most important partnerships with many of the leading companies here, and we’ve had an incredible opportunity to do innovation together. We’ve also had an opportunity to help grow and shape the market for IT products to try and help with the efficiency of all the different economic activities, and I would say there’s a lot of great work that we’ve done together on that, but as I’ll suggest today I also feel there is much more that can be done.

Microsoft was started based on the belief that the microprocessor would change everything. We saw this computer on a chip as something that would allow us to create the personal computer, and that was very different than the computer that came before. Before the microprocessor-based machine, computers were very expensive, and they were a tool of large organizations and the government. And if anything individuals felt that they worked against them, that they were mysterious in keeping track of data in ways they could not appreciate. But the personal computer was very different. As it became more powerful, it emerged as the most important tool ever to let people express their creativity, to let them communicate, to let them analyze information, and it was used both in the business and at home in a very, very effective way. This vision is what caused me to drop out of my college education at Harvard, and together with Paul Allen start Microsoft. We saw that building software could be a real contribution, and it was only a few years into Microsoft’s time when we were still a tiny, tiny company that we started working in Japan. I built the partnership with Kaz Nishi, and he and I together got to know a lot of the companies here, and did some of the early work in the personal computer industry.

Well, today we’ve come a long ways. Today we have now over a billion personal computers in use on the globe, and so that’s quite an amazing thing. It’s not yet the full achievement of a computer on every desk and in every home, but it’s a very good start. And that innovation that’s taken place over these 33 years, a great deal of it has been driven by the work of companies here in Japan, whether at the chip level, printer level, display level, innovative videogame software, many ways that the work in this country drove the market forward.

Today, I can see even more opportunity in this sector. When we think of software now, we don’t just think of the personal computer, although that’s still very important, we also think of software in the mobile phone, software in the car, software in the TV set, software in many, many places that wouldn’t have made sense before. Even markets that are not yet established, we don’t know exactly when they’ll take off, like robotics, we can see that it’s, again, a magic combination of hardware and software that will really make that a very, very important marketplace.

In the years ahead, one of the most important changes will be how we interact with the computer. It will be very different than it is today. Today we mostly use the keyboard and the mouse, whether it’s the cell phone or the PC, we type. This is great for some things, but it’s also very limiting. I would say in the decade ahead, we’ll finally move to a broader range of interaction that I call natural user interface. We’ll move to where speech input will be very common. We’ll move to where the computer will be able to see who we are and what we’re doing, so even gestures and movement will be one form of input. We’ll have touch sensitive devices so that your very desk will be a computer display that lets you pick information and expand that information, or what would have been a chalkboard or a whiteboard will, instead, be an intelligent display that you can bring up a colleague and video conference, but also bring up business information and navigate that simply by pointing and touching in a very simple and natural fashion. This type of natural interface will change the face of computing, it will make it far more important, but in some ways even less visible, just part of the environment.

Now, in the work environment, this will be particularly important because computing in the work environment is letting us work in new ways. For example, it’s letting us eliminate paperwork, and the leading governments who are adopting e-government practices, over 90 percent of the paperwork has been eliminated. There are countries like Singapore, where when you file a lawsuit, it’s done completely electronically, there’s actually no paper involved in that whatsoever. If you think of an employee who is trying to analyze sales information, the information on the screen you can dive in and see it in detail, and look at what’s the surprising thing and share that with colleagues. It’s far more up-to-date and far more simple to work with than something that’s printed out only at the end of the month, and most people never look at that. And so as we move into this new world, we will digitize all the different business activities.

One element of this is, of course, a change to the phone itself. Instead of being a special device, it will simply be connected over the Internet, and you’ll be able to use your PC screen to see who has called, you can organize your schedule so that if somebody misses you, depending on who they are, they can pick the time that you would be free in a very simple fashion. So communications will be very different. The understanding of trends in your business, whether it’s quality or sales or profit, will be far easier. There’s a whole new trend called social computing where it’s not only just for people at home, but also within a company, finding colleagues who share a common interest, or have worked on a project that you might be able to share ideas on, that type of social networking is coming into the workplace as well, so that people, even if they don’t work in the same location, are able to help each other. The idea of search, where you can find any of the information also applies in this business environment. The ease of looking not just at documents, but finding out what’s going on in the company by using natural language type questions and having the computer understand those, that will be very, very powerful.

The computing infrastructure is changing because of the Internet. In some ways, we don’t really need to have all the computers on our business location. So in some cases, we can just call over the Internet, and use what’s often called the service there instead of having to run the software inside the company. Some of the data centers being built are now literally millions of computers, and the idea that companies like Microsoft and others can then make that capacity available for overload conditions, or backup conditions, or even for normal conditions, that will change the way that we think of computing. You’ll have a mix of computers in your own data center, but then also relying on computers that other people have and connecting up to them through these services. And so that service approach will be an important part of the mix. And in some ways simplify the way that you have to think about moving up to new software, and doing new things.

So when you take all of this together, the continued advances in the chip, the continued advances in the display where projection display will be so inexpensive that on any surface it will be feasible to look at doing display. We combine that with natural interface, we combine that with a new level of software, I think we can say that in the next ten years there will be more change than even in the last 20 years. One example of this is that Microsoft recently announced what we call the Surface, which is a table like device, where the camera underneath with software can see anything you’re doing. And so when you go into a store, for example, a phone store, you can put your phone down, and it will recognize that through it’s vision, and then tell you what the other choices are, what the different plans are, or different phones are. So even in a retail environment that you might not think of as computing intensive, you can see a big change taking place there.

Now this future will require lots of investment. Japan and the United States, I would say, have always been the best at taking a long-term view of investment, and believing that research and development will help define the future, whether that’s done at the academic level through the universities, or through the companies really backing a research type effort. Microsoft certainly is showing its optimism by having the largest research and development budget of any company, which is about $8 billion U.S. a year. Now what that maps to is not a large factory, but rather simply brilliant software designers reaching out to our partners who build the other elements, and thinking through what new things can be done. We have a special approach we’ve used to reach out to Japanese universities, which we call the Institute for Japan Academic Research Collaboration, and that institute takes the leading work in the Japanese universities, and the work our researchers are doing in software, and bring those things together. One thing that might surprise you about that is that because software is so important to all the sciences, the joint work we’re doing with the universities is not just about pure software issues, it’s also about things like advances in biology, where the amount of information and the complexity of that information really demands a very rich, and capable software. And so only by understanding the needs of the leading people in that scientific field can we make sure that software does the best job for them. That’s really true across all the sciences, whether it’s material science, or physics, or even astronomy, large databases, rich software, rich visualization is becoming very important.

In one of the most important areas for scientific innovation, which is in the energy field, where I’m optimistic that we can come up with a way of providing energy at both lower cost and in a completely environmentally friendly way compared to what we do today, this collaboration between the world of software that can model things in a rich way, and these people who are inventing new energy sources, I think that that is particularly important.

When we think about the Internet, Japan has played a leading role in so many elements of the Internet. The standards in the Internet have been very important, those standards continue to evolve, and it’s through the Internet that we need all the computers to work together with each other. A recent new standard that relates to office documents is called Open XML, and that was recently adopted. Japan was one of the countries voting for that that we appreciate very much. This idea of making it easier for computers of different types to work together, which is called interoperability, is a very important thing, because it means you’ve got flexibility to mix your different systems together. And so for the industry it means that every time you want to do something new you have more choice, because even if it’s a change from what you did in the past, the interoperability makes that available.

Now, as we look at the Internet it’s more than just high speed. The key to benefiting from the Internet is connecting up to the applications. And here I would say there is no country that’s doing as well as they could. For example, in e-government I wouldn’t put either the United States or Japan as the leader in using the Internet, either for the efficiency of government, or for the citizen to easily be able to get at new services.

It is used in the political process in the United States very well. In fact, we see in the current election how the candidates are competing to reach out to voters, and educate voters on new issues, through the Internet. And it’s a very powerful tool, because unlike broadcast TV it lets a candidate get more specific information out, and somebody who cares about a particular topic can find out more about that.

With the incredible infrastructure that exists for the Internet in Japan, there are some areas that really are ripe for more to be done. An example is in education. If we look at the numbers that indicate how many PCs that are in the schools for each student, Japan would be actually  have the least  one of the least PCs of all the developed countries. And it would even have a lot of schools that are not yet connected up to the Internet.

Now, this is at a time where I’m very optimistic that the Internet is going to make a huge change in education. In fact, I believe that even the paper textbook will become obsolete I the next 5 to 10 years. I believe that instead of a paper textbook the student will have a very nice, portable computer, probably a tablet-like device, where reading, and handwriting, recording the audio, browsing the Internet, watching videos, all of those things are very possible. And it will lead to a much richer educational experience. In fact, the cost of doing that would not be that much more than the cost of the textbooks, and yet that flexibility will be amazingly different.

When I was young and I wanted to learn a lot, I had to read an encyclopedia in an alphabetic order. Today the encyclopedias on the Internet are far, far better, with their animation, and their depth of information. I envy young people growing up today who have access to that. Making sure that not just kids who are well off, but all kids, through community centers, or libraries, have access to the Internet and computing, I think that’s a very, very important thing. But, to get the teachers to think through this new curriculum, it’s important to do pilot-type work.

Microsoft has around the world thousands of schools now that have gone to one computer per student, where they have their own machine, and the curriculum is very different. A good example of that is in Philadelphia, what we call The School of the Future. Here in Japan there are not many pilots yet, but last October we announced one in Wakayama Prefecture, that is in its early stages, but already looks like it will go very well. So this idea of changing education, changing the curriculum, having this tool just be a standard way that children learn is an amazing thing.

We also see at the university level that a lot of universities are putting their very best lectures out on the Internet. One of the first to do this was MIT, with what they call Open Courseware. And I personally love the idea that I can go up and watch these courses completely free of charge, and these are the world’s best lectures. And of course, as more and more universities do this, and there’s various rating services, that will become a resource globally, and we can make it easy to localize that content for students all over the globe.

Some universities, instead of trying to compete giving those lectures, will simply focus on the workgroup and lab part, and take advantage of the fact that the Internet allows for this very deep sharing. So I’d say that absolutely education is going to change, and yet only by government encouraging lots of experimentation and driving this forward, will a country be able to seize this opportunity in education, particularly for younger students, is a public activity, and so it takes political leadership.

Another application area that’s very important, certainly for Japan and the United States, is healthcare. If we look at the fact that we have more people living to an older age, we have substantial amounts of the government budget going towards healthcare needs, the idea of applying the brilliant efficiency of the Internet to all of these healthcare related activities, is very, very important. This is another case where I think some of the best examples will come from smaller countries, where it’s been easier to do the integrations of the systems, and really drive the data, the scheduling, the advice, the Interaction, really drive the Internet to be a key way that that is done

Doctors need lots of data. They need up to date information, and they need checklists, they need to know drug interactions. These things can be far better if they’re done with data. For the patient, the idea of being able to see their healthcare record, and being able to control who sees that, and yet share it between different specialists, who it’s not just on paper, but if I have an accident when I’m traveling that I can give the permission for that to be used, that’s a very important thing, or if I have a relative who I’m trying to help manage their healthcare, if they give permission, my ability to look at that record, and make sure that I’m helping them in an efficient way with this Internet enablement, that becomes very important.

Standards around the privacy rules, the interoperability and the standards are very important. So like we have in the United States where we’ve driven standards like HL7, we’re working with a group here to promote the idea of the connected health platform. Again, this is an application that will not really take off unless the government plays its role in terms of providing leadership.

Another thing that we expect will change very dramatically is the TV viewing experience. Today that’s a broadcast experience, and it’s not very personalized, it’s not very interactive, but in the countries where all the TV shows are now available on the Internet, that is starting to change, where the magic of software is making it so when I watch a news show, if I see a topic and I want to learn more, I just indicate that, and I see more. If there’s a sport that I don’t care about I can skip over that information. The weather forecast for different locations might or might not be of interest to me.

The videos that I want to see may not be the most popular. Maybe I want to see my child’s sports event, that somebody with a great, high definition camera filmed and uploaded to the Internet. Well, my TV guide in my living room should display that that’s available to me, just like it does those other shows. Imagine something like the Olympics, the Olympics are a great example where interactive TV is far better than just a normal broadcast experience. If I work during the day and I want to go home and see the highlights, and pick each of those, I want that interactive capability.

In terms of this interactive TV, the situation in Japan is somewhat of a paradox. Japan has, in terms of the speed of its Internet capacity, the best of any country in the world, and yet in terms of moving the content over, and driving the kind of experimentation and new ideas, that’s not happening, because the content is not yet out there. And so another opportunity that, with the right steps, Japan is well positioned for.

So I think you’ll get a sense that I’m very optimistic about innovation. As we continue to invest in young people, knowing the sciences, getting lots of them to go into science and engineering, that’s been a huge strength for Japan. As we drive these new products forward, and innovate in the software that empowers people in new ways, I think there’s no limit of what can be done. Even the toughest issues, like the environmental challenge around energy, I believe that innovation will provide a very strong, and effective solution to those problems.

So I’ll just say in closing that this is my  the last time I’ll address this group as a full-time employee of Microsoft. Some of you may know that starting this summer I’ll change to be a part-time Chairman of Microsoft, still very involved in the software work, but putting my full-time work into the work of the foundation, the Gates Foundation that my wife and I have put together. In that role I will bring the same optimism that I have, and start to think creatively about how companies can play a role in terms of putting some of their innovative work, not just where the market is strongest, which is often for the rich consumers, but also putting some of that energy and innovation into things that can affect the poorest 2 billion, that are living in a number of countries, and still experiencing very tough problems.

I often refer to that as creative capitalism, where businesses are very good at doing things, and with the right partnerships I think they can have a very broad effect. Certainly, I know a lot of the companies here view issues like that citizenship is very important. And I hope together we can come up with some ideas to take breakthroughs and bring them to everyone, including in the poor countries.

So I’m sure that I’ll continue the dialogue that I have with you, both in my role as Microsoft, and perhaps somewhat in my role at the foundation. So let me just close by thanking you for the great partnership that we’ve had, Microsoft has had with so many of you, and the great opportunities we’ve had to work together.

Thank you. (Applause.)