Brad Smith: Creating Opportunity Through Technology

Remarks by Brad Smith, General Counsel and Executive Vice President, Legal and Corporate Affairs
Tsinghua University
Beijing, China
November 8, 2011

It’s a real pleasure for me to be here, thank you. That story is true, I actually started to use a computer when I was a law student, when I was at law school at Colombia University in New York, and the very first software program I ever bought was version 1.0 of a brand new software program that had just been released called Microsoft Word. The year after I graduated from law school I spent the year as some students do, looking for a job, and I happened to work for a judge in a very large courthouse in Manhattan in New York City, and it just so happened that I was the very first person to bring a computer into that courthouse. I brought in the computer that I had been using as a law student, so when I moved to Washington DC to work in a law firm, I vowed that I was not going to give up my computer. There was no way I was going to go back to paper and pen again. And so I said I would take the job if they would give me a computer, and they did, and it was a very happy relationship.

That was quite a while ago now! Well, it was 25 years ago, and in some ways 25 years seems like a long time and in some ways it seems like just yesterday. But it is amazing to think about how much has changed over the last quarter of a century. It is a real pleasure for me to be here at Tsinghua University in the year 2011.

Steve Ballmer, our CEO, spoke here 11 years ago in the year 2000. Bill Gates, our Chairman, was given an honorary degree in 2007. And, of course, 2011 is a very special year. I know it’s a special year for Tsinghua University, because it’s your centennial. And I know on April 24th of this year you had the opportunity to celebrate the university’s 100th birthday.

Interestingly though, the year 2011 is a very important year in two other respects for information technology here in China. 2011 is a year like no other, because although the personal computer was really invented around 1980 or 1981, 30 years ago, every single year until this year, the largest market for personal computers was the United States. That is no longer the case – this year, the year 2011, China became the world’s largest market for PCs. 22% of all of the computers sold in the entire world this year will be sold in China. In addition, in all probability 2011 will be a special year for a second reason, because it appears that by the end of December China will become the first country in the world to have 500 million people using the internet. And as you all know, there’s only one other country with its current population that can even think of reaching that threshold.

So this is a great year not only for a great university, it is a great year for a great country, and the real arrival of China at the preeminent rates of importance for our entire industry on a global basis.

When I think of the 500 million internet users in China this year, I can’t help but think back to the day just a couple of decades ago when Steve Ballmer and Bill Gates together, just out of school themselves, talked about their dreams for Microsoft, our company. Bill was trying to persuade Steve to come up to the Seattle area to work with Microsoft, and as part of talking to Steve; Bill said “Steve, you have to appreciate how much the world is going to change. There is going to come a time when there will be a computer on every desk and there will be a computer in every home.” And yet when he said that, just 30 years ago, it was a wild dream. Very few people could imagine that dream coming true. In fact, the dream seemed so far-fetched that the CEO of the second-largest computer company on the planet at the time – a company called Digital Equipment – said the following: “There is absolutely no reason for anyone ever to have a computer in their home”. That company no longer exists. It shows the importance of choosing the right dream.

Here we are in the year 2011 and I think it’s a good moment not just to look back and think about how far the world has come, how much our industry has changed, but to look forward as well. To look forward not only to China, but also to the world, that how technology is going to change the world.

So this afternoon I’d like to talk a little bit about where we at Microsoft see technology going. Then I’d like to talk a little bit about the challenges and the opportunities I think this creates for a country like China and for a company like Microsoft.

As much as computers have changed over the last 30 years, in many respects we’re at the threshold of even greater changes that will unfold over the next decade. And at Microsoft we see these changes being driven fundamentally by three things:

The first is the evolution from a world that was principally focused on one computer in the house – the personal computers – to now a multitude of devices. In fact, if you think about where computing is going, it’s pretty clear that for many people in the world there will be three or four computers in their lives. There’s the computer that is their phone – the smart phone; there’s the computer that is a PC – it’s a laptop; there’s the computer that people may carry around in other situations – a slate or a tablet or an iPad; and there’s the computer on the wall – the television, and in many, many parts of the world is being connected to computer devices, like the Xbox that Microsoft makes. And so fundamentally we have seen all of these computers being used by people in so many different parts of their lives.

And the second trend that is really helping to accelerate these multiple computing devices is the emergence of what we call cloud computing. It’s like a lot of words coined by our industry, if you will, in terms of people trying to understand it, but at its core it’s really very simple, and it has been around for a long time. It really refers to people running software not on their own device and not on a server, but in a data center that may be located half a world away. For over a decade this kind of software as a service has been popular in many different situations – for example, email; anyone who has used a cloud based email server, such as Hotmail or Yahoo Mail or many others has in fact been running software in the cloud. Similarly, anyone who has done a search on Baidu has entered in the command on their laptop or computer, but of course the software really was running on a server in a data center located somewhere else. And yet in the blink of an eye the results of that were returned on their computers sitting in their house or on their desk.

Now we’re seeing a new revolution when it comes to cloud computing. In part it’s being driven by advances in broadband and other communications technology, but it’s also being driven by new advances in computer and software technology as well. At Microsoft we’ve created a new operating system, a version of Windows, for the data center; it’s called Windows Azure. And the software that enterprises – whether they are universities or governments or businesses – have created in the past to run on server computers increasingly can be written instead to run in the data center.

You might ask why people would choose to do that. There are a lot of good reasons. First, it’s a lot cheaper. So many places, in Beijing or around the world, so many buildings that you go in, have a room that no-one sees; it’s called the server room. And the server room typically is climate controlled, and it has several server computers in it, and if the institution is running an email service like Microsoft Exchange or has a database program, it’s probably in fact running on the computers in the server room. But server rooms are fairly expensive to maintain. I mean, after all, people have to go buy the hardware, they have to put it together, they have to manage the software, they have to go into the server room every time something breaks or fails to work properly, and for most institutions, by definition, this is not their core competency. In contrast, when a company like Microsoft or a company like IBM or others builds a data center, we are able to invest in a much larger scale. And we’re therefore able to take a lot of the cost out of what would otherwise require substantial investments by institutions to maintain the server room.

So by moving software from the server room to the data center, computing becomes cheaper. Not only though does it become cheaper, it really becomes in some ways a much more agile or nimble opportunity for enterprises. Because just think, if you want to add another server to the server room – someone has to go buy a computer; it has to be delivered; it has to be plugged in; it has to be connected. And yet if you’re an institution and you’re using cloud computing, you simply tell Microsoft that you want another server to be added to your capacity, and instantaneously it comes on exactly when you need it.

So we’re seeing cloud computing, more than anything else, change the economics of software use, and these changing economics are driving more software into the data center, and that fundamentally is also making it possible for people to connect all of their computing devices. So you can take a photograph on your phone and have it appear immediately, if you want, on your laptop or PC with something like Microsoft’s SkyDrive service. And the cloud therefore is a fundamental levering tool for all of the computing devices that are becoming more popular.

There’s a third technology trend that is also going hand in hand with these multiple devices and these cloud computing services, and this is a special area of focus and investment for us at Microsoft. It’s what we call natural computing, and it really consists of two things – the development of the natural user interface and the development of what’s called natural language processing. If you think about the user interface for computers – that computer that I asked the law firm to provide me with – back then it was called character based processing – all it could show was letters and numbers. And then the industry changed; it moved to what was considered to be the graphical user interface, which, of course, is the interface that all of us are used to seeing with the mouse and the pixels on our screen.

Now we’re moving from the graphical user interface to the natural user interface, and it’s really characterized by the ability of people to interact with computers in new ways. If you have a smart phone, you expect to be able to touch it, and the computer screen recognizes your touch. If you have the Xbox in what we offered last year – a new product called Kinect – you’re in effect looking at a screen that is too far for you to touch, but you can gesture and simply with a sweep of your hand, move from one program to another. You can even play games, and the games themselves recognize what you gesture – you can play ping pong with the best ping pong players in the world, or you can try to become one of the best electronic ping pong players yourself if you choose.

And in addition to touch and gesture, it’s just so clear that the future of computing is very much going to involve voice as well. Increasingly we are getting to the point where we can talk to the computer and the computer talks back. Or sometimes it happens the other way around. We have a new version of software that we call Windows Phone 7.5; it will be available here in China in the coming months. As is often the case at Microsoft, I get to try our new products before they’re out on the market – that’s actually one of the really fun things about working at the company – but it also means that I’m sometimes surprised because I get the product before they really have an opportunity to tell us what’s in it. So a few months ago I had this software in my phone and I had the phone in my car and my phone in my car was connected to the speakers in the car by a Bluetooth connection. And I was driving along and suddenly the phone said to me that it had a text message for me; I didn’t know how the phone could do that! It asked me if I wanted the phone to read my text message; I thought, well sure, why not, we’ll see what’s going on here. It turned out it was a message from my wife. The phone then asked me if I wanted to reply; I thought, well sure, why not, so I dictated a sentence to reply and then the phone asked me if I wanted to hear the message before it was sent so I could make sure it was right. I thought that was probably a good idea. So it read me the message and then it asked me whether I wanted it to send the message, and I said “sure, go ahead and send it”. Now, in the United States, in the State where I live, it’s actually against the law to drive and be texting at the same time. My wife knew that I was driving so her first question was “what were you doing responding to my text message while you were driving?” I explained I wasn’t having to use my thumbs at all, I could use my voice – it’s a new feature in the new software, it’s pretty cool. And it just underscores the new ways in which the user interface is becoming more natural.

And not only is that based on the ability a computer to recognize voice and gesture and touch, it also reflects what we call natural language processing. The ability for computers increasingly to talk in words like we understand and the ability for us to talk in words and have the computer understand them as well.

For all of the advances in search technology, it is today, in many respects, quite primitive. Try using a verb in a search engine, it doesn’t tend to understand what one is saying – it really only recognizes nouns. And so, for example, if you’re booking an airline flight and you want to figure out how to print the boarding pass, if you type into a search engine “print the boarding pass”, it’s likely to take you to some blue links that have nothing to do with what you in fact want to do. And yet with the kinds of investments we’re making – actually just here in Beijing – computers are going to have this ability to understand people to really a far greater degree in just the next few years.

So we can put these three things together – the new computing devices, the cloud computing services and more natural computing – you have the makings for another computing revolution. And this computing revolution will unfold over the next decade in ways that will create new opportunities and new challenges – for companies, for countries, for governments, for people young and old alike. The opportunities are really exciting; new industries will be born, new companies will be born, new jobs will be created, new careers will open up especially for people of your generation. But at the same time there are many new challenges that will emerge as well. New challenges as societies address new issues such as privacy and security, and as people have to grapple to develop the new skills that the new industries and the new jobs will require.

So it really will rise fundamentally for people around the world new questions about how to make the most of these opportunities and how to do the best to address the challenges at the same time.

I think it’s particularly interesting to pause and think about what all of this means to China. Because China in some respects is like every other country in the world, and in other respects, in some ways, it is unique. It’s really unique in a few important ways. First, as you know, there just is no place in the world that operates with the potential scale that exists here in China. There are today 485 million internet users, and to put that into perspective, that means there are more users of the internet in China than there are internet users in the United States plus the United Kingdom plus Germany plus Canada combined. No other country today has to think about developing and using the internet at the scale that exists here in China.

Now in some ways China has really emerged and progressed so amazingly over the last decade in terms of the expertise that now exists in the country, expertise that in many respects started here in this university, and has found its way to so many places – companies like Microsoft and Chinese companies as well. Already, if you look at market capitalization, six of the 25 most valuable internet companies in the world are headquartered and based here in China; two of the top ten – Baidu and Tencent – are headquartered and based here in China. A decade ago it was zero out of 25; it is amazing to think about what it could be a decade from now. So this expertise has really come together in a very short period of time, and it has positioned China remarkably well for future success.

But at the same time there are other areas where China’s infrastructure is still emerging. One relates to broadband. Although there are 980 million cell phone users here in China, only 10% – 98 million – actually have access to 3G services for mobile internet usage today. China, like many, many countries around the world, will need to invest in promoting broadband infrastructure in order to make the most of the opportunity that this new computing revolution has to offer. We’re seeing this around the world – just a few weeks ago I was in Latin America and I was in Africa, and it was amazing to see the government policies that are being pursued to help encourage the development of super-wifi or much higher speed wireless broadband connectivity. It opens a new door, not just in urban centers like Beijing, but in the rural parts of China and other countries as well.

In addition to the broadband infrastructure, it’s just so clear that there’s also an important opportunity for China to focus on its legal infrastructure as well. It really is a striking comparison to think about, for example, how long intellectual property protection has existed, first in the United Kingdom and then in the United States.

You heard a few minutes ago that it was 224 years ago when the United States, in its founding document – the Constitution – empowered our Congress to protect intellectual property through patent and copyright laws. It actually reflects one of the truly amazing coincidences in the history of the United States, because it was during the summer of 1787 that two amazing things happened at the same place at the same time. It was in Philadelphia in Pennsylvania in the summer of 1787 that the founders of my country, the United States, came together to write a new constitution. Philadelphia happens to be, like a lot of major US cities, on the banks of a large river. In this case it’s the Delaware River. And the eastern part of the United States, like the eastern part of China, is characterized by some very important rivers. In fact, for the people who were expanded in the United States at the time it was very clear that the country’s wealth would largely depend on people’s ability to move up and down these rivers, to transport goods and people. And there was a dream that existed at the time. The dream was that people would harness the power of steam to create boats that could move under the power of steam and not be dependent on the wind and the power of sail. Well, at this time there were two individuals who were, if you will, the Steve Jobs and Bills Gates of their era; they were both racing to invent the first steam boat. And one of them, a man named John Fitch, was working on his steam boat, on the banks of the Delaware River, in Philadelphia, in the summer of 1787. And in August of that year something amazing happened – he got his steam boat to work. And so it was in an afternoon in August that everyone who was attending the constitutional convention took the afternoon off, and they went for a ride on John Fitch’s steam boat. Not surprisingly, they were amazed, because one week later, without a single dissenting vote, the Constitutional Convention decided to add this clause that you heard before – to give to the Congress the power to protect copyrights and to protect patents because they understood that it was precisely this kind of step that would foster innovation and unlock the future.

And there’s a great irony in this story because of the scientific method that was so poorly developed at the time, just two months later John Fitch’s steam boat broke down. And he couldn’t figure out how to get it to work or work again.

Those at the Constitutional Convention gave the constitutional authority to the Congress to protect intellectual property laws; it actually took a number of years to get that system of law up and running. And it was actually 20 years later, in 1807, that the steam ship finally became developed to the point that it opened up the rivers of North America and ultimately the rest of the world as well.

But the lesson was never lost, and in fact this focus on innovation in intellectual property protection became a key staple of what enabled the United States to emerge, not only as an important country, but as a country that decade after decade, generation after generation, focused on innovation and the advancement of technology.

Obviously this focus on intellectual property does not have roots that are nearly as deep here in China. But over the last decade intellectual property protection has assumed a growing role in terms of investment here in China, and in discussion and in public debate. And during the last year in particular and through the steps of the State Council of the Chinese government, we have started to see new progress in protecting intellectual property, even for those things that are as easy to copy as software. And while the road ahead is long and there are many steps to be taken – there is still very wide-spread piracy of products like software here in China – it is really encouraging for someone like me, who’s been coming here for 20 years, to be able to come here this week and see the kinds of steps that are unfolding. These are the kinds of steps that will not only attract additional investment from companies like Microsoft, even more important they are the kinds of steps that will get people of your generation new opportunities to create new products and to build new companies.

And so by focusing on technological infrastructure and legal infrastructure together, it is clear that China has new opportunities to move forward. Ultimately, while I think it’s right for people not only to ask “what can we do” and “what do we want our government to do”, but to look at companies like Microsoft and ask us too, what are we prepared to do, what can you count on from us to help this country and technology here really go up? And I think especially at this place, Tsinghua University, it’s more than fair for you to say, “Tell us not only about your words, and show us your deeds. Show us what you’ve been prepared to do, and show us what you are going to do in the years ahead”. Because I think it’s right that multinational companies like ours should invest in countries in ways that benefit the people who are here.

And that in fact is what we have strived to do. If you actually look at what we have the opportunity to do, I think it is our investment, not only in innovation but in people that can make the biggest difference in any country where we have a presence.

One of the really smart things that Bill Gates did when he got Microsoft really growing was to recognize the tremendous strength in IQ and the talent in engineering students that existed here in Beijing. That’s why we have one of the world’s greatest researches and development centers just a couple of kilometers away in Microsoft’s Asian Research and Development Center. We have 3,000 people who work there every day, many of them graduates of this university. And these individuals have driven some of the really important advances in computer science, not just for our company, but for consumers and for the industry around the world.

This is the kind of investment that we’ve been focused on sustaining each and every year. We focused not only on investing through our own innovations in our own research and development center, we focused on partnering with other companies as well. Here in China Microsoft has 4,500 business partners, and these companies employ over 1.4 million people who are focused on creating software and tools and hardware that work with Microsoft products. And we focused not only on partnering with them on business opportunities, but on licensing intellectual property as well. We’ve entered into over a hundred patent licensing agreements around the world, including important patent license agreements with companies here in China. So they can make the best use, under an appropriate arrangement, of our intellectual property rights.

But ultimately, it’s not just about innovation, it’s about manufacturing. That’s why we at Microsoft manufacture the Xbox here in China. We manufacture keyboards; we have service centers here in China that employs thousands of people in key manufacturing and support across the country. It has become an important opportunity for us to serve the world by working with people in China.

And beyond innovation and manufacturing, I think in some ways the single most important thing we will have to do as a company is reinvest in young people. Because we recognize that if a technology company is going to succeed, it constantly needs to help create a new generation of people with the technical skills that add to the richness of their creativity – not just for working for companies in the industry, but working for customers and others who will make use of the products we create.

This is an important issue, not only in China, it’s an important issue around the world, and in fact I think it goes to one of the really important issues of our time. A decade ago many people in our industry and governments around the world talked about what they called the digital divide. It referred to the fact that some people had access to technology when other people did not.

Today, we need to focus not just on the digital divide; we need to focus on what we call the opportunity divide. The opportunity divide refers to the fact that there are some people who have access to skills, they have access to a great education and they have access to the opportunities to turn that education into exciting new careers. But there are many other people who do not. The truth is, all of us in this room share one thing in common: we’ve been extraordinarily fortunate to grow up on the right side of the opportunity divide.

But it doesn’t matter what country you’re in, whether you’re talking about migrant youths in China or people in the United States who are not graduating from high school or getting access to college. There are many people today who are not nearly as fortunate as we are.

That’s why we as a company have been focused on trying to help bridge the opportunity divide. It is not a divide that can be bridged by any single company, it is not even a divide that can be bridged by a government acting by itself, but it’s so clearly a divide that all of us need to work together to help bridge.

Now when we think about the needs of the next generation of people, the first thing we think about is empowering them with the skills they’ll need for success, and one things we’ve learned is if you’re going to empower great young people, you have to start with the people who are their teachers.

Now here in China we’ve put out a digital curriculum that has reached now 4.4 million teachers across the country, and we’ve provided advanced training for 144,000 teachers so they’re better equipped to provide technology training to their schools.

But of course, you need to reach students directly – that’s why we created a program called Dream Star. The focus of the program is to provide free software tools that can be downloaded by students who want to focus on their information technology skills. Here in China that software has been downloaded more than 1.2 million times. And we need to reach students not only in schools, but in other places where people spend their day. Yesterday I had the opportunity to announce some really important partners here in China, during the opening of the 47th community technology learning center that Microsoft has supported here in China. This particular center we hope will reach 10,000 migrant youths over the next few years to give them access to the kinds of technology skills that will open a brighter future for them in the types of things that they want to pursue.

One need to do more I think than simply empower people by helping them develop skills. One needs to help them imagine the world of opportunity that exists. To excite them the way the Bill Gates of the past was excited to go focus on computers.

That’s one reason that we have a thousand internships every year just here in Beijing. So that university students who are focused on technology can spend their summer working at a place like Microsoft. And you’ll probably be encouraged, if not surprised, to know that since its inception that 20% of all of our interns here in Beijing have come from one university – this university.

And it’s not just about helping people imagine the opportunities that will take them through internships – we’ve created what we call the Imagine Cup. It is like the World Cup for people who want to create software. Last year over 300,000 students around the world participated in the Imagine Cup; there were over 40,000 students from China that participated. And when we finally reached the final stages, one of the silver Imagine Cups was won by a team consisting of students from Tsinghua University. Students who have developed a new program to focus on health needs did it in a way that made computing skills more accessible to other people by coupling health, with of all things, the harmonica so that music and health could come together in a way that would really appeal to a new generation of computer users.

Well, ultimately we hope to do more than help people imagine these opportunities, we hope to help people realize their potential as well, and that requires that we work with people to help them get jobs as they graduate from universities, and ultimately help young people start new companies. We have a program called BizSpark; it’s a program that enables us to invest in new companies and, among other things, provide these things with free software and technology tools. Here in China 625 new companies have come to life, in part with the help of this program. In fact, one of them is a company called Gridsum that was created by a 2007 graduate of Tsinghua University. It’s a small company today, but it’s a small company that, like Microsoft 40 years ago, has very big dreams. It focuses on web and analytics, and its customers today not only include Microsoft, but CCTV and Shanghai Media Group and Coca-Cola. It’s the kind of success story that information technology makes possible. Our goal is to help 3,000 new companies come to life here in China over the next few years.

If we can continue as a company, and together with many other companies and in partnership with local and national governments, continue to help young people, your generation, focus on empowerment through skills and imagining the possibilities and realizing their potential, this to me is one of the great contributions that we can hope to make.

In conclusion, I think it’s pretty amazing to sit where you sit today and think about the future, because if you’re going to be entering the workforce in the next year or two or three, there’s a very good chance that you’re going to have the opportunity to work until the middle of this century. Just think about what the world in the year 2050 can look like if we took a technology tour. Unfortunately I don’t think I’ll have the opportunity to work that long. But I’m quite excited about what even the next decade will bring, because when I think back to that original vision of Bill Gates, I think over the next decade we’ll start to realize a world where there is a computer on every desk and there is a computer in every home. And I think we’ll see a world where there is a phone that is a computer in every pocket, and I think we’ll see a world where there are computers on many walls; there’ll be computers that are at the front of classrooms and there’ll be computers at the front of living rooms – they’re just TVs that become computer-connected devices. And just as computing changed phones over the last decade, they will change television over the decade to come.

We will have a world where there will be more computers for more people than ever before. And even more than that, if people at companies like Microsoft do a good job, and people like you enter the workforce and do a good job, we will make these computers much more powerful and useful tools for people. Because as exciting as it is to think about the future of technology, what is far more exciting still is to think about what we all have the opportunity to do to ensure that technology fulfills its fundamental mission of creating better lives for people.

Thank you very much.


MC: Thank you very much Mr Smith for a very interesting speech. In 45 minutes you’ve briefed us on the history of technology development, where technology is heading, and also the broad picture of 2050. We now have some time for questions and comments, Please.

Q: Okay. Mr. Smith, first I’d like to welcome you to Tsinghua. Thank you for bringing us such an informative and thought provoking speech. As everybody knows, that Microsoft is a global entity that is in business management, in technology innovation, and of course, in making money, People like you have made great contributions so we can make life more convenient and more enjoyable. But I think we can make enough innovations to take care of people; perhaps it’s time to make innovations to take care of the environment. As you have mentioned earlier, if we have more technology innovations we will have more computers. This year is very important for the world as well as for the country of China. But I think probably it’s also for another reason. Just a couple of days ago the world witnessed the birth of the 7 billionth baby, so with more people and with more computers I think the questions about our environment, our ecosystem, will be more and more unbearable. I’m a law student, so my question is, are there any technology and also legal visions in the United States of America to address such a problem, I mean the electronic waste? Thank you.

Brad Smith: That’s a really good question, and I think it’s only right that those of us at a company like Microsoft probably focus first and foremost on the areas where we think we can make the greatest contribution. And your reference to electronic waste is an appropriate one because the truth is that computers, and as they have become more ubiquitous, have raised a new set of environmental challenges. Part of it is waste – the other part of it is, frankly, just electrical consumption. A large percentage of electrical consumption now goes to electricity to operate computers or recharge batteries on smart phones and the like. That is probably the area that we have the most that we can contribute to be honest, in terms of where we try to help the world become a better place. So we can focus on a couple of things in particular. One is ways to use software to make computers more energy efficient. So this has been an area of focus over the past decade; it’s why you see so many features now in new software – I’ll make a pitch for people who actually are using a version of Windows that is newer than Windows XP, especially here in China. Windows XP was the best software that we created a decade ago, but if you look at the energy efficiency features in a product like Windows 7, which is on the market today, or a product like Windows 8 that will be on the market in a year, there are just so many more features to turn computers off when they are not being used, to turn monitors off, to turn screens down – all things that use energy consumption.

But then the other area where we realize that we really need to focus is the energy consumption for data centers. Because, after all, if we basically see server computers move from server rooms to data centers, then having energy efficient data centers becomes really important. 35% of the power consumption in data centers typically goes to one thing, and that is maintaining the temperature level at a level that computers will like – in other words, don’t be too cold, don’t be too hot. And so what we are focused on is not only technologies that will help computers to be tolerant to a wider range of temperatures, but frankly, also creating data centers in places where the natural ambient temperature is more friendly to computers. For example, when we created our first big data center in Europe we put it in Ireland, and the reason we put the data center in Ireland was a very simple one – Ireland almost always has a temperature that computers happen to like. It’s seldom hot, it’s seldom too cold. It’s actually friendlier to computers than it probably is to human beings. But, you know, it goes to the kind of thinking that’s going to be required to really reduce the energy consumption that computers will impose on the planet.

Now, I wouldn’t for a moment suggest that those kinds of steps by themselves are anything even remotely close to the complete answer that does your question justice, but I think it illustrates the fact that we all need to focus on a series of perhaps smaller things that together will add up to a much more energy efficient and environmentally friendly planet.

Q: Thank you very much. I am from the School of Economics and Management. Thank you for your great speech. I have one question: today you’ve been talking about the great opportunities in technology and you emphasized about using new technology to create innovation. I have a question about that; I think innovation does not only mean new technologies. Some people advance that technologies are not what we really want. So what do you think of other opportunities other than new technology? And I want to know, how can you compare the model between the models of Microsoft and the models of Apple? I think these two companies are quite different. Microsoft always tries to invent new technology to bring to us, but Apple always wants to create very new user experiences for us, and it has really made a big success in recent decades. So how do you compare these two models of business management? Thank you very much.

Brad Smith: Well, it’s a really great question that you pose, and personally, I think that Apple and Microsoft have both been very successful and great companies for the last quarter of a century. I think Apple has done a very impressive job of innovating around product design, especially for devices for consumers that deliver digital content in a form that is very easy for people to consume. I think Apple has also innovated outside technologies. When you think about the Apple Store – I think the Apple Store is a really interesting example of just innovating in a retail experience for technology. Steve Jobs was criticized for that new development when Apple opened its first retail store. No-one’s criticizing that decision today, and indeed a company like Microsoft is also starting to open retail stores that are aimed at taking the best and taking them even further in terms of innovating in the retail experience.

If you think about Microsoft, in part as a company we have innovated around technology; no doubt about it. But when I think about somebody like Bill Gates, somebody who I’ve had the opportunity to work closely with over the last decade, I think some of Bill’s great innovations have also come in the form of business models. That’s where Bill Gates and Steve Jobs took different approaches 25 or 30 years ago. Steve Jobs focused on creating a great computer – the Macintosh is what it became. Bill said, “I’m going to create great software, but I’m also gonna innovate in the business model, and by innovating in the business model I’m going to try to make it possible for lots of companies to build great computers”. And I think that change in the business model, more than any single step, is what turned computers from being very high-priced appliances to being very low-priced appliances. And that’s what enabled personal computing to spread around the world.

In my job I focus almost every day on other kinds of innovation. One is around business processes. Part of operating on a global scale, even just with lawyers who are in 50 countries, is continuing to improve business processes so you can do high quality work on a global basis at great scale, whether you are applying for visas for 2,000 individuals to come and work at Microsoft in the United States, or 3,000 patent applications – you constantly need to be innovating around business processes. The other thing I’ve found really interesting in a similar vein is the opportunity to get lawyers to innovate in legal processes. I think some of the most important work that we have done over the last couple of years, for example, to protect security on the internet has involved legal innovations. And I think there’s nothing more fun than being able to get up and go to work in the morning and be creative. That’s one of the things we really try to do; we try to hire really talented, smart, energetic people, and then we really try to encourage them to use their creativity, and then in every part of their work, not just in technology itself.

So I think your question really goes to the heart of what’s really an important opportunity around the world.

Q: First of all, thank you for your speech. In your speech you talked about Microsoft providing opportunities for companies and individuals, and I see another way to provide opportunities. That is entering markets for apps stores to actually provide opportunities for many developers who actually do not have a company, they are only individuals. I’m very curious about Microsoft’s view about this, and why I didn’t see a Microsoft market for these individual developers. Thank you.

Brad Smith: I think it’s a really interesting trend that we’re seeing in the industry, and I would actually agree. I think the apps stores have emerged to play a central role in connecting developers with opportunities to reach the global market. The fastest growing new apps store over the last decade is actually for Windows Phone, as we have in just a year, attracted developers who have offered 30,000 applications, and no other new platform has done that in its first year. We were talking, I was talking, to people inside of Microsoft just a few hours ago, because when the new version of Windows Phone comes to China in 2012 I think all of us inside the company are hoping that it will attract a great many Chinese developers who will want to create apps not only for consumers in China but for consumers around the world. I think that most new platforms in computing in the future will have apps stores as a feature just because we know it is by far and away the most efficient way to connect developers with the consumers.


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