MICHAEL E. JOHNSON, JR.: Good evening, everybody. My name is Michael E. Johnson, Jr. I am the Region VI Chair of the National Society of Black Engineers.

This year has been termed the rebirth of Region VI. Our objective has been to revise the customs and traditions that have historically made NSBE such a powerful force in the engineering community.

We’ve been very successful so far. This year we have hosted the largest summer camping conference to get high school students excited about entering careers in science, technology, engineering, and math.

Our membership is at an all time high, with over 1,800 members, which is an all time high at this midpoint of the NSBE year.

I urge each of you to take full advantage of everything this conference has to offer, including the educational and professional workshops, the academic tech fairs, and in particular the career fair.

Let us not forget that we are here to work and fulfill our mission, which is to increase the number of socially responsible black engineers who excel academically, succeed professionally, and positively impact the community. That’s beautiful. (Cheers, applause.)

We would like to thank Microsoft for hosting this year’s Region VI 2007 fall conference. (Applause.)

By stepping up to the challenge and hosting a regional conference of this size, Microsoft is demonstrating its dedication to NSBE. And it is one example why our national membership has named Microsoft as this year’s employer of preference. (Applause.)

On behalf of Region VI, the National Society of Black Engineers, it is both my honor and pleasure to introduce the chairman of the Microsoft Corporation, Bill Gates. (Cheers, applause.)

BILL GATES: Thank you. Thanks for having me. Thank you. (Cheers, applause.) All right, thanks very much. I’ve been at a lot of meetings in this room, but I think you may be the most energetic group we’ve ever had here. (Cheers, applause.)

Well, I hope to get you charged up a little more talking about some of the great things that are going to go on in the years ahead, and particularly about the incredible opportunities that breakthroughs in software will generate. We’re really going to change the way we work, the way we learn and the way we play.

We’ve seen a lot of that over these last 30 years. It was just about a little over 30 years ago when I interrupted my studies and started Microsoft. That was based on a vision that the microprocessor, the computer on a chip, combined with great software that we saw ourselves and other companies doing, could create something magical, a tool of empowerment.

Today, we almost take that for granted, but in those days computers were large, expensive, and intimidating, and, if anything, they were viewed as an enemy of personal empowerment. They were about the large organization keeping track of things or sending out bills that weren’t right, with little punch cards.

Today, we all know that the Internet lets us learn and connect in new ways, and it really lets people publish and share in a fashion that was only available to big companies in the past.

So, I want to talk about where software is going, and why I think we’re just at the beginning, and then also talk about the opportunities for all of you, how a highly skilled and diverse workforce is the key to driving innovation at full speed, and making sure that it’s available not just to the most privileged but really to everybody in the world in the right way.

The microprocessor has been at the center of these last 30 years. Its rate of improvement doubles in power every couple years, and that increase in the number of transistors is not slowing down. In fact, Intel over the next 10 years, and its competitors will be delivering us not just a chip with a billion transistors, but one with over 30 billion transistors.

Likewise, if we look at the speed of the network, wireless networks will be about 30 times faster than they are today. If we look at the quality of the screen, we’re just moving up to nice high-definition screens — a little expensive still, but that’s coming down in cost and going up in quality. So, even creating an immersive experience, even making it so say your entire room you can project up onto any wall the poster you like, the calendar, the map, the thing you’re studying, whatever you want, that digital sense of what you want to see will be easy to project.

We used to talk about a computer on every desk, and now we talk about actually putting a computer in the desk, so it can even see as you’re touching and moving things around. If you think about a whiteboard where you just go up with a pen, well, now that will be a computer screen, so it will not only see what you’re writing, but it will be able to project things, and you’ll be able to touch and move things around.

So, we’re really changing the whole interface. The phones that you carry around are getting a lot better. Those are going to connect up into the Internet, so all the information you care about will just show up automatically. Even if you move over and borrow a PC, as long as you indicate who you are, as long as you authenticate, all your information will just show up there. So, the ability to move around between different devices will be made very easy.

The variety of devices will get larger. For example, Microsoft just introduced a thing called Sync, which is a capability built into a lot of Ford cars, and it will be in even more, so when you get into the car you can talk to the car and all of your maps and media and messages, all the things that you want to interact with are available through simple voice command, including it will connect up to your phone, so you can give commands that will be passed to your phone or give commands to your music device that you carry into the car.

So, the overall picture of what the hardware will look like will be far better than what we have today, the pace of improvement is faster than ever.

Now, to take advantage of that we need better software. We need software that can create virtual worlds, that can take data and make it easy to visualize and understand. We need software that can take all the great lectures in the world and get them online, and have people comment on those, and annotate those, and find ways of doing online study groups where you can talk through material and share with people even if they’re not in the same location.

We need to make software understand documents. Today, we think about Web search, and it gives us some good choices, but we still are kind of on a treasure hunt of clicking on things and trying to find what we want. If the computer could understand our intent, and understand these documents by reading them, not just indexing keywords, then search and the tasks we do could be far, far better than they are right now. So, we’re just at the beginning of what that kind of navigation and empowerment can look like.

One of the ways we’re going to make this happen is by putting a lot of computers on the Internet itself. We often talk about that as “being in the cloud.” So, for example, when you connect up to the Microsoft search or the Google search, those are computers in a large datacenter, and those datacenters will have — today they have almost a million computers, but in the future they’ll have many millions. So, the total processing power is really going to be unbelievable. That’s where things like maps, the files that you want to make sure are always available, they’re going to be stored up there. Even really big computations will be able to be done in that type of new design. So, that will complement the computer you carry around, not eliminate it, but work in tandem with it. It will complement your phone, it will complement businesses having their datacenters.

And all of these things will be connected up in a far more reliable, high-speed way than we’ve had in the past.

If you do something on your phone, even if you lose that phone, the information will have been stored up in the cloud, so as soon as you get a new one, all of the things you care about will be there, just show up in a very automatic way.

Some of the complexities businesses have had setting up computer systems, we can eliminate that because we’ll either do it for them in the cloud, or we’ll automatically monitor and do most of the work of that, even if they’re running those machines in their own premises.

So, doing this requires huge advances in software, what we call models to describe the world so that you’re not writing nearly as much code, rich runtimes that include things like visual recognition, speech recognition, ink recognition, things that remember the way you work; the same way as you have a personal assistant who’s worked for you for over a year, they understand how to help you out far better than somebody who’s helping you on the first day.

Well, what is that knowledge that they gain? How is it that they watch the way you meet or interact with different people? How does that take place? Well, software that is able to watch how you manage your calendar, who you spend time with, what type of e-mail you send to various people, it ought to be able to in the same way learn about you and help you be far, far more effective.

All of the things in the world where buyers and sellers are getting together, where you want to pick a product and know it’s available, the price, the quality, the availability, we’re just at the beginning of revolutionizing those things.

So, we’re digitizing everything; even things that are still not very digital certainly will be 10 years from now. Today, TV is largely broadcast, you tune in to one of many channels that everybody is receiving. In the future, that TV will be connected to the Internet. Instead of getting the same video signal other people are getting, you’ll get an individual signal. So, the ads can be targeted to you, the time you watch the show. Even within the show, if you’re watching the news, the segments you care about, some sports, weather in some places, certain types of news items will get more time, and the things you care less about will get either no time or very little time. If you want to watch a sports show, you might say, yeah, I’ve love to see that game from last night, I only have 20 minutes, show me that baseball game in 20 minutes. Cut out the boring parts and just give me the highlights; that’s how much time I have. Sure enough, that’s the kind of thing the magic of software will find very straightforward to do.

As you target the ads, as you make them interactive, it’s a far richer experience. If you’re sitting watching TV, you can find out if your other friends are watching the same thing, chat with them. It will be a lot like what we call Xbox Live today with video games, but the same thing extended to the video experience.

Today, when we read newspapers or magazines, that’s still largely on paper, and that will move to the screen as the devices get very thin and light, less expensive, and so a tablet where you can write with the pen and read very easily with all the material being digital, that’s around the corner, and it will be far more convenient, easy to take your notes, always have the stuff you want available. Even just textbooks, they’re fairly expensive, you’re always carrying them around. Well, instead of paying for that, you’ll just buy the tablet and pay hopefully really limited license fees then to get the material that you want to get. So, it will be a simpler experience, a less expensive one, and yet far more effective at getting the information that counts and collaborating and taking notes around those things.

So, we’re in a period of very big change. The bet that was really made around software when Microsoft was founded has turned out to be a great bet, but one that we haven’t nearly exploited all the things that can be done.

The part of this that I think is probably underestimated more than anything is how impactful it is when you change the interface. That is, as you move away from just the keyboard or keyboard and mouse, as you move to having ink and speech and vision and touch, this is radical. This brings the computing into a sort of pervasive environment. It’s also important that these screens be bigger and they be everywhere, and they be very inexpensive.

We’re seeing little pieces of this already. You’ve probably seen Apple with their latest phone has the ability to do touch, and that has gotten a very good reception. Nintendo on their latest video game, not a very powerful video game, but — (laughter) — this idea of a 3D controller that you can kind of pretend to be hitting things, that kind of natural interface type thing that’s part of the reason that that product has done very well.

Microsoft has a thing called the RoundTable where if you’re in a meeting, it’s a little device you put in the center of the room, and it has six cameras, so it can take everybody in the room and send that image off to somebody who’s remote but participating in that meeting, and so they can see everyone’s reaction, and it notices who’s speaking and immediately focuses in on that person, and so meetings at a distance can be far more effective. So, as we take this natural interface, it starts to change the way we think about computing.

We have a company called TellMe that’s added to our work on voice recognition, and so on some of the cell phones now you can take and just push the talk button, and say the city and say what you want, like “Seattle pizza,” and then you’ll see the list of all the businesses, you can scroll down, pick the one you want, see the phone number, see the menu, see the map, see the hours, see the rating, whatever is interesting to you, it’s just all there. So, being able to do that with speech instead of trying to treat the phone like a keyboard is a very convenient way of interacting.

Now, to make all of that fast, to make it super reliable, that’s the software work that’s ahead of us.

So, I group all of those things into this area I call natural user interface. I wanted to show you what one of the things Microsoft is doing in this area, which I think is one of the most important, and that’s a very simple concept that’s really touch. So, this is the Surface here. You can see it’s just kind of like a table, this thing right here. Underneath this there’s a computer running the Vista operating system, and it’s got a projector and some cameras, and some very special software. That is, these cameras are watching to see what’s going on. So, when I touch, the cameras see that my fingers are touching down at various different places, and the software is there just to see that and respond in some kind of natural way.

So, what can you do with this? Well, this is pretty good here so far — (laughter) — but maybe we can do something more than that. Say we wanted to do photos, and select that. So, here’s a photo application that I can start up. Say that I’m somewhere and I want to get my personal photos, I just take a card I have and when I put that down, it recognizes what’s on that card, and so I take these little photo stacks, and I can open those up and move these around, select these. (Applause.) I can size those up, down, pick another stack here, bring those out.

It doesn’t have to be just photos either; I can have a little video clip. So, here’s a clip that I’ll start up, and you can see that there, kids just playing around.

So, you can kind of do anything with your photos. You could take and say that you wanted to send one of these off to somebody, make a little postcard or something like that, very easy to do when you have this type of interface.

So, let’s try something else. Let’s say that we wanted to do more of something that was, say, music related. So, we’ll take here and take music.

And so you’ve got a lot of applications, and, in fact, what’s happened is we’ve taken this to companies and they’re coming up with different ideas, because you can do any type of software in here. You can do desks in your office, you can do a desk in a meeting room, you can put maps on here and navigate, that’s very powerful. Here are the ideas, it’s like a jukebox, and at any point you can just pick one of these albums and say, okay, this is interesting, what have I got, and it’s a Bob Dylan collection, and take any one of these songs, carry that across, and put that on the turntable. It’s trying to make it look like a classic turntable there. So, I’ll put things over there.

So, you can have all these different things, or you can take and say, hey, I’d like to take my music player and put that down. When you put your music player down, you have the idea that you could take songs and just load them on to your music player. So, maybe you have some points or something that let you do that, and you can just take these songs and carry them across and say, okay — here I’ll take this one, put that across. All right. Or somebody else can come along with their music player, and I can see, okay, you know, maybe I’d like to take some songs and move them into their device, move things back and forth between what they’ve got, play that. So, it just makes it — I don’t have to read a manual or anything. This idea that, okay, there’s your songs, here’s mine, and we can move those back and forth pretty easily, or we can put them on that turntable, that’s a very straightforward thing.

We have a lot of stores who want to — like if you go in to buy a phone and decide, okay, this is the environment they can use in kind of a rich way to let you put down the products and compare the products, and see how those happen to work.

I’ll just show you one more thing. There’s a lot of fun ones here, but let’s go with this one. This is what we call video puzzle, and it partly shows the idea that you can put objects on this table, and these cameras and the software recognize exactly what you’ve got.

So, here what I’ve got is a little movie, and if I can figure out how to flip this thing around, it’s actually pretty — you’d be surprised how complicated that is. (Laughter.) I won’t try and do it. (Laughter.) I have done it in the past. But anyway, it’s kind of fun, and at any point, of course, if you want to put this away, the software will remember where you are, and you can go off and do something else. So, taking a TV show, classic type of board games, a good example here, you don’t need as much stuff in your living room to do this kind of thing.

So, this actually ships, we have it out now with Software Development Kits for the partners who are doing all the software, but then next year it comes out, and we hope to see it in offices and homes, and really as a kind of standard way that people will start to use computers. (Applause.)

Well, let me talk now about talent and opportunity. Now, Microsoft, like a lot of companies in this country, have done well because we’ve been able to hire great people, starting with myself and Paul Allen hiring our friends, then growing up to hundreds and then thousands, and now it’s kind of amazing, tens of thousands of people that write the Microsoft software products.

Actually, the campus that you’re on right now is a very large campus that’s got various buildings around, including one called building 99. It doesn’t mean we have 99 buildings, but we have about 40 or 50 buildings that are in this area.

This is where most of that software gets written. We spend about US$7 billion a year on research and development, which makes us one of the biggest of any company in the world. And in our case it’s not factories; we don’t have some nice factory to show you. Our factory is people sitting in their office and writing lines of code. So, that’s an investment that we’ll be making new breakthroughs.

Well, the key, of course, is making sure that we have great people and that they’re enjoying what they’re doing, and they work very well together.

So, for us the idea of getting as many people as possible to look at math and science from a young age, look at those courses even as they move up into the university, and then consider careers in all the different activities around software, starting with engineering, testing, program management, marketing, there’s a huge array of things that come together to help customers actually use software in the best way possible.

These are fun and exciting jobs. They’re jobs that pay very well, and the pace is really something because whenever you come out with software, customers love to tell you what’s right, they love to tell you what’s wrong, and you know you can go out and do something new. It’s not like working at a bread company where they tell you that you don’t like the bread, you go back and tell you they don’t like bread anymore, and great, well, we’re a bread company, what do they expect? We’re not going to change our product. But in our case the product we ship today is radically different than what we shipped even three or four years ago, so the choices to be made, the number of brilliant people who have to understand the customers and the engineering and make sure that comes together, that is very, very important.

And diversity we’d say is a very critical element of this, and I apply that in a number of ways. We want to get as many both men and women engineers as possible. (Applause.) We want to get engineers from all over the world, because that’s where we sell our software. Then, of course, we want to get black engineers, Hispanic engineers, every group — (applause) — everyone that we can.

To be frank, if you look at this, there are some success stories, but there’s clearly much more to be done on it. We have some great examples of people who have come to us who are doing amazing work. Kirt Debique, who I was with recently as part of our unified communications launch, is a strong person who’s really working on breakthroughs in the whole way that people communicate. He’s done a lot of multimedia work, been with the company 15 years, and just in the last year took on new responsibilities in that very hot area. He’s originally from the Republic of Trinidad and Tobago. (Applause.)

Another great example is Tammara Combs Turner, who works in a group we have, which is our Idea Agency Innovation Team, and she came from our research group, which is an incredible powerhouse group at Microsoft, and she’s getting her PhD in information science at the same time she’s got a full time job here. She’s very involved in the group called Blacks at Microsoft, and their VP of professional development, and originally from St. Louis, Missouri. (Applause.)

So, those are just two great examples, but clearly there would be a great benefit all around if we can get lots more.

I do want to thank NSBE for honoring Microsoft as the employer of choice for the year. That’s a great honor for us. (Applause.)

Now, we’ve got a long term commitment in this area, and I think we have a lot of people who’ve put energy into making our work there progress well, and so it’s really a tribute to them.

There’s a lot of ways to look at the numbers here. The overall picture is that the United States is not turning out from any group as many of the great engineers as there will be jobs for. There will be a huge number of new computer science jobs created over the next 10 years, and the number of people majoring in those subjects is falling short of that. In fact, those numbers are going down quite a bit.

We can see that as you go grade by grade, that there’s a falloff, a falloff in the total number of people interested in technological work, and a particular drop-off amongst the underrepresented groups, and amongst women.

So, we have to think, what is that in high school, in college really knocks things off track, what makes it unattractive, and what changes in terms of curriculum or role models can make a difference there.

If we look in high school, this is an area that Microsoft cares a lot about, and one that I’ve gotten some exposure to through the work in my involvement in my foundation as well, there’s quite a high level of poor education, including a pretty stunning dropout rate. The dropout rate overall is about one out of three; that is, if you take kids from 9th grade, and you measure all the way through senior year, over a third don’t finish. And if you take specifically African-American and Hispanic students, that number goes to over 50 percent.

That is a stunning number. I remember the first time I heard that thing and said, well, that can’t be right. They must not — did they mean 5 percent, 10 percent? No, it’s 50 percent. And if you look at the way the economy is changing, the opportunities for anyone who doesn’t get a high school diploma, the opportunities will be far more limited. So, the trends are very much working against somebody in that situation.

So, there’s almost this dispersion where if you’re very well educated the opportunities are greater than ever before, and if you’re not, then you’re worse off. So, getting as many people up into this area, and making sure that that is equitable in terms of who’s having those opportunities, I’d say that’s a major challenge for our country. I’d say that the quality of our education for me rises above all the other issues in our country.

There are some trends where we can see some hopeful signs. African-Americans are going into computer science in greater numbers. Since 1995, that number has doubled. Now, we’re going to have to double it again and again to get up to where we should be, but at least we’re off to a good start there.

Certainly Microsoft has a lot of things we’re doing, whether it’s down working in the high schools or working with boys and girls clubs or making software available, helping with new school designs. In Philadelphia we have a thing called the School of the Future that’s got new ideas. We’re a big supporter of the United Negro College Fund. That’s a group that’s done great work and we’ve made sure that they’ve got the latest software and cash contributions that have been very significant there; and other groups like Thurgood Marshall College Fund, the National Urban League. So, I think with the type of work that your group does, and what we’re doing, we can expect to see bigger numbers.

So, the magic of software, I hope we’ve given you a sense for my enthusiasm about that, and that there will be huge opportunities there. And the impact will be pervasive: education will be better, medicine will be better, games will be better, TV will be better. It’s hard to see some place this won’t touch. So, I know it will change all of your activities, and I hope a lot of you will choose to get involved in technology, and to be mentors who can help drive the numbers and broaden the participation.

So, with that, let me make one particular announcement that I’m excited about, and that’s a software grant that we’re doing specifically to the NSBE Educational Chapters. This is a free subscription for three years to what we call our Microsoft Developers Network Academic Alliance.

What this means, if you get the subscription, you get Vista and Server and SQL and Visual Studio, you get basically most of the software we do. So, all the NSBE member students will get to build their skills and use these tools that are being provided on a free basis. So, that’s an investment in all of your future with the opportunities to be IT leaders. (Cheers, applause.)

So, let me invite Darryl Dickerson, the National Chairman, on stage to accept the award. (Applause.)

DARRYL DICKERSON: Truly, truly outstanding. I want to thank Mr. Gates and thank Microsoft. It’s my honor to accept this on behalf of all members of the National Society of Black Engineers. This is yet another demonstration of exactly why Microsoft is NSBE’s number one preferred employer — (applause) — their true and honest commitment to diversity, and also a dedication to the NSBE mission.

Now, as Mr. Gates said, there is wide disparity in the development of engineers within this country. We have a lot of problems, particularly amongst African-Americans. So, this is sort of a bridge, a partnership that will allow us to ensure that we’re developing more technical talent, particularly amongst African-Americans, and I’m really proud of that. This is a great partnership, and we hope to continue it many years going in the future.

Now I’d like to bring up on stage a few people who were instrumental in making this partnership happen: Mr. Michael Johnson, Jr. the Region VI chair, Carl Mack, our executive director, and Cedric Coco, the general manager for Microsoft’s Engineering Excellence. Come on stage, gentleman. Thank you very, very much. (Applause.)

CEDRIC COCO: You guys ready for Q&A?

AUDIENCE: Yeah!

CEDRIC COCO: All right, go in and step up to the mic. Let’s go ahead with the mic over here, mic number one.

QUESTION: My question is, what factors contributed to your decision to start a new company, and how did you know when you were ready to undertake that task?

BILL GATES: Well, I’d say it was a pretty unusual set of factors that came together. When I was only 13, the school I was at got a computer terminal that was connected up to one of the very expensive computers. So, we got free time at night to mess around. At first, the teachers were supposed to help out, but they got very intimidated because they spent a lot of money very quickly on this time sharing computer, and so they ended up letting the students sort of — which was particularly myself and Paul Allen — get involved and really learn the computer, and we ended up teaching the computer classes.

So, then when that chip, computer on a chip came along, we saw something that even Intel, who was making it, didn’t see in terms of how it could be used. So, it was really that insight that this was almost miraculous and incredible thing, and that all that was missing was the magic of software, that’s where we felt that, hey, we just had to go and show that, and fill that void.

In a way it wasn’t that risky, because I could have always gone back to school. When I started hiring my friends, and they had kids and things, then it was more risky, could I pay them. (Laughter.) So, I had to be really sure. And we were very conservative in terms of not expanding our costs until we had the revenue that could justify it. We’ve always been very, very conservative.

So, I’d say it was the idea that there was something quite unique that could be done, and that we felt it was very urgent to go out and do it, and it turned out to be just an amazing opportunity where we were the first to have that vision, and we were able to create a whole industry of software companies and hardware companies around the idea of the personal computer.

CEDRIC COCO: Great, thank you.

QUESTION: My question for you is, how does it feel to have revolutionized the world the way that you have?

BILL GATES: Well, I’ve been very lucky to be part of this whole amazing personal computer revolution. It’s been fun for me. I get to work with very smart people. The company I’ve been involved in can do all sorts of great research. It can play a positive role in society, not just in the United States, but around the world. Then I get both the responsibility and the opportunity to take the wealth that that’s generated and make sure that goes back to society in a way that has the greatest possible positive impact.

So, I consider myself as the luckiest person alive in terms of what I get to do, and what I’ve had the chance to be involved in. It’s amazing, and the fact that we’re not out of things that can be done, and the way that we can make a contribution makes it all the more fun.

QUESTION: You talked a lot about the software industry progressing. If you were starting your company today, what kind of obstacles do you think you would have to overcome in order to have been with your business venture?

BILL GATES: Well, when I actually started Microsoft, I was 18 years old, and so I couldn’t rent a car. (Laughter.) I was so young, and I looked even younger than I was, that at first people were skeptical, but then there was this funny thing that once they realized you do know what you’re doing, they kind of think you know more than you may know. So, there’s always some benefit once you fit into this model of young, smart person.

So, we ran a business that didn’t need a lot of capital. We had an idea that we really believed in, and were willing to work day and night to make happen.

If we were starting the business today, of course, you’d have to have an idea that’s revolutionary. So, you can’t do the same thing, that’s been done. Many of those things now, there’s not an opportunity to come in and change the paradigm. You’d have to have something really radical to build a Microsoft-sized company. You’d have to have a breakthrough in artificial intelligence or robots or something that was so big that the existing companies really somehow just weren’t getting their minds around it, and doing it well.

IBM and Wang and HP and Digital Equipment — nobody has ever heard of them — the companies that were the big companies at that time didn’t get how central important software was, and that you had to license it at very low cost and make it very individual. They didn’t see it, and that’s why we got our 10 or 15 years to really do something incredible. And then even if they thought we were ahead, we were focused, it wasn’t going to be possible for them to do what we had done.

So, you’d better see something I don’t see if you want to start a company now. (Laughter.)

QUESTION: I’ve recently written a paper involving Microsoft Surface and multi-pitch technology. It also has the ability to recognize 52 inputs at once, display product information and maps to the instant, take orders at restaurants and make payment transactions. Do you believe this technology will negatively impact the employment rate of jobs having a lower task variety?

BILL GATES: Having a lower —

QUESTION: Task variety such as waiters, waitresses, information, customer service, et cetera.

BILL GATES: Well, I certainly don’t see some dramatic effect in terms of total number of jobs.

The important thing to remember about jobs is that it’s not a fixed number. That is, as you get innovation, society is wealthier, and as society is wealthier, then you put those people back so that class sizes in school are smaller, so there’s more options so that people have better medical care, elderly people have better care.

One time 100 percent of labor was involved in feeding people, and as automation came into that agricultural business, people were very concerned, what would everybody do. Today, less than 1 percent of the U.S. labor force is able to more than feed the entire country.

Likewise, in manufacturing there was the great concern of so-called Luddites who would destroy the textile mills because they thought, well, with that automation what jobs would be left.

So, the truth is as long as there’s unmet needs, as long as schools aren’t perfect, healthcare isn’t perfect, care for the elderly isn’t perfect, opportunities for entertainment aren’t perfect, there will be jobs.

So, if this can free up jobs that are fairly repetitious and drudgery, then society as a whole just gets that much more capabilities. So, no, I’m not concerned about that.

Eventually as you get 10 or 20 years out, and you get robots that are very effective, then you may say, okay, there are certain kinds of jobs that these robots are good at doing, and you’ll want to make sure that you can make a skills transition if there is job displacement, so you’re helping train the people to do new things, but I don’t think Surface itself is all that significant in terms of changing, reducing the total number of jobs.

QUESTION: My question is how — well, this question is for both of you. How do I get to where you are? (Applause.)

BILL GATES: Do you want to take the start of that?

CEDRIC COCO: I’m probably a little more realistic on the answer. (Laughter.)

I think my advice is fairly simple. I think it’s about passion and drive. I think you set a goal, you pick a target, and you just have a lot of passion and drive. That’s kind of the way it’s been for my whole life. I think that the biggest thing is education is extremely important, as Bill mentioned earlier, and to me it’s a tradeoff on time. When I was kind of the age of a lot of people in here, I remember my friends going out and hanging, doing other things, talking about not studying. I remember when I was taking comp sci classes in college, there was a tendency, hey, you know, you can go the football game and hang around, or you can sit down in the lab to try to figure out why your compiler doesn’t work, and spend there 14, 16, 18 hours. And it’s those tradeoffs I think you make upfront that kind of yield the rewards that you get later.

So, for me it’s about setting a target, setting a goal, and then having the tenacity, drive, and passion to stay the course, to see it out. (Applause.)

BILL GATES: I mean, Microsoft has lots of open jobs for people with the right engineering backgrounds, who’ve really programmed and developed their skills there. These are very high paying jobs and once you get into them, their jobs where the opportunities for advancement are quite substantial, because we’re always going into new areas.

And, in fact, the number of people who mix engineering skills with management skills, that tends to be fairly narrow. So, first there’s the filter of how many engineers are there, but then only maybe one out of six of them really has the passion and the commitment to be a very good manager. So, at every level the people who really pull together the right skills are going to have those opportunities.

In my case there’s certainly an element of luck that comes into it as well. From a young age I happened to be exposed to something that was a huge change, and be around Paul Allen, Steve Ballmer, people who I was able to team up with. So, you’d better be very lucky to duplicate what I’ve been graced with.

QUESTION: I’ve wanted to first of all thank you for creating an industry which allows me to work. I work as a cryptographic analyst in the area of PKI, identity lifecycle. I’m very interested in your new product there.

I want to apologize also about not making this week’s shareholder meeting. I’m usually there but we had other things going. (Laughter.)

So, I wanted to talk to you though about your foundation. My wife is a principal, and I have a son — by the way, she’s formerly a principal in the Small Schools program. My son also is a recipient of the Millennium Scholarship as well.

BILL GATES: Great.

QUESTION: So, we have Small Schools over here, and then we have Historically Black Universities and Colleges over here, and then we have this massive dropout rate that you had cited earlier, 50 percent and above. What do you think your foundation can do to help bridge that gap between the earlier years of education and the age when engineers like the ones we have here begin to enter those Historically Black Universities and Colleges, and then enter into the professional workplace?

BILL GATES: Yeah, to be clear, Microsoft is involved with the UNCF colleges in terms of grants and things like that, but also the Millennium Scholarship is not particular to any college. You can take that scholarship and go wherever you want to go, and there’s quite a mix of UNCF schools, as well as other schools that people take advantage of that with.

The bulk of the money spent on education is spent by the government. That’s just not going to change. It’s a massive amount of money, even compared to what a large foundation like mine has available.

So, the role of the foundation is much more about what kind of new approaches the design of the school, the incentive systems, the curriculum, the use of technology, what kind of approaches can take the latent talent that we all know is there, and make the courses interesting and engaging and really get people to want to stay in high school.

You interview dropouts and they say, “Yes, it was boring. I know I should have stayed, but they really didn’t encourage me. There were a lot of things that set me back. I missed one thing, there was no way to go back and get caught up on that.” So, the system isn’t working for a lot of people.

What the foundation is doing, we’re specializing just in high schools. That’s not to say that K-8 is not incredibly important, but if you want to improve something gigantic and complex like this, you’ve got to focus. There are others who are more focused on pre-K and K-8, and we’re focused on high school design, which there hadn’t been many people.

What we’ve got now is 1,600 high schools around the country that some new approaches have been taken. They’re smaller, kids take less classes, they’re more thematic, and the teachers are expected and measured in a fairly different way than in the typical school, which has caused some tensions in terms of how the union likes to see things being done.

So, these are pilot schools, and we’ve been doing this for five years now, and the data on the schools that we started earlier that include a lot in New York City is that the graduation rates are up very substantially. The schools we replaced there were below 50 percent graduation rate, and now are at about 76 percent graduate rate. That’s not perfect, but it’s a very substantial increase. If you look at — (applause) — attendance or lack of violence or teacher satisfaction, many of the factors that really help are there.

Now, that’s taken not just the foundation to come in but Mayor Bloomberg and his chancellor, Joel Klein, it’s taken a lot of political consensus and willingness to stand up to the way things were done in order to achieve those results. The idea is that that’s done without the cost per student being higher than what it was in the previous design.

So, the hope is that these ideas can spread. Obviously there are breakthroughs in curriculum and technology that as time goes on, there are greater opportunities. Likewise this School of the Future that Microsoft has done, employs a lot of new approaches.

So, the idea is to have model high schools, and ironically a lot of it is about challenging kids, in some cases less subjects at a time, and so you’re way more in depth doing way more projects on the subject you’re taking as opposed to just sort of a very light touch where over the course of the day it might be six or seven different subjects that you’re kind of shifting between. So, some of these approaches I do think are going to make a difference.

QUESTION: My question is going to be very much in the form of a story form, but is a short story, but at the same time my question is very simple, because I’m from Africa, and that’s how we do it. (Laughter, applause.)

When my dad, for example, would buy me a shoe, I would sleep with it because I was so happy about it. Then after five days, I would take care of it in the same time it belongs to me. So, having studied the company, you are so hyped up and maybe even so fascinated by the idea that you are now out of this big thing that’s going to come to revolutionize the technology of today. So, when did you sort of come down or are you still up? (Laughter.)

BILL GATES: Well, I hope I understand. Certainly when the company was started, I was very young, and I remember we used to stay in for days at a time, and work straight, and I didn’t take vacations, I just didn’t find it as interesting. As I’ve gotten older, things are a little more steady state in terms of going home at night, going home on weekends, and really building a company that lets the people have some degree of work/life balance in what they’re doing.

I wouldn’t say that the passion for what we’re doing is any less. In fact, as it’s gotten so big, this ability to really impact schools or impact people who are blind or look at medical services around the world and how the breakthroughs that come from using these tools will really change things, I’d say it’s even more exciting because it’s really the dreams are coming true.

So, in the right sort of way, the energy and passion is every bit as strong as ever, and we’re accommodating lots of different work styles. I do take some vacation. I’m probably thinking about work some of that time. So, yes, big passion is still here, and that’s key to success.

QUESTION: I’d like to know what’s the future of Microsoft globally based on the declining dollar value, and the current U.S. job market.

BILL GATES: Well, the declining dollar actually I wouldn’t call that a major effect for us. It’s actually slightly beneficial in the sense that our revenues outside the U.S., when they get translated into dollars, that actually helps our growth rate. But currency fluctuations are not a key issue in our future.

The job market is a factor, because we’re primarily based in the United States. We’ve got sites around the United States, but this is by far our largest site. Here in this site we have all the skills that we need. We’ve got marketing skills, testing skills, management skills, engineering skills. The one that’s in the greatest shortage by far is engineering, and if we look at the trend of number of people going into engineering, it’s going down in this country, it’s going up quite dramatically in Asia, particularly in India and China. So, in those countries we find there’s lots of great engineers.

Now, they don’t yet have the program managers, testers, marketers, and particularly managers that we have here, and so we just have to decide as we’re growing how much of the work gets put over there, how much gets put here, and certainly the workforce thing is causing us to have a higher growth rate over there, although we’re still increasing the numbers here. In fact, we’re pushing as hard as we can.

The United States also has the visa thing, which makes it very hard even for very smart people who want to come from other countries to come here. That’s unfortunate for us, because if those engineers can come in, we can create four or five jobs here around that person, and get the best team possible, whereas if we can’t get the engineer here, then we have to do that elsewhere, which is tougher in all ways. So, the workforce issues are important to us.

I’d say even more important than that is our ability to keep innovating, to make breakthroughs. If you have this surface, that’s good; you don’t have that surface, that’s bad. We have some great competitors. Particularly I’d say Google and Apple are very visible doing software work on their own. In many cases they’re playing catch-up to us. There’s a very few cases we’re playing catch-up to them. (Laughter.) And we’ll be able to surprise them in terms of what we’re doing.

So, it’s really much more about innovation. The economy can go up and down a little bit, but we’ve made sure that the balance sheet of this company is such that that really wouldn’t change what we do. As long as we believe in the software we’re doing, we’ll keep that full bore, even if economics, any type of that kind of a fluctuation means that in the short term our total profits may be somewhat down, but it’s about five to ten years from now that the work we’re doing today is mostly focused on making sure we’re the leading software company for the software as it will be popular then.

CEDRIC COCO: We will take the last question from the little gentleman over here. Sorry about that. (Laughter.)

QUESTION: I can’t do this.

CEDRIC COCO: You can do it, man. Grab the mic. Grab the mic. (Cheers, applause.)

QUESTION: My name is Jordan, and I’ll ask this: How do you make Xbox 360s? (Laughter, applause.)

BILL GATES: Great. Well, we get to make a wide range of products at Microsoft, from SQL databases to auditing and compliance packages, payroll packages, all the way to Xbox 360.

It’s interesting that we’re a software company and so why do we make a piece of hardware? Well, we decided that the hardware and software were so connected together, the way that you sell the hardware actually at a loss to start with, but then if there’s enough good software, you can make it up by making money on your own software and getting a small license fee from other people who do software, and so that comes together and gave us a big opportunity.

We built the first generation of Xbox. That goes back to about six years now. That was Xbox one. And there we were gaining credibility, gaining relationships. We had that for a little over three years, and then we got to do a second generation. So, it was almost two years ago now that we came out with Xbox 360.

We don’t actually have the factories ourselves, but it’s our design, we take the risks, we do the marketing, and it’s really the software that’s magic, the software that’s built in, the software that does Xbox Live, the games. Hopefully you’ve heard of Halo 3, which sold 3 million copies last month, and a record for entertainment sales. Xbox is doing very well.

If you’d actually asked people to guess going into this generation who the likely leader would be, they might have put that Sony would be number one, and that either Nintendo or Microsoft would be number two and number three. In fact, what’s happened is much to people’s surprise that in terms of unit volume, Nintendo is number one, our unit volume is a little bit less than theirs, and then Sony’s is dramatically less than ours.

In terms of dollar volume, we’re actually pretty close to Nintendo, because we have a higher end system, people buy a lot more software for it. But we’re going to make sure that the one thing they did well, which is this approachability and broad set of games, we’re going to make sure we do that better than they do.

So, you’d be surprised that in Xbox, even though it’s about fun, the sophistication of the software in there about matching people to who they might want to play with online or rendering graphs or smoke or glass to make it look realistic and make it really fast, the amount of brilliant Microsoft Research breakthroughs that’s actually embodied in that nice little box and some of the amazing things that it can do, that is about incredible people who thought up amazing things.

Now, over time Xbox will be how you watch movies, it will be how you watch TV. There’s a lot more. That’s a very powerful general purpose box, even though it’s mostly being sold today on the gaming.

So, if you work on software, you get a lot of choices of things that you want to work on. I will say it’s one of the most popular groups in the company.

CEDRIC COCO: Well, with that being said, we’d like to thank Bill Gates. (Cheers, applause.)

BILL GATES: Thank you.

END