ANNOUNCER: Ladies and gentlemen, please welcome back Hernan Rincon. (Applause.)

HERNAN RINCON: Well, hello again, dear friends, and I am glad to be here with you again this morning. I hope you have enjoyed the program, the presentations from Governor Fortuno and Governor Wagner, as well as the panel we had on government innovation.

Let’s move on now to the last session of the forum. It is my personal honor to introduce to you the founder and chairman of Microsoft Corporation, and co-chairman of the Bill and Melinda Gates Foundation. Please help me welcome Bill Gates. (Applause.)

BILL GATES: Well, good afternoon. I’m glad to be here with all these leaders, and have a chance to talk about the challenges and opportunities ahead.

The Government Leaders Forum is one of my favorite events, and it was just a year ago when many of us got together in Miami.

I think it’s safe to say that the world has changed a lot in the last year. With the credit shortfall in the United States we’re seeing the biggest global economic crisis in more than a generation.

We had a period of incredible growth, almost 50 years of very positive growth, and some amazing things came out of that; whether it’s literacy, nutrition, education, stable governments, miracles like the Internet, the economy has grown on a worldwide basis every year, and this year will be the first time that it’s ever shrunk since World War II.

Now, when you think of this, it hits people at every level of income. If you think about the poorest people in your countries, in some ways they’ll be the most affected. The Inter-American Development Bank, a good partner of ours, predicts that over 10 million people in that region are in danger of slipping below the poverty line over the next two years.

So, you know, these statistics are a bit scary and daunting, and in particular now we have to think about the investments we make.

And a key point I’d like to make is that we have to think about these investments not only in the short term, issues around food availability and stimulus packages, but also in the long run. And in the same way that President Obama sees a chance to connect these things, I’d say I also feel that, and I think that can be a big part of our conversation today is how do you take whether it’s investments in education or infrastructure and say that these are helpful both in the short term but even more so in the long term to see more of the great things that have happened over the past.

I am very optimistic about the future. The world as a whole continues to make breakthroughs. The speed of the chips, the speed of the networks, the quality of the software, not just in quantitative terms but in qualitative terms, things like visual recognition, speech recognition, mapping information, learning algorithms, textbooks online so that kids can navigate and use interactive information.

I see it myself whenever my son asks a question. We can sit down and watch videos about whatever he’s interested in, and learn together. And certainly when I grew up there was nothing like that.

So, we need to look hard at what the excesses were, the imbalances, the use of debt, where regulations need to change, and some of what went on in this last decade we should avoid repeating.

But it’s also important to remember that the growth was based on education, it was based on investment, and so we have to be careful to maintain and even double-down on the aspects that have moved us forward.

After all, we want cures to new diseases, whether the diseases of the poor, which is the particular focus of my foundation — malaria, AIDS, tuberculosis — or increasingly the diseases that are shared globally: diabetes, obesity, heart disease, that as economies become richer, so far they all face huge burdens in those areas. And it will be education, modeling technology, and great people who understand this domain, and in that case medicine, that will allow those breakthroughs to happen.

So, if we think about 10 or 20 years out, I am every bit as optimistic as I was a year ago. These things are going to happen. More and more smart minds around the world are working on these problems and collaborating together. So, as we renew our investments, that focus on education and science and technology will be important.

Striking the balance, there will be many lessons that come out of that. I spent the last few days with politicians in Washington, D.C., and I really did congratulate them that they’ve made education a centerpiece of what’s taking place.

Also they increased research funding. The medical research in the U.S., which is greater than all countries put together, that’s called the National Institute of Health, which is US$30 billion a year, that’s been increased to 35 billion a year. The basic science work, the National Science Foundation, has also been increased about 25 percent, and I hope that sets a model.

In education some of the new dollars aren’t just to spend more money but also to finally really measure future effectiveness, take some of the experimental models, which in this country are called charter schools, and get behind them, let them duplicate; and in the case of Microsoft and my foundation we’re looking at breakthrough ways of using online material, both videos and interactive tests that can diagnose what a student knows, what they don’t know, and made education far more effective.

In fact, you could say why is there being a physics lecture at thousands of universities, why isn’t that simply on DVD for free on the Internet, and schools focus on the interactive thing, the study groups, the labs, and are able to use their resources better in that way.

And I think we are on the verge of that revolution, not just moving away from the textbooks but also moving to thinking about what parts of an education can be delivered en masse, and what need to be more individualized and then revolutionizing those pieces.

So, you’re hearing me talk a lot about education as the key to economic growth. Obviously, Microsoft sees software as catalytic in many areas, but I do put this at the top. It’s catalytic in business formation, catalytic in government efficiency, government transparency, and I know there have been good discussions about all of these things.

The reason I am so clear about education being at the top is from many perspectives. As the chairman of Microsoft, the company is looking to hire the best people worldwide. That’s why we’ve put research facilities in many places around the world, and even more importantly why we’ve reached out to have deep relationships with the top universities throughout Latin America, throughout Asia, throughout the United States, and those collaborations are very important to us.

About a quarter of all people who get PhDs in computer science have had a chance to work as an intern at Microsoft, either at their university with a grant program or actually coming and visiting one of our research sites. So, that outreach, which they’ll remember throughout their career, allows us to stay in touch with them as they’re making breakthroughs so that we can help support them and in many cases commercialize that work, whether it’s robotics or medicine or learning technology, we’re interested in that. So, Microsoft as an employer cares about education.

In my foundation work I also see education as the key tool for social equality, and I wish I could say that the U.S. was a beacon of virtue in terms of how it runs its education system. In the case of universities, absolutely. The top universities in the world of say the top 20, the U.S., depending on who you ask, would have anywhere between 15 and 18 of the top, and so that’s quite a novel thing.

But if you look at a more broad statistic, international competitiveness on math, dropout rates, the equity, the broadness of education is actually quite poor, and a number of countries are doing better, and that’s unfortunate.

I also care about education as a parent. You know, I see how sometimes math and science can be made engaging, and sometimes they can be made boring and not interesting, and that’s true for boys and girls alike, but particularly for girls where that kind of digging into something complex you have to give them a reason even more so they stick with it.

It is concerning that the percentage of people going into science and math in almost all countries outside of Asia are going down quite a bit. So, all of us can work together to think about how do we change that.

It is ironic at a time when those are the people who are going to make these big breakthroughs. It’s not just them working in the biological industries or the IT industry, it’s them working in government, it’s them working in product manufacture where digital modeling is very important, it’s them working in farming where biologically modified crops, used in the right way, are actually going to be an important part of increased productivity and competitiveness in that space.

So, every part of the economy is demanding these kind of jobs, solid background in math and science, and ability to use information technology: technicians, even a sales manager digging in and seeing the trends, and understanding how they should spend their time; somebody, even a poor farmer who, connecting up through the cell phone, would want to see what the latest advice is, the weather data, the pricing, and have that all in mind.

So, the percentage of the economy that you might think of as an information worker is actually much larger today than most people expect, and it’s definitely on the increase.

So, how do we build this workforce that’s ready for those jobs? How do we motivate this type of learning? Well, the computer and software certainly have a role to play. Projects like getting those computers out into libraries in your country, those are the kind of thing Microsoft is very interested in working together on, because that kind of accessibility can make a huge difference.

Computing is like the new literacy. So, any effort you made for books and literacy, there’s a parallel here. Sometimes the Internet connectivity is hard, but it’s well worth the effort.

And getting teachers to use that to connect up to each other, you know, I see a scenario where a teacher with a Web cam in their class can take some 15-minute segment where they wonder, did I teach that well, did I discipline the class and keep them calm in the best way, they could simply take that clip, send it off to a group of teachers, and get feedback, you know, no, I think you should have done this or looked at how I did the same thing. And so they’re building learning from each other, and that average quality is continuing to go up, you know, making it easy to measure things, making it easy to know where students are falling behind.

Obviously it’s a combination of things, a great network, great universities to train the people, getting the software and the computers out there. You know, we’ve seen some pioneers in this, not just in the U.S., people like MIT or Stanford, but the Monterey Institute of Technology happens to be one of the most aggressive. They’re mostly doing the notes and the text, but the video will come in along with that. I think that’s a very important approach.

So, gifted teachers will be more leveraged. You know, in science the person who makes a breakthrough is able to spread that out to many people. In education that kind of learning has not been there. So, you could say 50 years ago, the best teacher ever you couldn’t deny that, whereas in science, of course, the accumulation of knowledge means that we’re working at a deeper level of understanding because of the ability to benefit from other people’s work.

Now, this all boils down to individual opportunities. We’re committed to help with this at all levels of the system, even very young people who get the comfort, all the way up to the university where it’s kind of tragic if you’re investing in somebody at the university level for them not to have the comfort and the tools and the latest software.

We work, of course, through Partners in Learning. That’s our way of going to the education groups in each country, and saying how can we best work with you.

And it’s been adopted; you know, what class do we start in, how do we train the teachers, how much online content do we have. We’ve reached in Latin America over 70 million students over the last six years, and in all the different countries, and we’re very proud of that. And best practices that are done in one country often spread into the other country.

One example in Guatemala is that the Ministry of Education is going to ensure complete access to computers over the next three years.

Now, one of the things they know — and this is a lesson we’ve seen — is you’ve got to get the teachers so they don’t feel threatened by this, and so they’re making sure the teachers get them early on, and they actually have a very inexpensive way that those teachers can buy the machine for $10 a month, and actually have them home and get comfortable, so the students are not too far ahead, and they feel like they can integrate it into the classroom. It’s a great kind of program, and one that I think will be a success and could spread elsewhere.

We’ve also got this idea of student helpdesk, where we have training so a few of the students can actually make sure the network is working, the software is up to date, and the teacher doesn’t have to think about that or spend time on it. The student help desk thing just started in the last year, but it’s catching on very rapidly, particularly in Latin America.

A student who does this gets a certification from us that helps them get a job afterwards. It requires getting 16 hours of qualified in-person instruction, but several months of quite a range of things that are available online. So, we’re mixing online learning and in-classroom learning for this.

The students love it, and the teachers love it, because then there’s this community responsibility, the students get involved, and they’re spending time on what they like.

We’ve got it rolled out now in 17 countries, so virtually all of Latin America, and it was in Brazil that we got early results that showed that three-quarters of the students who got involved in this did get good jobs out of the IT sector, and over three-quarters of the teachers said that it really made a difference in terms of how they were able to use the computers in the classroom.

So, that is just one new thing that I was super pleased to see how that’s working.

I want to briefly mention two other programs. DreamSpark is our offering to students to have the very best software tools, and this includes the most advanced tools that professionals use, our Visual Studio compiler. We’ve always had small versions of the compiler, express versions that are free, but here we offer everything, all the capabilities that professionals have.

And what we did is at first we made it available to college students, and we had a way they could connect up and download, and that happened 12 months ago. I was lucky enough to be able to make that announcement. And in the last 12 months, 2 million copies of the software, including the Visual Studio and the database and Robotics Developer Studio, have been downloaded; so a huge success. That’s almost double what we would have expected.

And now today we’re taking the step of extending that down to high school students, because even at a young age people kind of want to push the limits, and so it’s all these tools, we just get a letter from the school, and we make it so you can freely download these things.

You know, it really for me hearkens back to when I was a student, and I wanted to push the limit, work with computers day and night. They weren’t quite the same. It was time sharing, and I had to be very clever to go find unused computers. But, you know, it says that somebody who’s that age can be contributing and learning and the earlier you get going, the more likely you are to be super good at these things.

So, DreamSpark has been a success, and eventually I guess the way we’ll measure it is how many of these young people come up with ideas to start new companies. Some will go into existing companies and help them with their software, some will smart small companies, but hopefully several will even start the companies that become the Microsoft or the Googles of tomorrow, because we’ve facilitated their work.

Another program that I want to mention is called BizSpark, and this is more business focused. Even though education is the foundation for growth and job creation, we also like to see new companies get started, and some of those are in the IT sector.

In 2007, the IT sector in Latin America accounted for over 2 million jobs, and over half of those people, their jobs were because they were adding value to Microsoft products.

So, we’re proud of this business model that’s a business model that our partners in country are providing the consulting, the services, the customization. It’s not just passing through the hardware or software as a distribution channel, although they do that, it’s really making the solution, and that is actually way more jobs done in the country building the skills, using the dollars there, way more jobs than actually even at Microsoft itself.

One new thing we’ve done to make this IT company formation even easier is this BizSpark idea. How it works is if you say you’re starting up a new company, got to be a new company, then we give you our software with no upfront cost. If you go on, you’re very successful, then at some point you work with us on a normal basis, but in that startup phase where capital is very scarce, we take the risk and provide the software; and not only software, we connect you up with other partners, give our advice.

And this is a new program, but I’m very enthused about it. Already we’ve got 700 companies that are benefiting from it in a dozen countries. And it’s not just the free software. When we talk to them, it’s much more the support, the advice, the questions that we can solve.

So, BizSpark, you know, we’ve added that to our list of tactics, and already off to a good start.

You know, at forums like this we get feedback about how we can tune that, make it work better in individual countries, and ideas about new programs like that that we can build.

So, let me just close by reemphasizing this importance of investing for the long term. You know, there will be cutbacks, even in education there may be some cutbacks, and so we have to be smart. We have to make sure that the jobs that count, the IT skills that count, the software familiarity with the same software that’s used in the commercial world that makes people employable, that that’s there, and that Microsoft is doing its part to facilitate that. That’s really the seed corn of the future.

So, I think you know we’re very committed to the region, we’re committed to learn and do new things, and events like this are very catalytic in helping us do that in a better way.

So, thank you for coming, and excited to have a chance to have a dialogue with you. Thank you. (Applause.)

Craig Mundie and I are going to do Q&A, but before we do that, there’s kind of fun treat, which is Craig has brought some new stuff fresh out of the research labs that he runs. And what this is about it’s about connecting people together. You can think about this in business and education. It’s kind of societal networking. So, Craig is going to give you a look at that to stimulate your thinking about new software ideas, and then I’ll be back out. So, let me welcome Craig Mundie to do that demonstration. (Applause.)

CRAIG MUNDIE: Thank you, Bill.

So, as Bill said, I want to take just a few minutes and give you some ideas through some prototypes and vision demos of the way we think some problems will be solved in the future.

Many of you are policy people, and one of the big challenges policy people always face is to try to make good policy decisions in the present day, perhaps with incomplete knowledge or understanding of what might change as a function of either societal activities or technological advances.

So, today many people are familiar with social networking, things like MySpace and Facebook. These are popular, particularly with young people all over the world. And more and more through the use of cell phones and other popular technologies, game consoles, personal computers, instant messaging, we have a world that’s increasingly more and more connected. And yet these things are primarily used for fun, for personal communication, for some types of business communication.

So, one of the big questions in our mind has been as these evolve and come together, is there a way to use them to help solve some bigger societal problems. So, I’ve titled this set of demonstrations “societal networking.”

One of the challenges that policy people face, particularly when dealing with things like natural disasters, is how do you mobilize the population? How do you create some type of coordinated activity?

In an event like a hurricane, for example, the destruction can be fairly widespread, many people can be dislocated, and the scale of the problem is one that immediately overwhelms the first response capability of the officials.

So, oftentimes the public is left in a situation where they want to do the right thing, they need to do the right thing, but there’s no longer any effective communication between the public officials and the public itself.

So, we started to think about are there ways to use the technology that people use every day in their normal life, and build a network of networks that, in fact, would then support these kind of specific problems.

So, I’m going to go on and give you a quick demo. What I have here is a cell phone, and the scenario that I want you to think about is that, in fact, there’s been a hurricane. Those of us who have lived in the south of the United States, as I did when I was growing up, and many of you in the Caribbean region or the Gulf region, are familiar with the problems of these large scale tropical storms.

What I’m going to show you is how we could use the technologies of mobile communications and wireless networking, and the techniques that people are growing up with every single day to help each other help themselves in a post-disaster kind of environment.

So, in this scenario I’ve basically been displaced during a hurricane. So, I’ve gone somewhere inland. I’m now visiting at my sister’s house. My standard cell phone has many different types of things that I might normally do. It has my music, it has my photos, it has my flu records, flu shots and other things.

But one of the other things that it does is it brings me messages. So, I might get this red sort of alert that says – the message says return home.

So, if I go ahead and click on this mail, what I’ve got now is sort of an instant message. In this case it’s from the emergency response team that has been assembled that’s dealing with the reinstatement of services in my own network. And it says it’s safe to come back now, and they’ve set up a mesh communication network.

We now have the ability to take small devices, personal computers, and in the future allow them to create a local communication capability that will provide local and free communication, and can be bridged with official help into more traditional communications systems. So, while we seek to repair cellular or land-based communication, we can use these devices themselves to create a backup to help orchestrate these kinds of activities.

So, I’ll decide that, OK, it’s time for me to go home, and so I’ll want to communicate to my neighbors.

In this case the societal network is one that brings together my traditional friends and buddies in the communications sense, but blends them together with other people who are important, because we, in fact, have this geographical commonality of the neighborhood.

So, if I click on my neighbors instead of just my friends, what I see here are people who all have a comment, but it allows me to add more insight as to what’s going on.

So, if I look at each of these people, I want to be able to communicate to them what my intent is. So, I’m going to send them a message. I’m going to change my status, my social networking status to being from at my sister’s house, and so I’ll just click and say, okay, I’m on my way back to the neighborhood.

At this point, I drive home, I get to good old Woodgrove, Texas, and as I arrive there, I can see on my phone from that little symbol at the top that the traditional cell service isn’t operating anymore, but I get a message that says that the emergency mesh network has, in fact, been found, and I can click on that button and join it.

So, now I’ve essentially hooked my little phone through its Wi-Fi type of radio into the local community network that’s been assembled to allow us to coordinate and help each other.

So, the first thing I might want to do is ask for a map. Here are the icons where the neighbors who are back in the region have now been meshed up on a local map picture, and I can see where each of them is, where their houses are. I can see an overlay, in this case the red zone where the public officials have essentially given us information that says this place is known to be without power and perhaps flooded, and you shouldn’t go in there, but the rest of you can essentially go on and do other things.

So, I can begin to communicate now through messaging with my neighbors. So, here are some pictures she took that are a collage of a tree being down or a power line down in her neighborhood. A little farther up the block I can look at the next person, Sarah, who says I need some help to move a tree that’s fallen on my house. I might look at the third person who says I have a water main break, and be sure to check the valve, and I have a wrench.

So, here you’re essentially seeing a dynamic combination of the efforts of the individual, people you know or may just have a neighborhood affiliation with, and information that can be provided through these networks by the officials.

In doing this, we’re able to provide a much more coordinated response to a large scale disaster than we can do today.

One of the problems with most emergency systems is even if they continue to operate, they tend to only be a big broadcast environment, emergency radio or television broadcast. Even if you can receive them, you tend to have to give a very general message to the whole population. But when you’re trying to recover in an individual case, it’s a lot more important and valuable to know what’s going on in your own neighborhood, what the risks are, and who’s available to help you.

When I get this kind of information, I can essentially use my phone to get other types of help, not just from people, but, for example, I can push self-help on the phone, and essentially start to access Web-based mechanisms.

Bill, in his talk, talked about having educational videos. It’s possible here to have a library of things that would help people solve disaster-related problems. So, for example, if you have a gas main break in your house, and you need to know, well, how do you turn the gas off, you can click on this and essentially see a little video or use the camera to actually determine what is a gas main, where would I find it on my house, and which way do I turn the valve.

So, there’s a lot of technologies that come together as the computers become more powerful, even the little computers like the phone, to be able to provide help with this kind of situation.

Let me give you one other example. I’m going to move over to this device.  One of the other big things that we think is going to happen over time is people’s interfaces with computers is going to move beyond the traditional desktop computer to point and click, or just the touching on the small devices in your hand. And there will be increasingly prevalent that you’ll see large displays on walls, or on table surfaces. Microsoft introduced the Surface computer a couple of years ago, and it’s starting to find some specialty applications. But our belief is that in the next few years that the cost of building these large-scale displays will continue to decline, and it will become more and more commonplace that people will be able to use them not just to interact with data on a personal basis, but to combine communication and collaboration technologies in order to be able to look at things, to understand them in visual and intuitive ways, and to get help in different ways. So I’m going to show you a prototype using this touch screen of how we might use this technology if we were a public health official, and having to deal with a determination of whether the health condition in a city in the flue season is actually following normal parameters, or might actually be some special case problem.

So here what I have is a map. And so just like the one I had on my phone in the disaster scenario of the hurricane, this map contains data overlays where we take data feeds in in real time, we compute them, and instead of just putting up a bar graph, we can essentially geolocate this information on this graph.

And so here I have an array of things that I can pick to add. There’s already some hospital information on here, but I can say I want to see what kind of information is coming in from the schools. So if I take the school data here, and drag it onto the map, then I add a couple more bars to this. The map is essentially one that’s interactive, I can essentially zoom in on a particular part of the town. I can turn it around and look at it in a 3D environment. So more and more people’s ability to look at this is like the 3D videogames that your kids are becoming familiar with. I can say, well, here’s some additional information, let’s take a look at the pharmacy data for over the counter medicines. And so you can basically get more and more reporting, you can composite it, you can begin to look at it, you can turn different types of data on and off, and zoom in.

Another thing that’s possible is we’re getting more and more sophisticated modeling capability. So if you’re trying to analyze this as a medical professional, what you really want to see is the pattern of how this developed overtime. And so we can actually have a time series, because the computer can remember everything. So I can go back earlier in the day, or earlier in the week, and see what these same things looked like. I could essentially drag this into the future.

Now, employing sophisticated computer models to say based on these trends what might I likely expect would happen at some point in the future, and I can essentially go back to the present. I can pull in some other individual data, for example, some reports from individuals. It may get a little busy, so I can turn off some of the other data. And then at the end, you know, I’m quite interested in looking at this in a different way. I want to understand what are these people telling us, what are the individual reports. So I can get a different type of visualization, in this case what’s called status updates, where we take the data and we essentially convert it into text descriptions, and then the size and placement of the individual words allows you to see what kind of activity are people reporting at different parts of the city. I can essentially take these things and turn around and look at them to get the clearest picture of what’s happening in a particular part of the town.

Now, as a public health official what I’m really questioning now is am I looking at statistics that indicate that it’s a normal flu epidemic, or outbreak in a city, or is it some new thing, perhaps like an avian flu, which would be a much more serious problem. So in this case what I want to do is I can see that I have some contacts available here, and one of these is Laura Kane. She’s a doctor at the Center for Disease Control in Atlanta, and I can essentially use this capability to drag her into this and essentially make it into a discussion that I can have with her in a video conference. So here we’re going to have – 

LORI KANE: Hello, Mr. Mundie. What can I help you with?

CRAIG MUNDIE: Hello, Laura, I’m really trying to determine whether this data indicates we have normal flu or perhaps something more like avian flu.

LORI KANE: OK. I’m going to change your view. There’s definitely cause for concern here, with very high margins of error. What I’d like to do is I’d like to apply some of the algorithms we’ve used in other locations for determining between different types of influenza. I’m going to apply one of those right now to your data and see how it affects it.

CRAIG MUNDIE: That would be great, thank you.

LORI KANE: Based on this outcome I think we can actually rule out avian flu. It looks just like a seasonal outbreak of influenza.

CRAIG MUNDIE: Thanks, that’s great. I appreciate the help.

So I can close this session and essentially I’ll return to these data models, and now what I want to do is communicate. And just as individuals wanted to communicate with each other, all of the people here who need to be informed about what the status is, and what actions they can take, these can all be automated workflows now. So, for example, I can just say send alert that this is just a standard flu outbreak and we update all people. So the flu specialists, the neighborhoods, the school districts all can essentially be automatically updated. You can communicate with the officials who need to know this, and instead of having an army of people with telephones trying to hunt people down we use these latest and greatest communication networks and social networks to essentially bring these things together and get coordinated action.

So this is just an example of how we think these things will come together in the future to give more powerful tools not just to the people at home, and who use it in their daily life in normal tasks, but how to convert that into an emergency response system, and how to use these same technologies and more advanced visualization and collaboration tools to give public health officials a better way of dealing with the uncertainty that exists in this medical environment of the future.

So let’s just stop here and I’m going to ask Bill and Hernan to come back out, and we’ll use the remaining time we have with you for a question and answer session. (Applause.)

HERNAN RINCON: Well, thank you very much, Bill, for your insightful thoughts a couple of minutes ago, and thank you very much, Craig, for a very interesting demonstration of the latest technology.

We will move now to the question and answer open session. And Bill and Craig, we have received many, many questions. So we’re going to begin with a couple of questions that were submitted this morning, and then we’ll open it up to the floor here. The first question is for you, Bill, it was submitted by Jorge Ande from Brazil, and the question is, how do you see the role of the university in creation of an innovational environment, such as with scientific and technological parks, in order to improve economic development around the world?

BILL GATES: I certainly highlighted that as a key investment in my comments. I do think there are cases where universities in some countries have done a very good job with that, and there’s other cases where the universities have been fairly isolated. One of the things that’s important is for universities to essentially compete with each other. When you look at universities in the U.S. you’d say, well, do they really compete, they have a tenure system, they don’t have a profit-loss statement, why do you say there’s competition? The fact is, at the top level they’re competing for students every year, they’re competing for professors all the time, they’re competing for scientific grants and relationships with private companies, and they have the flexibility. They can pick to be in certain areas and not to be in other areas. They’re apt to end up specializing, if they don’t do well in one area they get out of it. And they can pay salaries that are competitive, so that the boundaries between academia and business you have great people on both sides.

And we’re seeing this – we’ve seen it in the U.S., we’ve seen it in the UK, I’d say those are the places where it’s done the best in the world today, and you can view it as good or bad that actually in China it appears they’re mimicking that U.S. type model, fully effectively in getting lots of startups in the area, to date mostly the top universities. But in Europe as a whole they haven’t done it. Latin America is I’d say somewhere in-between, Monterey being a good example, and three or four others that are more interest that top league. But you’ve got to have a lot of flexibility and view your university as not just a static state institution with a lot of rules, but as a competitive almost business.

HERNAN RINCON: Thank you, Bill.

The second question that we have came from Mexico, the person did not identify himself but it was a very good question. And the next question is for you, Craig. How does one leverage cloud computing in the healthcare and educational field? What obstacles do you see in the path of achieving this objective?

CRAIG MUNDIE: Well, when we think about cloud computing what we’re really talking about is these very large scale computational and data facilities that exist, and will exist in various places around the world. Today these have been built to support first things like electronic mail, instant messaging, more recently search and advertising capabilities. But, we see them as becoming a more general infrastructure, which when operated in conjunction with these increasingly powerful client devices that are in your hand, on your person, or on your desk, really will provide a next generation computing platform that will be the basis of solving many problems.

So when you look at the healthcare example, even the demonstration I just gave is one way of thinking about the cloud working in conjunction with the client, where the client is this local computer and display device that brings these things together. The cloud is essentially the data sources, all of those different data feeds from the drug stores and the different –  the students and other places that are on that map, those things have to be integrated. So it’s this sort of push/pull relationship between what happens in the cloud, and what will happen on the client that we think has broad application.

In the education space, I think the same will be true. Bill mentioned in his remarks the idea that going out to the Web to find information, whether it’s Wikipedia, or Web pages, or increasingly educational materials themselves, is an example of using the cloud as a repository that allows you to deliver these things. There are two basic impediments to this, particularly in healthcare and education on a global basis. The first is, we have to have the communications infrastructure to make it effective for the cloud to talk to the client. And without that, you know, the real value is harder to get.

I think the second impediment is, we have to have regulatory environments that really allow it to be economically effective to distribute these kinds of massive infrastructures. Unlike the traditional enterprise client/server model, where these things were done a very relatively small scale, to make these other things work, you really have to have very large-scale investments, and all of the infrastructure for power and cooling, as well as communications, and a regulatory environment that allows them to be built up at scale. One of the challenges we face is incompatible regulatory environments from one country to the next, even in a region, that says we can’t put a data center in Country A that is handling the data, like medical data, for Country B, and I think that some rationalization of that would be helpful as we try to deploy this and put it in these public sector enterprises, like health and education.

HERNAN RINCON: Thank you, Craig.

Since we are doing very well in time, let me take a third question here. This question comes from Pablo Ruiz from Chile. And the question is, Mr. Gates, in your opinion will the future of information technology consider more different characteristics than people may have among themselves, or perhaps there will be more uniformity?

BILL GATES: Well, at the core of these systems, there is deep standardization. The Internet protocols, the popularity of the Microsoft software, the way you represent information, but part of the beauty of that is by having the things at the core be identical, you give people immense flexibility. And so when you engage in social networking, who you pick to work with, what your appearance is, when you play on a gaming network how you choose to connect up, so you get to personalize things at that level because the technology underneath has been so scale oriented, and the price has been brought down so dramatically.

Take electricity, it’s standardized in large part, it’s too bad the codes aren’t totally standard, but the way you use it, which TV show you watch, how you do the things you do in your home is not constrained, it’s just the base capability.

And so we’re going to let this software be more flexible for individual needs, whether it’s learning styles, or types of business, but in that technology stack it will be fundamentally very standardized.

HERNAN RINCON: So in essence, the standards is what allows you to have all the flexibility for people to use it.

BILL GATES: That’s right. But when somebody builds an electric generator, they know on a worldwide basis they can sell that, so they can put billions into R&D, just like we put billions into, say, Windows 7, and we know that billions will use it, and so we can offer it per user at a mind-blowingly low cost. The chips, the software, and Microsoft Office are all subject to this unbelievable scale economics, where you as an individual are getting billions of dollars of research for very few dollars.

HERNAN RINCON: Thank you, Bill.

We open up to the floor now. If we can have the house lights just a little bit higher, it would be better and easier for us to see. Let me ask that you give us your name, and your country, if you don’t mind, and also if you are going to ask a question in Spanish or Portuguese, which is perfectly okay, just give us a second so we can get the headphones on. So there is one question on that mike.

QUESTION: Hello. My name is  (inaudible)  Mexico and, Mr. Gates, some years ago you presented in Davos the idea about creative capitalism, an approach where government, business, and nonprofit go together. Could you give us an example of an initiative that could be considered a good one in this creative capitalism system, please.

BILL GATES: Sure. Businesses, of course, are driven by profits, and that will be the primary thing that lets them decide what projects to do, what risks to take. But when it comes to the needs of the poorest, often those market signals don’t cause enough activity. And so for particularly businesses that have lots of smart people and want to do social good, I’d encourage them to put, say, up to 5 percent of their innovators on things that they wouldn’t naturally do. And we’ve had some big successes in this. The drug companies, I had dinner with 13 big pharmaceutical company CEOs Tuesday night, and we have several of them that are going way beyond that, and we were kind of telling the laggards in the room, hey, we’d like you to be like GSK, or Novartis are the ones that have really jumped in, and showing them why GSK is enthused about it, why it’s worked out, why it’s been a net benefit to them, and actually helped them attract good people, do good science. And they use this thing called tiered pricing where if a product is being used in different countries, they price it more according to that income level.

So the pharma industry is where creative capitalism is the furthest along. In fact, there’s a third party report called Access to Medicine that comes out every year and rates them, and they looked at it and said, whoops, we need to do better, GSK was at the top. I won’t say who was at the bottom, but he wants to do more.

The same sort of thing is going on with the food companies. The food companies have technologies for getting micronutrients into foods, buying food from poor farmers, or understanding purchasing systems. So Nestle, Unilever, a lot of the top food companies have been really great.

The biotech companies, Monsanto, Syngenta, DuPont have been great. Some of the cell phone companies, Vodafone. In Kenya we really have this phenomenal digital money thing going that we want to spread to other places. Some banks, technology companies, I’d certainly put Microsoft at the top of the list, but there’s more that can be done with others on that.

So I think we are seeing it from the leading companies. We need to spread it down, and create this thing where people feel good about it that they can hire people, get good reputation, and so that the average level in these industries keeps going up.

HERNAN RINCON: That was a great question. Thank you very much.

We have a question on No. 3, yes.

QUESTION: My name is Patricia Vokas, I am a representative from Chile, and in Chile implementation of CETS, Child Exploitation Tracking System, has been very successful, and it has been very successful to prosecute child abusers, and also to combat child pornography. My questions is whether Microsoft is thinking also to support other countries with this program, and eventually try to train police forces, and policymakers so as to work on this issue at a global basis?

CRAIG MUNDIE: Actually, Microsoft developed that system, and I think the first country we did it in was Canada, and it was very successful there. And based on similar encouragement, you know, we basically have worked to support other countries who have sought to implement it. The list is fairly long now. I don’t know the exact number, Linda might know, but we are definitely willing to help other countries who want to take these kind of technical approaches to expand the capabilities of their law enforcement environment in order to make them more capable to deal with cyber crime, and other issues, which will expand over time.

I mean, today, the amount of criminal activity that goes on on the network, not just in the child exploitation realm, but in many other realms, is growing quite dramatically. And so broadly most countries are behind the power curve in terms of having their law enforcement people really up to speed with the tools and training necessary to prosecute cyber crimes. And so I think this child exploitation system was the leading edge of that type of collaboration, and it will have to be generalized more and more, and not just constrained as a child exploitation domain.

HERNAN RINCON: We have been very active, as you guys know, on this specific area. Chile has been a great example for Latin America and we will be eager to work with any other country that wants to do this in the near future. So thank you for that question.

We have a question right here in the front, please.

QUESTION: Good afternoon. My name is Nelson Colon. I am the chair of the community foundation in Puerto Rico. And my question is, the Bill and Melinda Gates Foundation has significantly invested in high schools. So I would like to know what some of the key lessons learned were by the foundation after the investment; and, second, this is a question for Bill, I would like to hear some of his ideas on the role of foundations to improve education in our countries.

BILL GATES: Yes. I had a good conversation with the Governor of Puerto Rico this morning, and the education minister, about the opportunities with the stimulus bill to do some new things, try out some new models. The role of foundations in education is quite modest. If you look at the total money that they have compared to the amount spent on education, it would be well under 1 percent. And so the role of the foundation is a fairly specific one, it’s to take new experiments, new pilots, where somebody is trying out something that the teacher’s union doesn’t want their money used for, or it might be risky, and so having the foundation foot the bill, particularly for a transition where you’re training new teachers, you may be starting a new school, and first it’s only ninth grade, then ninth and 10th, and so you have some higher costs to get those new things to work.

Everything in education has to be designed to operate on an ongoing basis at whatever the dollar per student are that the government is raising, because there’s nothing that can really raise that up. And anything that operates higher than that is artificial and won’t last. And so we’ve had two big efforts in our foundation. One is to create new schools. They’re done using a structure on the mainland called charter schools, and these get started up, and there’s a lot of very good ones. And then we take the good ones, and we see if they can be duplicated. And there’s about 10 organizations that have shown they can duplicate these amazing schools.

KIP is the best known, the most successful, it stands for Knowledge Is Power. I highly recommend the book called “Work Hard Be Nice, “it tells the story of this organization that now has 66 schools, and it will have 100 schools in a couple of years. Yes, High Tech High, Green Dot, anyway there’s about 10 that have proven to do this. And we’re trying to drive those from what they are today, which is only a few percent of the schools, drive them up all the way to about 20 percent, and that will take probably 12 to 15 years to do that.

In parallel, the goal is to take the average quality of the teachers in the rest of the schools and improve them, and take the ideas from these charters. A lot of these charters have very long school days, 7 to 5 every day, Saturdays every other weekend, summertime, and so it’s very intense, and the students make a real commitment even though they’re only – they’re not selected to be the best students, actually they’re selected from the poorest areas. Over 90 percent go to college.

Now, raising the quality of the teachers in the other schools, that’s hard. Some of the work practices where the unions will defend the worst teachers, where they aren’t using technology to see each other’s work, where they’ve not seen who is the best, the schools of education aren’t helping, we’re trying to change that. And we’re using things like video in the classroom, examples online, student surveys actually are pretty interesting to see how they’re responding. Tests that are diagnostic, so test scores are very important. So a lot of initiatives to raise average quality in what will still be the bulk of the system, and as yet has not improved dramatically.

HERNAN RINCON: Thank you, Nelson, for a great question.

We have time for just one more question. No. 4.

QUESTION: I am the Health Secretary of Sao Paulo. Andre is my name. I would like to ask you what your outlook is, why is health management and hospital services, with all of the emerging technology, why is it that this sector still – why does this sector still use a lot of manual processes, in the financial management as well as the interaction with the patient?

BILL GATES: Why don’t you start.

CRAIG MUNDIE: I think there are really two sectors of our economy that have been resistant to embracing technology the way business has, and in fact, both of them are health and education. I think there are some common reasons.

In the case of healthcare the economics, particularly when they’re driven by the kind of reimbursement systems, or the state-driven environments, don’t have the same profit motive that standard businesses frequently have, and so there’s less incentive to do things that just improve financial performance. I think the other big issue, though, and this would be perhaps common, you could say, between the health professionals, even the doctors, and perhaps the teachers, is that the technology really hasn’t been good enough for them to think that it’s improved their efficiency. They think that for them personally it slows down their work.

So for teachers where the technology was something they had to do that was extra, it wasn’t actually helping them teach, it wasn’t helping them grade, it wasn’t helping them with their real task of teaching, they resisted, because it was extra. And I think many doctors have approached the technology the same way. They don’t like typing, they couldn’t take it with them, they were used to having help or the ability to speak, have notes transcribed, and so the computer wasn’t effective as a tool in facilitating their work. In the medical arena the doctors really end up being the controlling influence on what will be and will not be accepted within the clinical environment. So you’ve seen technology advance dramatically in the diagnostic area, but you haven’t seen it affect workflow within the clinical practice.

I think we’re now at a point where that will change, that through tablet computers and interactive displays it becomes more effective, and frankly the ability to have the doctor speak to the computer, to have it speak back, to have hands free operation, all of these are being brought about now by the tremendous increase in computing capability, and as Bill said earlier, the dramatically improved quality of the software that we’re able to write. So I think that the day has come now.

I think there’s one more thing that will also drive this, which is that medicine itself is about to make this big transition from, if you will, the analog world of medicine, to the digital world of medicine. The introduction of proteomics and genomics are clearly digital medical sciences, and for them to really pay dividends we need to have them done on a more personalized level. And for that to happen the scale of that problem computationally, storage and interpretation, can no longer be done unaided by even the most brilliant physician. And certainly it can’t be done as drugs have been done, where they’re more or less generic across the whole population. So I think these thing are now going to force the change, and the change will be welcomed, because the doctors will find that the tools actually improve their ability to deliver healthcare, as opposed to are attacks on their ability to deliver healthcare.

BILL GATES: Just to add to that, if somebody found a way to use the tablet computer that’s better than anybody else, in a business environment you see your competitor doing it, you see it, it spreads, because it drives the efficiency. In the medical realm, where measuring and rewarding efficiency is so difficult, you have people doing it great and people aren’t, but it doesn’t necessarily spread.

And yet, as Craig said, because medical records are more digital, more tracking is going on, more quality measures are taking place, the digital world is coming in there, and we have some amazing pilot things where people take tablet PCs, they take the data visualization. So we’re very optimistic. Craig has got a group that’s investing pretty heavily. We’re optimistic that the normal software technologies, as well as some special healthcare things we’ve done, will help change that efficiency picture.

CRAIG MUNDIE: I’ll just offer one more thought. I think that as the patient themselves is given access to tools like personal computers and the Internet and search, doctors are already finding, and I’m sure many of you do this, that when you have an ailment, or you’re not sure, you’ll go out on the Internet, and you’ll research that medical subject yourself. By the time you get to the doctor you come in armed with a big printout of, hey, doc, I know all this about my problem. It may not have been right, but at least you’ve made the investment. The doctors are realizing that they need to be able to take advantage of the fact that people care about their health, and it’s the digital tools that are empowering the people.

So I think with the focus on wellness, and the patients themselves wanting to have access to their records, wanting to be able to consolidate their history, these are also going to build some pressure on the health institutions to move in this direction.

CRAIG MUNDIE: Thank you, Andre, for a great question.

Unfortunately, time does not permit any more questions today. I would like to thank all the delegates, and participants for investing one-and-a-half days with us here in Virginia. It was a great event for us. We hope that you have had an enriching experience, and that you leave with great new ideas to take back with you, back to your countries.

Thank you, Craig, for participating.

Thank you, Bill, so much for giving us so much of your time. We truly appreciate it.

We wish you all a happy return back home. Thank you very, very, very much. (Applause.)

END