Remarks by Steve Ballmer
North Carolina Chamber of Commerce
Charlotte, North Carolina
July 11, 2001
MODERATOR: Good afternoon, ladies and gentlemen. It’s a pleasure to have you here today at a very auspicious meeting of the Chambers Information Technology Counsel Speaker Series. We plan to do this on an ongoing basis and bring you in touch with the leading minds and personalities in the technology field. Today we have a very, very special guest, whom I will introduce momentarily.
I would like to say that in terms of the whole realm of technology that very soon, this part of our program at the Charlotte Chamber will become the largest single element funded by our Chamber when we launch the Advantage Carolina E-Learning Tech Connect Program in all of our high schools. This program will spend over the next five years approximately $7 million helping our high schools become proficient and accelerate the technology learning with our high school students.
I would like to recognize our sponsors today. We have four. We have On Sphere, Parks and Company, Synapse Technology and Team Technology. Please join me in giving our sponsors a hand today. (Applause.)
It’s also a pleasure to welcome a long-time friend of Charlotte’s, former Governor Jim Hunt. Jim, please stand and take a bow. (Applause.)
As well as our smiling and erstwhile mayor Pat McCrory. (Applause.)
I had the pleasure a few minutes ago of attending a meeting of the chief information officers, who chatted with our guest speaker today, Mr. Ballmer. And I can tell you that this is a gentlemen who not only is one of the more effective and visionary leaders in the United States of any company, but is one of the most excited and enthusiastic people that I’ve had the pleasure of being around.
Steve Ballmer has been CEO of Microsoft since January of the year 2000, and has brought with him a focus on customer relationships, as well as relationships with partners.
Steve is bringing to the company today — as a matter of fact, he spoke yesterday, last evening to 12,000 Microsoft associates in Miami and dealt with the future and different product offerings that the firm will bring to the market; all under a vision of .NET for Microsoft, which is their version and their overall, encompassing concept to implement XML, which will enable you to use many different devices and programs across the digital interaction.
Steve is a native of Detroit, where he grew up, where his dad worked for Ford Motor Company. He graduated from Harvard and roomed right down the hall from a guy named Bill Gates.
It’s our pleasure today to welcome Steve Ballmer to Charlotte, North Carolina. Mr. Ballmer, the mike is yours. (Applause.)
STEVE BALLMER: This will be the most difficult thing I’ve ever done. (Laughter.) And it’s not because you aren’t warm, wonderful people, and I appreciate the time and the wonderful introduction; but I have a Hall’s mentholyptus in my mouth. I could tell you I’d take it out, because that’s more polite, but if I take it out, I’ll lose my voice. The footnote to the speech to 12,000 people yesterday was I lost my voice box basically by the end of the speech, so please bear with me.
We have made one small modification to the presentation, probably smart anyway. We’ve shortened it — (laughter) — to give more time for questions and answers, and I also figured people would be more a little more interested, and I can get my voice to rest during the question period.
What I thought I would do today is to have a chance to talk to you about what we see happening overall in the computer industry, some of the great developments, the exciting things going on, some of the ways in which Microsoft is trying to contribute, and then just have a chance to hear what’s on your mind.
I want to start, though, with a few comments about Microsoft here in Charlotte. We’re up to close to 1,400 folks here in the Charlotte area. That might officially — since we have the governor here, that could be 1,350 in Charlotte, 50 in Wally, in which case I apologize for overstating the case, but we made our home here for our East Coast product development, product support center, I should say, a number of years ago, and that winds up having been one of the best decisions that we’ve made. We found that there’s just an incredible body of very able, proficient technical people here in this area, and we’re actually providing mission-critical advice and support to our most important customers on the Eastern seaboard from the centers here.
And when we innovate in the product support arena, heaven knows there’s a level of innovation needed. I had some good meetings with some of our customers here in Charlotte. We’re doing that innovation from the centers here in Charlotte. We’ve tried to be the kind of company we are everywhere in the world — a little informal, pretty intense, and certainly we try to be technically as proficient a company as any you’ll find.
We’ve also tried to be pretty active in the community. Microsoft certainly as a company embraced the notion that what is good for the community in which we live is good for Microsoft, and as a company we do a lot to encourage our employees to give back. We’re pretty active in the United Way here. We’re the fifth largest giver to the United Way, we think, in North and South Carolina. Most of that comes from the employees themselves. The company will match what the employees want to do, and then we also will contribute additional cash and software from time to time.
So we’re very proud to be a citizen here in the Charlotte area. I haven’t been to our new building. I’m told I’m going to get my socks blown off, and I’m also told I’m going to think there’s still too much empty space, but I guess if you live in Charlotte that’s a good sign that we expect to hire some more people there, and we’re just happy to have a chance to have a really significant presence.
This is actually the largest Microsoft facility — is that true? — yeah, this is the largest Microsoft facility in the world outside Seattle, about the same number of people here as we have in Silicon Valley, so it’s a big, big deal for us.
I want to talk about the last year a little bit. The last year in the technology business was a wild year, I think I could say quite fairly. I think whether you’re in the information technology business or not, you’ve watched the wild ride of the stock market, and I’d say in some senses of the greater economy, triggered largely by the drop-off and fall away of the technology stocks in the mix. And I think it’s a year where you can learn a lot.
A year ago, I think there were some false things happening in the world. There was a bubble of money that was funding certain kinds of Internet companies, certain kinds of telecommunication companies — all fine companies, not bad companies, but at the end of the day, capital is supposed to fund things that make profit, and if you look back a year ago there were plenty of things being funded that weren’t making profit, that had never made profit and frankly were unlikely to ever make much of a profit.
And the notion a year ago that probably upset me the most was that there was a way to get rich quick in this world. Whether you were an entrepreneur starting a company or whether you were an investor trying to pick a stock, everybody thought that things could happen quickly, that money grows on trees. It was a very weird mentality. Companies like ours had a very hard time hiring. Everybody we knew had just received an offer for a new dot-com at twice their salary and they were going to own 10 percent of the company and it was all going to vest in a week and a half and the company was going to IPO in two weeks and life would be fine. And the world’s not like that.
We’re a company that believes that you’ve got to have vision about what you want to do, that you’ve got to be patient, that you’ve got to execute with a lot of hard work over a long period of time, and, in fact, all the businesses that we’re in that are any good, we failed the first two or three times that we got into them.
When I think about our Windows business, we launched the Windows product in 1985. It failed. I’m sorry, we announced it in ’83 and had to work two more years to ship it. It failed. It failed again when we re-launched it in ’87; popped it again in ’88, failed; and finally in 1990 we got some traction.
And I’m not encouraging such a robust failure for everybody — (laughter) — but the notion that it takes patience and hard work to get things right, to get customer feedback, to learn what really makes sense, to differentiate your product, that mentality was absent from the industry, and the thing that I think is great today is the culture of hard work, a long period of time, real innovation and that those things drive profits and profits are valuable; that kind of sounds like the economics I learned as an undergraduate economics major in school, and the world is a rational place again.
Now, a lot of people aren’t very happy about that. You know, stocks went down. People lost money. Jobs are gone. Those are all very bad things, and certainly, as we were discussing in our sales meeting yesterday, we’ve had literally tens of thousands of people — friends, partners in other businesses in our industry — who have been laid off. But in the long run, the rationality of having the market be sane, be one that will lead to greater innovation and greater advances than we’ve seen before, and I’m very excited about where the market is.
People ask me, “Aren’t you afraid though, that with the economy bad, with information technology markets down, that your business will be bad?” Well, that’s not something anybody can control. That’s not something we control in our business.
What do we control? We control what products we do, exciting new products. If you ask me what’s the number one cure for the disease of the technology business, it’s hot products, hot services. It’s things that galvanize people’s excitement and attention. And I want to talk to you a little bit about some pretty exciting ideas that we have, but I think that’s really the key.
I think the other thing that’s important and we need to highlight is — this is an industry, information technology, that sees major revolutions, that sees major revolutions quite frequently. I joined Microsoft 21 years ago, and in 21 years I have lived through three revolutions — not changes — three revolutions. And maybe every business goes through revolutions that quickly, but not like these.
The PC was a revolution. There’s not a soul in this room who doesn’t recognize it in that way. In the mid-1980s, 1990s the world moved from the old world of computers where you looked at the crazy screens that were all black or had little white letters on them and you had to learn things like DIR and CMD and EVLINT — I don’t even remember, but they were all crazy things we had in our DOS product, but the world moved to a world in which screens were pretty and had pictures. There were things that maybe still are a little confusing, but you can look for help on screens, and people think of things like the Macintosh and Windows again as real revolutions.
Certainly there’s nobody in the room again who would doubt that the Internet was a major revolution, a major revolution.
And today we’re entering the next revolution. We call it the XML revolution. XML is kind of a — oh, what shall I say — technology standard that’s buried away inside the Internet.
And you’d say, “Okay, the guy’s talking about something that’s a revolution, and I’ve never even heard of it,” or, “some technology thing; that can’t be a revolution.” But each of these other things had the same characteristic.
I dropped out of business school to join Microsoft. Neither of my parents went to college. They thought that was kind of not a very smart idea. (Laughter.) I called them up and I said, “Yeah, I’m dropping out and I’m going to go work with that guy, Bill Gates, that I went to college with.” They said, “Oh, you always seemed to like him pretty well; that sounds okay.” (Laughter.) “What are you going to be doing there?” And I said, “Well, they do software for personal computers.” And my father said, “What’s software?” And my mother actually asked a more pressing question. She said, “Why would a person need a computer?”
And if you think about it, not all revolutions are obvious at the start, and this XML thing won’t be obvious maybe for a few years, but essentially, XML is kind of a lingua franca for the Internet. It’s kind of a standard language that software can use to talk to other software. And if you think about it, that’s a very powerful concept, because most of the biggest revolutions in information technology occurred when you let people more easily build off of the work of other people.
What was the key to the personal computer revolution? Everybody got to build off of the work of Intel. It’s a simple concept really, a very simple concept, but that’s what happened.
It used to be that everybody built their own computer and software and everything else. IBM, Digital Equipment, Honeywell, Control Data; these were the computer companies when I was a kid growing up. But then Intel built a computer and other people could do the software and the applications and everything else.
In this world of XML, the innovation is, people get to do what they’re specialized at, and yet their software still gets to talk to other people’s software. And when you think about perhaps there’s a number of owners here of smaller businesses and you do business with the power company, Duke Energy today, and you do business with FedEx and UPS and you do business with accountants and lawyers and head hunters and a variety of other people, how do you make those connections digital? You’re not going to have the resources in a small business to sit there and design complicated IT interaction with all these people. So you need a world in which standard ways of communicating develop.
The Internet was a very low-level standard way. HTML, which is what you send around when you see things in a browser, that’s a higher-level way to exchange information.
In XML, then, I could actually send from my computer to your computer information that you can use. Let me give you an example. I’ll take the example from a company like General Motors or Ford. General Motors or Ford has suppliers who have suppliers who have suppliers who have suppliers who have suppliers who have suppliers. That’s about how complicated it is. And of course they really want to know what the inventory is across that whole supply chain, so people talk about B2B, but if you’re the guy at the end of the supply chain, you know what you are; you’re a little tool and die shop. You probably have five employees and you likely have your offices on an eight-mile road in Detroit. I know because I grew up there. You’re not a sophisticated IT shop. Not only does Ford need inventory data from you, you actually want to make sure that the design drawings match up across the chain, because if you make the wrong tool that makes the wrong door that fits on the car the wrong way, you know what happens at the end, don’t you? The door rattles. We’ve all seen it happen. And it can get all the way to suppliers 10 deep.
So how does Ford make sure of its designs and what’s being built seven layers away? What’s the communication between the computer systems? They can’t afford to have people talk to that small tool and die guy.
The answer is you need a standard XML description for design information in the automotive industry, because that same tool and die guy is probably doing work for GM, Daimler Chrysler, Ford and a variety of others.
And that’s the sort of essence of this. Think about it in the sense of some other problem. Let me give you an example. Today, when you go visit the Internet, you see what you think of as a Web page. A Web page is a picture of some information. It’s a picture. And if you want to get information off of three different Web pages, what do you do? You go look at the picture.
Suppose though, just suppose you didn’t want to look at the information three times. You wanted to have your page, your personal Web page, and on your personal Web page what you really wanted was ESPN sports headlines with your own personal calendar, with news that came from CNN, which is not owned by the same guys that own Microsoft or Disney, so, of course, you can never find those on a page together today. Nobody cooperates.
But you want to pull all that together, plus I happen to work at Microsoft, so maybe I want our sales information on that page and, oh by the way, of course I want my wife’s calendar superimposed on my calendar, because that’s the mission critical application in the Ballmer household, is calendars. So that’s what you want. You can’t do it today, because everybody just sends a picture of the information. In this new world, you get sent the real information, and so a software can then pull it back together and let you have your own personal page.
Now, it may not be obvious, but it’s exactly the same technology that lets that second scenario happen. It’s the technology that lets Ford work with their suppliers. They’re the same technology, and that’s why we think it’s a revolution.
One more example to prove the point: Suppose you wanted to carry a small device that fit in your pocket. Well, if you get sent a picture of a Web page, how do you look at that on a small screen? You take that small screen and you scroll around and you’re trying to find the right part of the screen; it’s crazy.
What, of course, should happen is instead of getting a picture of the information, the Web Site should send you the information and then software in that device can decide how to present it on the small, little screen that’s inside the device.
And that’s why this idea of XML as kind of a standard language of information that you send around the Internet is as powerful as any idea we’ve seen since I’ve been at Microsoft, and I guarantee you that while many of you haven’t heard of the idea today, you’ll have heard about it within five years, because it will affect the IT systems and it will affect the capabilities that we all get as consumers inside our PCs.
You’ll see a world in which we move to embrace new devices. It won’t be just the PC. It will be PCs that you carry with you. It will be handheld devices. It will be phones. It will be devices that attach to your TV set.
We talk about the digital divide; this is a major issue. My great hope for the digital divide, resolving the issue of the digital divide, is to make a device someday that’s so much more valuable to a family that they buy it and it’s a PC, the DVD player, the intelligent set-top box, it’s a game player, it’s a VCR, it’s a CD system and it’s all in one box and it only costs $600.
And people might come out and say, “How could that be?” Well, think about what’s in a PC today. What’s in a PC today could be a VCR. You have a thing you record on. It’s called a hard disk. You have a DVD drive and a CD player in most PCs today. You have a monitor so it could be your TV. It’s a place you can store information. It’s just not all hooked up and engineered exactly the right way.
But if you can get one device that replaces three or four devices, and so even the family — most families will buy a TV even if they’re not very affluent or buy a TV and they might buy a music player, possibly even a VCR. If you can get more value into the device, you can really dream of something much more powerful.
In the business market you can see how these handheld devices could change fundamentally how people do things. In our sales meeting last year, the number one request from our people was they all wanted handheld devices. At our sales meeting this year, the number one request was they all wanted the expense account reporting application on their handheld device. And each year we were able to satisfy them. But again, XML permits and facilitates the use of these non-PC devices.
This is a big year, I think, also for our company and our industry, because of the product Windows XP, which we will launch in October. You might ask in a sensible way, “Why is an operating system such a big deal?” An operating system is a big deal because it’s at the center of the ecosystem. Operating systems don’t change the world; it’s what people do around them.
Windows XP will be the most usable. It will be the most consumer friendly. It will enable people to do things relatively simply with digital photography and digital music, support their friends and neighbors, but what it really does is it opens up opportunity for a lot of other people, people who build hardware, people who build software, people who build digital cameras, people who provide photo processing services and music services. And Windows XP will be absolutely the most reliable version of Windows we’ve ever had, particularly for the consumer market. Our business customers have had this very reliable Windows 2000 version for a number of years, but our consumer customers have suffered, and we know we need to build a product that just works and is really going to satisfy what people want in their PCs at home.
One other area I’ll just touch on and then kind of wrap up is what’s going to happen in the office. Everybody here is a user of the PC as a basic tool of what we call knowledge work — expressing yourself, analyzing information, communicating, preparing budgets and marketing reports and presentations, et cetera.
And you might ask — a lot of people do — are we at the end of the road for innovation in this area? The answer to that question is clearly no. I dream of the day when this kind of a meeting even is fundamentally changed by the computer. I dream of a day when everybody here brings — and most people have little pads with them, notes they’re carrying to the next meeting they’re going to. I want that pad to be a little computer — not a little computer actually, a full computer. We’ll have a computer out next year that’s this size, this thickness, maybe weighs a couple pounds. That will be a great device for you.
When you come to a meeting like this, you’ll have access to your whole desktop, your office. There will be a wireless network that this hotel has to have in place to stay in business. You’ll be online. If you have other things you want to do while I’m speaking, you’ll do them. That’s part of the cost of this game. If you want to record my speech, we’ll simply make this audio available over the wireless LAN and it will synchronize with PowerPoint, which will also be made available to you, and you can take the speech back and give it to the information technology guys in your company. If you want to make a note, you’ll write right on the PowerPoint slide. You’ll just write on it in your own handwriting, “Hey, this made some sense. Check it out and see if Steve was really telling the truth here, people. I want to know about this XML thing.”
Because we’re all on the wireless network, we’re a virtual community, as they say in cyberspace, which means you’ll be able to look at a list of everybody else who’s in this room, as long as they want to give permission, because their privacy will be respected. But perhaps Governor Hunt will notice some friend or neighbor or relative, spouse is elsewhere in the room, and he can send them directly then an instant message, “Hey, didn’t know you were coming today; let’s meet afterwards and get a cup of coffee and have a chance to chat.”
Meetings have not been fundamentally affected by technology, and it’s just one of a number of small ways in which there’s just a lot more that we think technology can do to support the kinds of things that people in this room do on an every day basis.
This is a big year for our company. We launch Windows XP. We just launched our Office XP product, our newest version of Office. We launch our .NET line with VisualStudio.NET. Our Xbox gaming console is coming out this year. Sometimes I feel like I have to say whether you like it or not, as the father of a nine-year-old, I like Xbox as a business, but I’m not sure I like the amount of time my nine-year-old spends on videogames. It will be the best one out there, so if the kids are going to waste time, better they should waste it with us. (Laughter.)
Fifty years from now I know there will be sociologists who write about what videogames did to society. It will either be real good or real bad. I hope as a father I’m making the right call every day on the amount of screen time they get.
And finally, we have a new version of MSN we’ll bring to market later on this year.
We’re a company that spends $5 billion in R & D and really, at the end of the day, that lets us do one thing, which is hopefully bring out some new products and services that help positively impact the way you live and the way you work. And we’re glad to have a chance to do that on a worldwide basis, and we’re extra glad to have 1,400 committed Microsoft people doing what they do best here in the Charlotte area.
And with that, I’ll say thanks.