The Bill
Gates Interview
Copyright (C) Playboy Enterprises, Inc. 1994
Page 3 of 6
[...continued from previous page]
PLAYBOY: Do you dislike being called a businessman?
GATES: Yeah. Of my mental cycles, I devote maybe ten percent to business thinking. Business isn't that complicated. I wouldn't want to put it on my business card.
PLAYBOY: What, then?
GATES: Scientist. Unless I've been fooling myself. When I read about great scientists like, say, Crick and Watson and how they discovered DNA, I get a lot of pleasure. Stories of business success don't interest me in the same way.
PLAYBOY: How come you're not in a lab coat somewhere?
GATES: Part of my skill is understanding technology and business. So lets just say I'm a technologist.
PLAYBOY: If business is ten percent, how does the other 90 percent break down?
GATES: [Blows a big raspberry]
PLAYBOY: Come on!!
GATES: This gets far too ephemeral and private. It is an interesting question, I will admit. But applying it to myself in a public way is probably
PLAYBOY: But you brought it up.
GATES: I did. OK. Ninety percent to all other.
PLAYBOY: [Blows raspberry]
GATES: This percentage thing is too hard because you always forget something important. Whoops, I forgot about my family. I mean, come on, this is too difficult.
PLAYBOY: Its hard to believe we found something too difficult for you.
GATES: There must be another metric to explain what I mean when I say that business is not the hard part. Let me put it this way: Say you added two years to my life and let me go to business school. I don't think I would have done a better job at Microsoft. [Stands] Let's look around these shelves and see if there are any business books. Oops. We didn't need any.
PLAYBOY: How do you define smart?
GATES: [Rolls his eyes] Oh, come on. It's an elusive concept. There's a certain sharpness, an ability to absorb new facts. To walk into a situation, have something explained to you and immediately say, Well, what about this? To ask an insightful question. To absorb it in real time. A capacity to remember. To relate to domains that may not seem connected at first. A certain creativity that allows people to be effective.
PLAYBOY: Whew. Are you smart?
GATES: By my own little definition I'm probably above average.
PLAYBOY: Why do some of your critics say you and by extension, Microsoft are not innovative, that you are evolutionary rather than revolutionary? Here's a quote: Bill is just a systems guy who has been able to fund a wider range of me-too applications on the basis of one extremely lucrative product MS-DOS practically handed to him ten years ago by IBM. All he's done since is hang in.
GATES: [Smiles] DOS has been as much as 25 percent of our profit. But believe me, those profits go to the bottom line. If the company weren't profitable you could say, Ah, DOS, they're using it to fund the other stuff. The fact is, everything is very profitable here. And we're doing so many innovative things now, even my harshest critics will never say that again.
PLAYBOY: Perhaps. But why did they say it in the first place that, along with vision, luck, timing and an unrelenting need to win, you've succeeded by picking up the fumbles of your competitors? You were given the right to license MS-DOS by IBM because it thought the future was in hardware, not in software or operating systems.
GATES: [Stands, paces] So here's our management meeting: Well, I don't know what we're supposed to do. Has anybody fumbled anything recently? I mean, come on! Hey, Digital Research: I hear they're fumbling something. Let's go do something there. What was the first microcomputer software company? Microsoft. The very first! Who were we imitating when we dropped out of school and started Microsoft? When we did the Altair BASIC? When, early on, we did CD-ROM conferences and talked about all this multimedia software? And who were we imitating when we did Microsoft Word? When we did Excel? It's just nonsense.
PLAYBOY: It's said that you have nothing less than industry domination in mind.
GATES: But what does it mean to win? If I were a guy who just wanted to win, I would have already moved on to another arena. If I'd had some set idea of a finish line, don't you think I would have crossed it years ago?
PLAYBOY: Do you want to dominate the software industry?
GATES: No. We're only healthy if the industry as a whole is healthy and thriving. Most types of software aren't appropriate for us to do. For those that are, well always have competition. Its so simplistic. Whenever a company is successful, people say it's out to dominate. Take Disney. Its a wonderful company, but there are people within the entertainment industry who wonder about Disneys goals. Or IBMs, when it was successful. People impute all sorts of ridiculous motives and plans.
PLAYBOY: Such as Disney being called Mauschwitz because of the tough deals they drive?
GATES: They do great products and they're good businessmen. In our industry, some people are afraid of us because were so good. Outside the industry people say, Wow! This software stuff is confusing. You bet I want to go with a company that's going to be around and has proved it has things that work together and are pretty good. Actually, that scares successful companies in the industry. You get a good enough reputation and you're like an incumbent.
PLAYBOY: And vulnerable to incumbent-bashing?
GATES: Yes. The industry press has been tough on us for as long as we've been the largest company. We're involved in setting some fairly key standards and people are afraid of us because they think, Geez, they are quite capable. It's daunting, I suppose.
PLAYBOY: You suppose?
GATES: One thing people underestimate is how markets don't allow anyone to do anything except make better and better products. There's not much leeway. The world is a lot more competitive than most people think, particularly in a high-technology area. If a company takes its eye off improving its products, if it tries to do anything that would be viewed as an exercise of power, it'll be displaced very rapidly.
PLAYBOY: You're not suggesting you've never exercised your power.
GATES: OK, so we tried to get everybody to write software for Windows. If we discouraged people from writing software for Windows we would be hurting ourselves a lot.
PLAYBOY: And now Windows is so popular in the stand-alone-PC market that you've blown away competitors like IBM's OS/2 and HP's New Wave. Has Windows won?
GATES: If you define the term narrowly enough, you could say yes. Windows has a substantial share of the volume on DOS-based PC's. But we keep doing versions. And despite its current success, unless we keep the price low and keep improving the product dramatically, then it will be supplanted. Of course, we think there are enough improvements in the next version, 4.0, code-named Chicago, to extend Windows success another couple of years. And then we'll have a version after that.
PLAYBOY: Do you have an unfair advantage over your competition because your systems people who do things like MS-DOS and Windows exchange data freely with your applications programmers, thereby breaching the Chinese wall, the ethical boundary that's supposed to separate them? Its been an oft-repeated charge.
GATES: [Strongly] Chinese wall is not a term we've ever used. And companies often have more than one product. Kodak makes film and cameras, and those two parts of the company can work together. IBM makes computers, some peripherals, and software and applications. Ford not only makes cars, it makes repair parts. The day it thinks of a new car, it doesn't call in all the other repair-parts companies to build those repair parts. We're actually more open than any other company that has multiple products. We take lots of affirmative steps to help other companies. Naturally, our applications group is the most committed to Windows. In the early days they didn't hesitate when I said, Hey, we're going to do Windows. Other companies did, even though we begged them to write for Windows. That gave us a leadership position, which we've continued to increase over the years. We bet the company on Windows and we deserve to benefit. It was a risk that's paid off immensely. In retrospect, committing to the graphics interface seems so obvious that now it's hard to keep a straight face. But the big beneficiary of the whole PC phenomenon has been the users. Individuals can now get these tools at very low prices. This is the market working exactly as it should. And yeah, that's been tougher on some producers, and it means we have to keep working hard. We can't rest for a second.
PLAYBOY: Let's talk about the recent government investigations. Last year the Federal Trade Commission concluded a three-year look into Microsoft's affairs. During that time many of your competitors complained about alleged Microsoft strong-arm business tactics and monopolistic practices. After two votes the FTC decided not to proceed with any action. Now the Justice Department has picked up the ball. Is Justice asking questions different from the FTC's?
GATES: It's the same stuff.
PLAYBOY: Why don't you just refer them to the FTC files?
GATES: That's millions of pieces of paper.
PLAYBOY: Did these investigations take you by surprise?
GATES: At some point, with the kind of success we've had, it's both expected and appropriate for one government agency to review what's going on in the industry. The fact that we have a second one doing it, sort of double jeopardy, is unprecedented. But fine, we'll go through another one. It may take many years.
PLAYBOY: Are you hoping that it takes many years?
GATES: No. It would be better if it were over soon.
PLAYBOY: What was the toughest part of testifying before the FTC?
GATES: No real problem. I was quoted once. I think the quote was misinterpreted as answering the question, What's the worst case in your dealings with the FTC? with, Well, if I trip on steps when I'm walking in and break my head open, that's the worst case.
PLAYBOY: It does seem rather cavalier.
GATES: It does. What I meant was that you multiply low-probability events by their probability. That's how you judge them. You don't just take this one-in-a-billion thing and spend everybody's time elaborating on it. In any case, we had no problem with a company as successful as Microsoft, in an industry as important as ours, being looked at by a government agency to make sure we're competitive and that things work the right way. In fact, we spent three years providing the FTC with millions of documents and explaining our industry so that it could be sure the status quo was being maintained. That's perfectly legitimate.
PLAYBOY: Does the FTC have to go through all that trouble to understand your industry?
GATES: Yeah. It takes some time. But if it hadn't looked at the software industry, then the status quo still would have been maintained.
PLAYBOY: This also happened to IBM and AT&T, with the latter being broken up. Do you fear that?
GATES: No. The government decides when something's important enough to look into. Then it allows all your competitors to call it up and say, Please hold them back this way. Please make it harder for them to create good products in this way. Please tell them not to compete with us anymore. Microsoft makes a little mouse, so we had these guys who make mice saying, Why don't you tell them not to do mice. They do Windows and they do mice. Some guy who does Arabic software layers complained that he didn't like the way we were doing Arabic software layers. The government looks at all the mud that gets thrown up on the wall. We did have one competitor who launched a paranoid political attack against us with the FTC in an attempt to persuade the government to help it compete.
PLAYBOY: Everybody knows that was Ray Noorda, chief executive of Novell.
GATES: That was disappointing.
PLAYBOY: Careful word, disappointing. Didn't it piss you off when you thought Noorda was working against you?
GATES: To the degree that he failed, we can be magnanimous about it.
PLAYBOY: Was the outpouring of negative sentiment hurtful?
GATES: No. This is a very competitive business.
PLAYBOY: You're blase about it.
GATES: It's cheap for a competitor to pick up the telephone and say, in effect, Please hurt my competition in the following way. It's straightforward. It's absolutely to be expected.
PLAYBOY: Is there nobody you'd like to restrict or retaliate against? For instance, one of your most vocal critics is Borland chief executive Philippe Kahn. It seems he goes out of his way to attack you.
GATES: When we got into the Apple lawsuit, he said, Oh, Windows, it's like waking up and finding out that your partner might have AIDS. That was his quote in Time. In another magazine, I think it was Business Week, he chose to compare us to Germany in World War Two.
PLAYBOY: And your response?
GATES: That was so extreme. I don't think it will mislead people in any way. People who do that discredit themselves. It's so outrageous and so offensive and inappropriate. Just think back to the Holocaust and all the tragedy. But what bothers me more is when facts are twisted so that people can't tell what's right or wrong. You won't find us ever doing anything like that with any of our competitors. Philippe is a smart guy. I've been critical of his company's inability to make more money, but that's something I do to his face. Everything I'm saying to you about Philippe, I've said to him directly.
PLAYBOY: Mitch Kapor, founder of Lotus, says Microsoft has won and now the industry is the kingdom of the dead.
GATES: I have immense respect for Mitch. We've agreed and disagreed on many things but stayed friends through the years. After he said that, I saw him and asked, Hey, Mitch, what was that?
PLAYBOY: Had he really said it?
GATES: He has strong opinions, and I think that the remark was taken out of context. He's given us good feedback on our software for a long time.
PLAYBOY: Is Microsoft so big that you never go on the offensive?
GATES: Never. And as we move onto this information highway, believe me, most of the companies involved are far bigger than we are. We're dealing with the German telephone company and with British Telcom. We're dealing with NTT, the worlds highest-valuation corporation. Are they going to compete with us? Work with us? Were a small, small company in that arena. There may be some point when we feel that somebody is using market muscle against us and wish we had a way to avoid it.
How Long do you Plan to Stay at Microsoft?-> ... 1, 2, 3, 4, 5, 6
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