TechNet Summit: Gates on Google, iPod, Zune, bubbles and the future

During an interview conducted by Charlie Rose at the TechNet Summit, Bill Gates discussed his philanthropic efforts, his future and Microsoft’s business. Rose asked Gates about competing with Google. He avoided getting into much detail, claiming that the competition is fun for both companies. “They have done a good job on a number of things. It comes back to extreme high-volume, low-cost model that is magical in terms of richness,” Gates said. My interpretation of that statement would be that doing software for the Internet can be very low cost—free—and can address billions of users.  He said that Google and Microsoft, both software companies, would overlap more in their efforts over time. “We both believe in hiring smart people,” he said.

Rose also asked Gates about Apple and the iPod, which is timely given Microsoft’s Zune just shipped. “The iPod is phenomenal, unbelievable, fantastic,” Gates said. Rose asked what makes the iPod so great. “It’s a disk with music on it,” Gates replied. “There  are things that happen in these markets were get enough things together--like Windows, Word and Excel. You get something good enough and the market latches onto it and you get momentum within a category. Apple did enough things right to create an incredible phenomenon in a category.”

Regarding Zune, Gates said the initial goal is more modest than being better than the iPod. He cited the wireless capabilities for sharing playlists and music—which he called connected entertainment—as a unique feature, but allowed that Apple will likely copy the features. “It’s a growing market and Apple done very well. We can get some of new users, people switching, we can get quite a mixture of those. We have to excite people about the concept.

Of course, Microsoft's methodology is to keep spending money and chipping away at competitors' share, as it did in vanquishing Novell, Lotus, and others over its history. Sony (Playstation), Apple (iPod) and Google (search, applications, advertising) are just the latest to fall into Microsoft's orbit, and it's not clear who will be the winners. 

In speaking about globalization, Gates said the U.S. has been spoiled being a leader for so long, and will need to make adjustments given how the country's relative position on the world economic and innovation stage is changing, and that it is not a zero-sum game. Sounds like good advice for Microsoft.

Gates had a good one-liner about requests to take features out of Windows by regulatory bodies that could provider competitors with an advantage. “If you can castrate someone’s product, what a free lunch that would be,” he said, sounding like the Bill Gates of yesteryear. 

He was asked if he were worried about a new bubble, and responded that we aren't going to experience anything like 1999 or 2000. As long as it's rich investors who are losing money, it not a big tragedy, Gates said, and also took a shot at executives who took short cuts with stock option back-dating to enrich themselves.

In reference to YouTube and MySpace, Gates stated the obvious--traffic doesn't equal profit. Switching costs on Internet are low, and the technology makes it easy to belong to many communities. He said that Microsoft is working on pulling out what is happening in multiple communities and aggregating them in one place and managing identity across sites. 

Gates is still beating the drum on speech, ink and the Tablet PC, as digital approaches that will change the way people work, and mentioned projecting documents on a table via software and cheap cameras, which has been a long-term Microsoft research project. 

Gates, who will remain chairman but give up his day-to-day duties in 2008, maintained that computing is in its infancy. "It is a time when all leading companies have more opportunities than ever before," Gates said, but the Bill and Melinda Gates Foundation is more compelling. He compared working on healthcare problems and dealing with poverty and other global issues to the early days of the microprocessor industry. "You have to put the pieces together in a different way than has ever been done before," he said.