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Titans Talk Tech : Bill G. and Michael D.

Aug 2001

Michael Dertouzos and Bill Gates ponder open-source software and the
future of the computing industry.

DERTOUZOS: It is ironic to me that in the United States, the bastion of
capitalism, where people have given of their work lives and capital to
create a huge industrial economy, we are now asked to surrender the very
same factors of production -- our labor and our capital -- to develop
software that will be open and free for all. I do see some qualified
benefits to open software, but I wanted to get your views on the big
picture before going any deeper.

GATES: Most of the people and companies that create intellectual property
will continue to want to get some payment for it, as with any creative
area. The beauty of all intellectual property compared to physical
property is that there is no marginal cost of production. The world
benefits immensely from this, whether it's from a great book or a new drug
or a new piece of software. There are fixed costs, so most work will cost
something, but for software sold on a high-volume low-price model the
price is very small compared to the value.

There's always been a role for open-source software, and there always will
be. Free software has been around for a long time. Likewise there is
commercial software where the source is easy to access so the pricing and
the source availability are two different things. Ideally, software should
be componentized enough that you could extend it without having to read
and rebuild the source code of the product.

For any software to gain widespread acceptance and use to be popular with
consumers and corporate customers it has to possess the infrastructure and
support that make it efficient and easy to deploy. So just as the car
became popular only when there was a network of gas stations, repair
shops, dealerships, paved roads and so on, the same is true for software
and most other products. The role of common standards in intellectual
property is central here. Thanks to a common operating system standard --
Windows -- a whole industry got created, one that employs more than five
million people worldwide. When both hardware companies and independent
software vendors have a common standard to work with, the end result is
enormous choice for consumers.
Open-source software's strength is massive customization but this works
against consistency. Consumers don't know what to expect when they load
the software; corporate customers find it hard to stay current as each
version is customized; developers don't get a volume market because there
are multiple flavors of the same product.

A lot of software that started out as university software -- like browsers
-- transitioned to become commercial software when customers asked for
rich features and broad support. In the case of browsers they stayed free
because of the advertising value and additional demand for complementary
products that they create.

DERTOUZOS: I agree with you that there is a role for all three --
commercial, open, and free software -- and add to the list another
important benefit of open software : It accumulates for everyone's use
code contributed by many programmers. But what of commercial software,
that has the potential of becoming a standard for millions of people? To
be used widely, it will be given away initially, and sold later when it
has taken hold. In the long term, after the software has stabilized and
returned its development cost and a good profit, software developers may
find it increasingly difficult to charge for it. I suspect that such
software, and maybe most software, will, after a commercial period, become
very low-cost, and in some cases, even free. Do you think this is likely?

GATES: One of the key characteristics of the software industry is that,
because of incredibly rapid technological change, products must be
continuously modified to reflect innovations. For example, software will
need to change to support speech input, which will be fantastic for users.
So development costs are ongoing. With the high-volume, low-cost model
adopted by Microsoft and the PC software industry, such costs are spread
widely, so consumers pay a very low price to benefit from billions of
dollars of R&D.

The key is in value and utility -- if consumers get both, they will be
willing to pay for them and, if the software is good enough, it will be
used widely from the outset. So the world you are describing already
exists : Consumers already get an amazing amount of functionality from
their software at a very low cost. Contrast the old proprietary computing
model, where software accounted for a high proportion of system cost, with
the PC model, where software is only a tiny percentage of overall cost.
That comparison makes much of today's PC software seem almost free.

DERTOUZOS: In the commercial period, when the software is still evolving,
a successful strategy for maintaining revenue is, increasingly, the annual
upgrade, which, incidentally, adds to the "feature shock" of users. This
practice, together with an evolving Web, suggests that we'll move from
buying shrink-wrapped software to simply buying upgrades through periodic
downloads at a monthly fee. Do you see Microsoft and other software
developers becoming such "service" organizations?

GATES: Regular upgrades are clearly necessary in an industry that is
changing as fast as the software business -- just as they are in, say, the
auto industry. I can't ever imagine a time when software will not continue
to evolve in this way. With the high-volume, low-cost model, you have to
make the software as attractive as possible to as many computer users as
possible, and that means lots of features. And clearly not all of them
will be used by every buyer. But in general I think you are right that, in
order to "hide" the complexity and adaptability of software from the
average user, upgrades will increasingly be carried out transparently and
automatically, without users having to do anything. So rather than having
to ensure that your software is always up-to-date, the software will do it
for you -- you'll wake up in the morning and the latest version of the
software will have been installed overnight. To that extent, software will
evolve into even more of a service business than it already is, and in the
long term there will probably be a move toward a subscription-style model.

DERTOUZOS: Browsers and operating systems will merge in functionality,
simply because people need to have the same commands for dealing with
information, regardless of whether it is local or distant. On this, you
and I agree. However, we disagree on how to get there: I dream of a system
built from scratch that gets rid of layers of old software and brings a
new truly easy-to-use metaphor to the Web-centric world, as important as
the desktop was earlier. I believe that you want to get there gradually,
by upgrading Windows. Recall that the Web itself was created by a small
team of people, yet ended up on millions of computers. Could something
like that happen here, with a new system that might spring out of nowhere?
Would you consider replacing your own baby, ahead of a competitive threat,
with a brand-new, simple, super-efficient browser-operating system?

GATES: Whenever a new word is added to a computer language or a new
feature to an operating system there is a question of whether it would be
better to start from scratch. We actually did start from scratch with
Windows NT and I am sure we will do so again. In the meantime, we are
evolving every version of our operating system. We have made the browser
and HTML the primary display language, replacing the old style help and
folder display. There are new operating systems that integrate the browser
like BeOS but none have done as much as Windows has.

For every new advance there will be many new competitors, including people
who compete with a whole new operating system and people who compete using
middleware to run on top of the operating system. If we do our job well,
giving people the new capabilities and compatibility, we can make a big

With Windows running on well over 200 million computers worldwide, we
constantly think about the customer base and how we get them from here to
there. A lot of the "layers of old software" you refer to do get
eliminated we're constantly stripping out redundant code or replacing it
with faster ways of doing what the old code did.

DERTOUZOS: The millions of users of all operating systems and browsers,
worldwide, appreciate the need for system stability. Yet the incremental
changes that have ensured it have also led to today's difficult-to-use
systems and I mean the systems of all software developers, without
exception. Novices and experts alike kneel (I sometimes even cry) as we
try to fend off a tangle of intertwined lizards and thousands of moving
parts within these systems and the many applications that use them until
we luck in on a fix. We'll have to clean up this mess if we are to provide
the true ease of use that will enable people to achieve the 300 percent
productivity gains we envision in the 21st century. People will have to
rise above battling low-level details, to access the knowledge they need,
collaborate with others, customize their systems to their own human needs
and automate their own repetitive tasks. I think the time has come to
bridge local and distant computation and support these much-needed
capabilities in a new breed of system; applications will then be freed up
to use all this new power in medicine, education, business, recreation,
commerce and so on. I can't see us getting there incrementally.

GATES: The danger here is that we may simply dismiss the progress that the
computer software and hardware industries have already made. Twenty years
ago nobody used a computer unless they were a hobbyist or employed by a
corporate IT department. Now, even a child can use a PC to carry out
computing tasks that were actually beyond the capabilities of those 1970s
IT departments. We've already seen huge gains in productivity as a result
of the PC, and enormous strides in education, medicine, recreation and
commerce. Four years ago you couldn't buy a book online; now you can buy
almost anything online. And the gulf between remote and local computers is
already being bridged, both by the Web and by other networking
technologies. Clearly, we're only at the start of the Digital Age, and our
future progress will undoubtedly dwarf our past achievements. But we
shouldn't underestimate how far we've already come.

We also shouldn't underestimate how much work remains to be done.
Simplicity is a key goal, but it's a constantly moving target. Both
hardware and software are constantly becoming ever more sophisticated, we
want to add more and different types of devices to our computers, and we
want all this to work perfectly and easily and be simple to upgrade too.
Plus we're trying to drive computer usage toward less-technical consumers
deep into the mass market. And that's a huge challenge for the industry,
but one we undoubtedly have to meet if we are to drive future growth.

DERTOUZOS: The Agrarian Revolution with its plow, the Industrial
Revolution with its steam engine and the Information Revolution with its
computer have all improved our economic lives. Maybe the time has come for
a new revolution, not about things, but about the most precious resource
on this planet -- ourselves? What role and purpose do you see for human
beings in the Information Age?

GATES: I'm very optimistic about the role of human beings in the
Information Age, because this is an era where people their knowledge, and
their ability to put that knowledge to work will be more important than
ever before. There are great dangers to thinking that just because manual
labor -- whether on the land or in factories -- is playing a relatively
smaller role in wealth creation, then people are also playing a smaller
role. In fact, the Information Age is enabling people who were previously
forced to pursue a single means of wealth creation those, for example, who
lived in remote areas had no option but to work on the land to choose from
a far wider range of work. Technology such as the PC, the Internet and
cheap telecommunications have brought amazing mobility to the factors of

The Information Age has brought people together in even more fundamental
ways. The increasing speed and flow of information has opened up closed
economies and helped democratize the most repressive regimes. You can
close geographic borders but you can't build effective borders in
cyberspace. So technology is giving people more freedom, and the power to
do more with that freedom. And technology will never replace the wonders
of human interaction no matter how good PCs get at recognizing voice or
handwriting, they'll never read body language or smile back at you.

DERTOUZOS: I fully share your views and optimism on human beings and the
future uses of the technologies we are developing. However, I am concerned
about a split that started 300 years ago in the Enlightenment that busted
up faith and reason, man and nature, which until that time were united.
The liberation of reason caused science to blossom and led to the
Industrial Revolution, which made our part of the world wealthy. By now,
this split has taken hold, and each of us goes through life in a
compartment, labeled technologist or humanist, rational or spiritual,
logical or emotional. I don't see the Information Revolution curing this
split. It may even aggravate it by increasing our reliance on virtual
encounters and machine knowledge. Meanwhile, the world around us is
becoming explosively complex with a myriad of intertwined challenges and
problems that straddle these divisions and cannot be handled with such
partial mind sets. To cope with this new world, but also to enrich
ourselves, I believe we need to unite our divided selves and try to become
whole again. That's what I mean by a fourth revolution aimed at
understanding, beyond things, ourselves. Any thoughts along these lines?

GATES: If the Information Revolution did lead to a reliance on virtual
encounters and machine knowledge, then I would agree with you. In reality,
though, the computer is increasingly a gateway to knowledge, to the arts,
to new cultures, and so on, that were simply not accessible before. It is
creating communities that, far from being mere virtual entities, serve as
the foundation for real relationships. So to the extent that the computer
can link people with knowledge and cultures and each other more
efficiently than any other past technology, it can help push them toward
healing the rift you see. But technology is only a Toland, like all tools,
its effectiveness depends on the skill and intentions of the user. In the
end, you have to put your faith in human nature. If you think the
invention of the book was bad, then you will feel the same way about the
changes that are coming. If the book was a good thing, then these advances
carry the empowerment even further.

DERTOUZOS: I agree with you on this last point: The angels and the devils
are definitely within us, not within the machines we use. And so are our
divided selves. That's why I view this as a human problem in need of a
human revolution. Speaking of human problems, I believe that left to its
own devices, the new world of information will increase the gap between
rich and poor people, simply because computers make the rich more
productive and hence richer, while the poor are standing still. Do you

GATES: The power of cheap software and cheap computing has brought
enormous economic power to millions of people who in the past lacked it.
It has helped democratize nations and economies around the world. It is
bringing about the death of distance, as high-speed telecommunications
link people, companies and countries faster and cheaper than ever before.
And while this Information Revolution hasn't yet reached deeply into the
poorest regions of the world, it will look at what is happening in India
and China, for example. The Industrial Age did in many ways bypass poorer
countries; the Information Age actually gives those countries a chance to
compete on equal footing with richer countries. In fact many of the poorer
countries have a comparative advantage in that they can now leverage their
cheaper labor around the world not just locally using the power of the PC,
the Internet and cheap telecommunications. The poor are not standing
still; they are catching up faster than they ever did in the Industrial

DERTOUZOS: I share the view that the poor could rise out of poverty, by
using the new world of information to learn how to read and write, take
care of their health, cultivate the land, and acquire language and other
skills that they may use to sell services in the information marketplace.
However, for this to happen, the poor will need communications,
workstations and training all of which cost a great deal, and therefore
cannot materialize spontaneously. The people you allude to, in Bangalore
and elsewhere, who deliver software services over the Net, speak English
and know how to program. They are but a drop in the ocean of six billion
people on Earth, barely 2 percent of whom are interconnected. My point is
that all the benefits that we envision will not become available to the
poor if we leave the Information Revolution to its own devices. We need to
take an active role as individuals, companies and governments of the
industrially rich world to help the poor ascend along this path. How can
you disagree, in light of all you have done along these lines?

GATES: Unfortunately, the benefits of every new technology tend to trickle
down slowly. Even the earliest tools of the communications revolution the
auto, the airplane, the telephone have yet to benefit some poorer parts of
the world. But what will clearly help the spread of information technology
is the amazing speed at which computing costs have dropped, along with
information technology's ability to break down borders. We're already
seeing examples of how cheap PCs can transform companies and government
agencies in poorer countries, and the benefits of these changes feed
directly to the population. But generally, you are right: companies and
individuals in rich countries will have to contribute technology and cash
to kick-start a truly global Information Revolution.

I am a big believer in philanthropy, and I'm excited about the impact it
can have. I think it is also important to consider priorities. I have
chosen to focus on making sure that children in poor countries get access
to vaccines so they can live a healthy life. This has to come before
making sure they have access to computers. I have put more than $6 billion
into my two foundations because of my enthusiasm for taking the great
advances in medicine and information technology and giving more people
access. We can do some great things here.

DERTOUZOS: I wish other people and organizations would follow your
philanthropic lead. And thanks for this enjoyable and informative

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