Bill Gates reboots

Microsoft's founder on his decision to step aside, Warren Buffett's gift, and why it all gets him a little choked up.
By Brent Schlender, FORTUNE editor-at-large

NEW YORK (FORTUNE Magazine) -- Think for a moment what it must be like to be Bill Gates. At the ripe old age of 50, you're a living cultural icon who simultaneously is the world's preeminent computer geek, its richest businessman, and its most ambitious philanthropist.

You're an old-fashioned family man who dotes on his wife and three young children, and you also love your brainchild-Microsoft-as only a founder can.

You're an unabashed optimist, and you've grown accustomed to being able to focus your considerable intelligence and energy on whatever activity you choose, knowing that it will have an enormous impact.

You are also aware that even you can't do everything, especially if you want to do it well.

But if you're Bill Gates, you're just as methodical and shrewd when thinking about your own life and career as you are in plotting corporate and technological strategies.

As he relates below, his recent decision to "shift priorities" and gradually recede from a day-to-day role at Microsoft to focus full-time on his philanthropy by June 2008 is the end product of much soul-searching and planning. It doesn't, however, mark a complete disengagement from the company that carries so many of his genes.

As nonexecutive chairman and the company's largest shareholder, Gates will still be a force at Microsoft far beyond 2008.

That Warren Buffett almost simultaneously chose to contribute much of his own vast fortune to the Bill & Melinda Gates Foundation seems to be more than a coincidence, especially since the two are such close friends.

But both deny it. "Poetic synergy" is how Gates describes it, insisting that both decisions evolved independently and over a long period. In the end, it doesn't really matter. Because more than anything, the enormous gift provides the Gateses with even more impetus to make their foundation the kind of catalyst in philanthropy that Microsoft has been in information technology.

Bill Gates sat down with FORTUNE editor-at-large Brent Schlender, who's been covering the mogul for 20 years.

Gates seemed happy and relieved to have his decision out in the open - but also a little apprehensive about where his new career path would lead. Here's what he had to say.

In Gates' words

When I practiced the speech for the press conference and talked about working with Steve [Ballmer, Microsoft's CEO] every day for the last 26 years, I had a hard time saying that. I practiced a few times so I wouldn't have to stop during the press conference.

When I did give the speech, it was an emotional thing for me. There's a ton of people here I've been through ups and downs with - dozens of them. This has been my life's work.

And I don't even know what it's going to be like. I'm taking a risk here that I'm going to miss it very badly.

There's a level of intensity - oh, this happened, yikes; that really went well, this went disastrous, this guy is unhappy, this guy has done better than we expected.

And every day it's just happening, and it really does keep your brain going. It isn't so much the competition that keeps you going or wears you out. It's more the people you're working with and that process of invention, because in a lot of fields we work in there really isn't that much competition in the sense of a pitched battle.

Even some of the most interesting stuff - the tablet PC, IPTV, productivity and collaboration software, are areas where it's interesting not because of the head-to-head battle, but because it's just interesting.

Of course, then there's search. [He chortles a little.] Hey, both our own people and those in the press think that's a head-to-head battle, although some people may think we haven't even caused much of an impact yet.

Jobs like mine are intense in this great way. Sometimes if too many things hit you in one week, it's like, wow, I'm glad there's the weekend. But that doesn't happen that often.

I love the day-to-day activity, and I have this strong sense of responsibility, so it could be tougher to make this change than I expect. I do get to do leadership-type things - not running things per se - in my foundation work and exploring technology, with a similar thread of being optimistic about new discoveries and bringing in very sharp people and showing them how you can help their work have an impact that they may not have seen.

Still, there's nothing like Microsoft. We're in this very central role where people expect a lot from us. But they also expect the latest challenger to do more damage to us just like that, whether it's Netscape or Sun or Google.

And we sit here wondering, Gee, why do they think every new competitor is going to be our demise? Are we sure we're right about this one? And then there is the great friendship and trust I've developed with Steve and the other key people.

So I'm giving up some of that. There are some who say that maybe there's a sea change in software that Bill doesn't get, and that Ray [Ozzie, chief software architect] is going to step in and solve that problem.

Hey, that's great. I do think Ray brings a different way of looking at things, and this whole Windows Live platform is something he's really led. And there are people who look at our current hot competitors - Google or Sony or whatever - and they ask, Well, is my decision to change my role somehow related to something in those competitions?

And the answer is absolutely not. I love those competitions, and there are neat things we're going to do in response, and two years from now we'll be much further along.

So it's not based on any paradigm shift I don't want to deal with. People say it's the end of an era, but in software you have to completely rethink what you're doing every year.

There's no one instant when everything suddenly changes, even when you look back. Was it the personal computer that changed everything, or was it the graphical user interface, or was it the Internet?

All you can say is that the digitization of the world is accelerating every year, by whatever measure you choose. So there's no magic either on the positive side or the negative side that says that 2008 is a particularly significant year - it's just the one that felt right to me.

Also, 2008 is a long time before Steve will need to pick his successor, so it means we're changing only one of the two key people at a time.

I'm super-happy to see other great people around here get more visibility. We had the top executives over at Steve's house the night before the announcement of my new priorities - it was a really great thing for us all to just sit and talk.

And I told everyone, "Hey, even if 80% of the credit I get for doing things could go to others, there'd still be plenty left for me."

Because of my founder status there's been this broader view of what I do without an appreciation for the work of a ton of other people. In some ways I've always had to be very careful about when I'm speaking in my role as a decision-maker vs. my role as a brainstormer.

I can throw out something that's, say, a quarter right, and people a lot of times go, "Whoa, are you saying we're supposed to do that?" I want them be able to latch on to the parts they agree with and dismiss the rest without fear. It's going to be fascinating to see how that dynamic changes.

Managing the transition

The last time I made a big transition was when Steve took over as CEO about six years ago, and it took us about a year to get the rhythm of how we worked together, and I think there will be some of that same learning curve as I step into this new role.

So Steve and I don't have a crystal-clear view of exactly how this will play out and which projects I'll work on. But we've already begun going through how I spend my time.

It is kind of a liberating thing that I won't put in time on the normal review process. But there's a pretty big piece that I'll continue to handle in my part-time role, which is brainstorming with research and product groups. I love that part of my work.

Whatever time I do spend, it will be with research guys, or with the tablet guys, or search technology, or other special projects.

It's pretty neat, because it's kind of a pure thing. And it will be important that people see I'm keeping very up-to-date on everything. I'll do that at the foundation too. I'm not going to go buy a bunch of test tubes and start doing protein-folding experiments or anything, but I am going to be looking at how technology can have an impact in health and education and keep learning about health care and how the U.S. and other rich governments can do more things for the rest of the world.

That involves understanding low-cost computing and gathering information, and getting the network out to places it doesn't exist. That's just as complex and interesting as what I do at Microsoft.

So unlike somebody who is really retiring - that's a word we resisted - and even though there's a big change in my status, I'll be, I believe, as fresh as ever on what Google is up to or what Oracle is up to or what the hardware is enabling. And I'll still maintain a strong connection with the company, even though we are making it clear that other people are taking over all these day-to-day responsibilities.

One of the problems with doing this over two years is this: How do you both acknowledge to people what their new roles will be and yet also get back to work, and not have my official goodbye from full-time work until maybe June 25, 2008?

Steve brings up the example of Kareem Abdul-Jabbar during his last season in the NBA. They kept saying goodbye to him again and again and again. I don't want that. I just want to really be back at work between now and when I step away.

Dual passions

The chronology for changing my priorities goes back to a discussion with Melinda in the spring of 2004, when I said to her I was feeling that I wanted to spend more time in the foundation. A couple months after that I raised the issue with Steve, and pretty soon it was clear I was serious about it.

And so we started thinking about a specific time frame, about the idea of who could step up at Microsoft, and about how would it work.

In the meantime things were going really well with the foundation, which led to scaling things up. Every time we get a new drug we think, Gosh, now we want to get this out to people.

Or if a model school works, we think, How could you get more of these and what general lessons are there from that?

Patty Stonesifer is doing a great job as CEO there, so I'm not talking about taking over management at the foundation at all. I'm talking about having the same kind of role I've had at Microsoft since I became chief software architect six years ago.

And so I was going along down that path, and there came a time when I shared my thinking with Warren. As you know, Warren has been an advisor to me ever since I got to know him in 1991. So I ran this by him.

Of course, my situation is very different from his, where he's in the job he wants to do for his entire life. I'm unusual in that I have two things that I feel fully engage me and that can have an enormous impact.

That's why I still will have a strong connection here at Microsoft, even if I'm full-time over there at the foundation. Then, in parallel but completely separately, Warren started thinking about what should happen in the context of his will. This was after his wife, Susie, tragically died two years ago.

And as he thought more about it, he thought, Hey, I don't think I'm going to wait to give my fortune away. He's always been the most generous person and said how his wealth should go back to society, and his articulation of that had a big influence on me.

A few years before, Melinda and I had started making presentations about the work of our foundation, including to a group Warren hosted at the Greenbrier Resort in West Virginia, and he could see how energetic and excited we were - Wow, if you just get the right people together and you get the right incentives, you could have an impact on millions of lives.

And over the years I kept sharing with him my amazement at what needed to be done and what could be done. So as he was thinking of how to move ahead, he came to Melinda and me and suggested that our foundation could be the recipient, because he thought it would be able to scale up easier than his own family's foundations.

In any case, the two things were going in parallel, and it seems logical that they'd be related. But they're not. My decision to shift came before Warren started the discussion about moving some of his resources to our foundation. And as that went along it may have subconsciously made me say, "Wow, I'll need to be there full-time."

But his gift didn't affect my decision on that in any way. And even this idea to make Warren a trustee, once we get the legal stuff put together over the summer, well, that's independent as well. I would have been glad to make Warren a trustee of the foundation without his putting a dime into it.

So you kind of have multiple things that do fit together. But it's not cause and effect, just poetic synergy. We don't really know specifically what we're going to do with Warren's gift, but there's plenty of time to think about that.

This week is really Warren's time. This is about an amazing person doing something quite extraordinary. I still find it hard to believe. I mean, I know it's true and all that, because once Warren makes up his mind, he is a very crisp guy. But even so, it may only really hit me later.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.