An Interview With Gates In the heat of antitrust negotiations, Gates took time for a two-hour interview in which he explained why he finds dealing with the government so frustrating.
(FORTUNE Magazine) – So where was Bill Gates while Microsoft negotiators, Justice Department officials, and representatives of the states' attorneys general were trying to hammer out a deal? Far from the controversy, on a solitary retreat at Hood Canal, Washington, for a periodic "think week." Gates usually mulls competitive issues and long-range goals: One year it was the Internet; another year it was all about R&D. But this year, as the controversy escalated, Gates ended up spending many hours on the phone negotiating with federal antitrust chief Joel Klein. He also made time for a two-hour conversation with FORTUNE senior editor Brent Schlender.
How did you ever get to this point of ongoing confrontations with the government? Can you give me a sense of what it's been like to deal with the antitrust issue over the past few years?
This thing goes back quite a long way--back eight years ago to when the FTC came to IBM and us and said they thought we were conspiring to monopolize the operating-systems market, when actually IBM and Microsoft were in vigorous competition. They asked for documents from everybody with an ax to grind. So you get a situation where the government has become the Microsoft Complaint Bureau, where you get literally millions of pages of documents and E-mail going to these guys.
But until this year, dealing with this hasn't taken up a measurable amount of my time. I tell the people at Microsoft, "You don't have to worry about this stuff, because the law encourages innovation." But this year I did make a special trip to Washington to see Orrin Hatch, and I did make a trip up to New York for that event where our partners said that Windows 98 is an important product for the industry. Of course, people spun that to say that we were saying that stopping Windows 98 will stop the economy. We never said anything of the kind. We just said that blocking Windows 98 serves no positive purpose.
Why do you think things have snowballed this way?
I can't really explain it. Certainly there was no expectation on our part that first we'd get the FTC, and then the Department of Justice consent decree, and then the judges' rulings that we got lambasted on. And it's not expected when Netscape and Sun hire Bob Dole and Robert Bork, and they do all these press conferences, and then you get Nader in on the thing, and Orrin Hatch. The state attorneys general add another level of complexity. It's an incredible phenomenon. And now Sun has filed a lawsuit arguing that we fooled them into signing this agreement on Java without telling them we were going to enhance Java to make it work better with Windows.
Yet none of the dialogue goes back to "Windows has improved over the years and has done some very good things for customers. Is there something wrong with that? Is that a bad thing?" Windows 98 is a good product. You can't just rip the browser out of the thing. We're not just making that up.
So you just sit here, and at some point you say, thank God for the judiciary. At some point, it may be better to get the judiciary involved, because when you're in a lawsuit people have to tell the truth, and you get to cross-examine people. Whereas when you're in the prefiling stage, any sort of rumor or allegation can be newsworthy no matter how loose it is in terms of facts or law. It's a shame.
IBM got involved with the judiciary in 1969, and that case dragged on for 13 years.
We get all these myths about the IBM lawsuit. The IBM lawsuit had no positive purpose of any kind. The people who believe that that lawsuit helped new companies and competition come along, well, that's just an absolute lie. There is no way that the IBM lawsuit served any purpose at all except to waste people's money.
Do you think there's anything Microsoft did to bring this on yourself?
We were successful. Seriously.
No. We were successful in a part of the economy that is very interesting and very important. Given our level of success, you're going to have some government scrutiny. That's fine. But when you look at how they've promoted this, how they've kept it open...at the end of the day I'm disappointed that they can't see what we've done, what kind of company we are, and actually encourage us to continue on the path we're on.
Do you think things would have been different if you weren't a public company?
There were ways to create liquidity for employees that would've been simpler than being a public company. We never needed outside capital. But I don't think that would have changed the dynamics of this thing. The problem is that we're incredibly visible. If you asked most people how big we are in terms of revenues, most would probably say we're ten times bigger than we really are. Look at the percentage of articles, whether in FORTUNE or any other publication, about PCs and the Internet nowadays. And who else in that business are you going to focus on?
Are there historical parallels that you've read about that give you insight into your situation?
I can't think of any parallel where product improvement came under attack. When IBM improved its disk drives or its software, when Kodak came out with a new camera with film that wasn't compatible with existing cameras, all those cases were upheld. There's not a single case that says you can't do innovative products if you're a successful company.
I wonder why there aren't four or five journalists who, instead of grabbing the daily feed of "Netscape said this" or "The Department of Justice attacked that," would instead step back and look at what this is really all about? We often sit here and say, "We're not getting our story across very well."
I'll admit, there was a naivete here about spending time talking to the politicians in D.C. about the PC industry and the benefits it's creating. We think of ourselves as having to move very fast, and that we can just focus on the products; at some point we got to a level of success where that was a little naive, and we're paying the price.
You know, it's weird. When does anybody step back and think about the fairness of all this? Scott McNealy gets up and says Microsoft is like Russia and Sun's like the United States, and we're just bad, bad people. You'd think that after Scott comes out with that, somebody would say to him, "Come on, Scott, this is way, way overboard." I mean, I sat near him in the Senate hearings when he said that there will never be any competition for Windows, and that we can just sit on it without improving it. Well, that's just an outrageous statement that goes beyond the normal rules of straightforwardness.
Well, if you're not as evil as Scott says, what do you think people are missing about what Microsoft is up to?
If we don't explain to people what we believe in and what we stand for, then sure, people will come after us. But if we're articulate about what motivates us to come in to work, and about why we're excited about this industry, if we get that message across, then there won't be a target on our backs.
At the end of the day, it's the success of Windows, it's the success of the Office applications products, that says it all. Why did Excel beat Lotus 1-2-3? Is it because [then Lotus CEO] Jim Manzi wasn't doing his job? No, I don't think so. Why did Scott's prediction that his workstations would wipe out PCs fail to come true? Is it because Scott McNealy isn't tough enough? Not at all. This is about a vision of computing that we have had for years and that we pursue on a long-term basis.
When we add anything to the operating system, there's someone who doesn't like it. Why else would we add the thing, if there weren't other developers saying, "Wow, that's a missed opportunity." Sometimes we get there first. Other times there are utilities and other software that others get to market first.
As an innovative company, we're allowed to add features to our product. The courts always say, "We won't interfere in product design." Those are the rules. The rules have been upheld many, many times, whenever there is a clear consumer benefit. Features can only be banned when you specifically do something solely to hurt a competitor--when it's not at all done to help users of a product. I was very clear with Joel Klein and everyone else that our ability to innovate was not subject to negotiation.
Is there anyone you can talk to about all this?
I talk to Warren Buffett. I talk to my dad and to my lawyers.
Isn't part of the reason for all this your personal wealth and the attention it attracts?
If they want to put in the consent decree that I'm going to give away 95% of my wealth, I'd be glad to sign that. I do this job because it's a fun job. What you and I have been talking about are not the parts that make it fun.
Certainly, my wealth is a mixed blessing. Things like the Gates Library Foundation, where Melinda and I make sure that anyone who goes to a library can get hooked up to the Internet, things like that are the positive side. What wealth means in terms of people's overinterest and overfocus on me personally is the bad side. If you go out on the Internet, there are far more nice things and far more mean things about me than I could possibly deserve, by a factor of 100 on both sides.
If there was some way to make the wealth issue disappear, I'd do it. But if you're going to be serious about giving a lot of money away, you really have to put a lot of time into it. And right now, this job is what I believe in.
There are, of course, historical examples of the government going after a highly successful company led by an emblematic figure.
I don't want to be compared with those people because I don't really know anything about them. That would be unfair to me and unfair to them. These analogies to the past aren't based on much data. Part of me says that at some point somebody's going to test our right to innovate in a court. I'm confident that the law upholds that right--in some ways, I think we just have to get that decided.