January 24 2008: 2:42 PM EST
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In Davos, Gates calls for 'creative capitalism'

His speech laid out a methodical argument for engagement with the world's problems, especially by its largest companies, regardless of near-term profit.

By David Kirkpatrick, senior editor

Melinda Gates talks about living with Bill, working with Warren Buffett, and giving away their billions. (more)

DAVOS, SWITZERLAND (Fortune) -- "In many crucial areas, the world is getting better...but it's not getting better fast enough, and it's not getting better for everyone," Bill Gates said in Davos on Thursday as he called for a more concerted global drive toward what he calls "Creative Capitalism." He said that companies, especially the biggest ones, can improve the lot of the world's least privileged by better aligning their self-interest with the good of society.

"There are two great forces - self interest and caring for others," he said. But he noted that "profits are not always possible when business tries to serve the very poor." However, he noted the power of "recognition which enhances a company's reputation," calling it a way to more strongly appeal to customers and attract better employees. Thus indirectly, he insisted, companies can concretely benefit by doing good.

He spoke of what he believes is the growing global movement for corporate social responsibility. But businesses, government and nonprofits need to work together better to "stretch the reach of market forces," so more companies can make a profit doing work that will "improve the world." (That phrase is included in the tagline that defines the purpose of the World Economic Forum.)

He noted that many of today's most high-tech products have relatively low marginal costs of production. That's true of software of the type that Microsoft makes but also many drugs for disease - once they have been invented, producing additional copies doesn't cost very much. As a result, companies that are willing to apply variable pricing models to different markets can help the world without impairing their profits.

He spoke highly of C.K. Prahalad's book The Fortune at the Bottom of the Pyramid, noting a Dutch company described there which gave away the rights to a cholera vaccine in the developing world even as it retained them for the developed one. The result was a drug now distributed in poor countries for under $1 per dose.

He also spoke approvingly of a new U.S. law that offers expedited review for unrelated drugs a company might have in the pipeline if it develops a new treatment for an important disease of the developing world. "This priority review could be worth hundreds of millions of dollars" to companies, he said.

Rock star Bono also figured in the speech, as Gates described a late-night drinking session the two men had here in Davos a couple years ago. "After a few drinks," he said, Bono became expansive describing his idea for how people could show their support for causes they care about just by buying products. So was the Red campaign born, which Microsoft (MSFT, Fortune 500) and Dell (DELL, Fortune 500) recently announced they would support with a new line of laptop computers.

Since the launch of Red, Gates said, over $50 million has been raised for the Global Fund to Fight AIDS and Malaria, and as a result over two million people now receive life-saving drugs.

"This is a worldwide movement, and we all have the ability and responsibility to accelerate it," Gates said. He asked everyone listening to personally dedicate themselves to one project of creative capitalism in the next year, to "stretch the role of market forces."

During a question and answer period, Gates said that he felt the atmosphere had changed. Previously, non-governmental organizations viewed many corporate social responsibility initiatives with suspicion. And he agreed that many efforts have been little more than window dressing. But, he added, it is in the largest companies where the tradeoff between recognition and near-term profits is now "net positive," "so they should lead the way."

The standing-room audience in the World Economic Forum's largest hall greeted Gates' speech with tepid applause. The merely polite reception may reflect both that for many in the audience the ideas he articulated did not generally come as a big surprise. And other audience members may simply still believe, as the World Economic Forum founder Klaus Schwab commented, characterizing a common objection, that "the business of business is business."

Schwab himself clearly endorsed the speech. The Forum seldom gives such a stage to a single speaker who is not a head of state.

Gates leaves Microsoft this coming summer. Here he got perhaps the world's most prominent business podium to articulate the path he and his billions will follow over coming decades. To top of page

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