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Gates without Microsoft

Ah, retirement. Time to kick back, relax, and rethink philanthropy, learn biochemistry, eradicate malaria and develop drought-resistant crops.

By Brent Schlender, editor-at-large
Last Updated: June 26, 2008: 2:57 PM EDT

Gates will divide his time among three offices: one at Microsoft, one at his foundation, and another one equidistant from the other two.
Gates without Microsoft
Staying power Staying power Staying power
Bill Gates gave Fortune magazine exclusive access to some rare photos from the Microsoft archives - and shared his memories about them.

(Fortune Magazine) -- Let me tell you about Bill Gates. He is different from you and me. First off, the billionaire co-founder of Microsoft has always been something of a utopian. In his mind, even the world's knottiest problems can be solved if you apply enough IQ. Accordingly, Gates, who has been spotted on Seattle freeways reading a book while driving himself to the office, covets knowledge. It's as if he's still trying to make up for dropping out of Harvard, as he spends just about any spare waking minute reading, studying science texts, or watching university courses on DVD.

Some say his wealth and famous opportunism are reminiscent of the robber barons of yore. Yet here is a man who has set a goal to eradicate malaria. Rich as he is - his net worth is an estimated $50 billion - you can't call the man greedy when he has pledged to give back to humanity all but a tiny fraction of 1% of that fortune.

These traits only begin to explain why Gates, at 52, has chosen to redirect his efforts toward more altruistic pursuits. On July 1 he will step away from an operating role at Microsoft (MSFT, Fortune 500) to devote more time to philanthropy and other interests. The shift has been on his mind for nearly a decade, and it reflects some important experiences over his lifetime.

Much is expected

Like that seminal time back in 1968 when his mother, Mary, spearheaded an effort to install a used Teletype terminal in his school so that her already autodidactic junior high schooler could teach himself how to program a mainframe. There was his epiphany when he first met fellow billionaire Warren Buffett in 1991 - and realized that it quite literally pays to follow your curiosity beyond your own area of expertise.

And there's the poignant letter his mother wrote in 1993 to his fiancée, Melinda French, cluing her in to the Gates family credo: "From those to whom much has been given, much is expected." (Mary Gates would die the next year.) That letter, in turn, led to the self-conscious irony in the slogan he and his wife hit upon for the Bill & Melinda Gates Foundation: All lives have equal value.

The genes, the IQ, the life of privilege, and the noblesse oblige have always been there. Given that background, it makes sense that he would turn his attention and wealth to the greater good. But there is a more selfish motive in the "retirement" of Bill Gates, and one that no one should begrudge him. For the first time since he quit Harvard to start Microsoft 33 years ago, Gates is going to have the time to indulge what his father calls his "world-class curiosity."

Gates' closest friends wonder how he will exploit this new freedom. "He doesn't know for sure where his mind is going to go," says Buffett, who has donated the bulk of his own $45 billion fortune to the Gates Foundation, largely because he believes his money will be used wisely and effectively. "Not only will it be fascinating, but I think it's going to be, for me, very satisfying to watch."

"He is one of the greatest business minds of all time, and you don't just shut that off," adds Nathan Myhrvold, the former head of Microsoft's R&D labs, who still kicks around ideas with his former boss via e-mail almost daily. "My guess is we have not seen the last business idea out of Bill Gates."

Setting a curious mind free

Bill Gates 2.0 will have three offices: one at Microsoft in Redmond, a second about 15 miles away at the Gates Foundation in downtown Seattle, and a third almost exactly equidistant between the other two (and much closer to home). In typical hyper-systematic fashion, Gates has allocated blocks of time to each location: a day in Redmond, two at the foundation, and two at the personal office, which he suspects will be his real "center of gravity." There will be a lot of overlap among his three roles. That's because the guy's greatest pleasure seems to be in finding connections among things he's interested in.

The biggest change, of course, will be in his workload at Microsoft, which will drop drastically. He'll remain chairman and weigh in here and there. "Other than board meetings and consulting on projects like Internet search technology, the only things I'll do are some company visits when I'm in developing countries," he says. "Or if there's some special award for someone at a company meeting, I'll come and present it. But that's about it." (For more on how Microsoft is coping with Gates' retirement, see the accompanying story.)

The opposite will be true at the foundation. Gates' official title, which he shares with his wife and father, is co-chair, but his real role will be as the organization's chief strategic thinker. And Gates is teeming with ideas, especially about things scientific. Unlike most benefactors, he doesn't merely want to eradicate malaria and AIDS; he wants to understand the nuances of immunology. He wants to learn about what happens on a molecular scale when a plant's genes are altered to improve hardiness. He insists on knowing the precise legal reasons women in developing countries are robbed of their estates when they become widowed.

"Here's how Bill thinks," explains Myhrvold. "He is always interested in looking at big systems in the world and understanding them at every level that he can. As an example, I got this e-mail from him today as part of this whole discussion on corn prices and crop yields and shortages resulting from ethanol production, and at the end Bill says, 'I really need to understand phosphates more.'"

Another big part of his new job will be to make more public appearances and do more arm-twisting of governments and corporations to do more for the world's poor. "I'm uniquely able to reach out to the big companies, to ask them not just to write checks but to offer more of their innovative power," Gates says. "There's a big category of my time for talking to drug companies, cellphone companies, banks, and technology companies, as well as talking with other people who are lucky enough to have superbig fortunes about how they want to give those back to society."

That does not translate to fundraising - on the contrary, the foundation plans to exhaust its $100 billion endowment by the end of the century. Gates is talking about setting an example for the plutocracy. Jeff Raikes, the former Microsoft executive who was just appointed CEO of the foundation, thinks that effort could have as much impact on the world as the works of the foundation itself: "He has an incredible opportunity to help shape the thinking of other multibillionaires by getting them to think about the process, the structure, the best practices."

Gates takes pains to stress that even in his more active capacity, "I'm not the CEO of the foundation. Jeff will be the CEO." That's simply not what he wants to do with his time. "Even today people at the foundation get lots of e-mail from me, but after Sept. 1 they'll get a lot more, because now I'll be able to take courses, read more, meet more smart people, and have better ideas."

Mellowing with age

In his younger years, Gates' gimlet-eyed idealism manifested itself in stubbornness and self-righteousness, an unusual boldness, and a tendency not to suffer fools. Most people who have worked closely with him can recall more than one instance in which he reacted to a comment or idea by standing up and hissing, "That's the stupidest thing I've ever heard in my life."

He hasn't lost that inclination toward intellectual arrogance. But in his philanthropic work, the shoe is sometimes on the other foot. He's not, after all, a microbiologist or a geneticist. Moreover, with age and maturity, Gates has become much better able to acknowledge what he doesn't know or when he's wrong.

"The classic CEO needs to be right, or rather needs to appear to be right more than he needs to actually be right - and that's not Bill," says his pal Myhrvold. "Lewis and Clark were lost most of the time. If your idea of exploration is to always know where you are and to be inside your zone of competence, you don't do wild new shit. You have to be confused, upset, think you're stupid. If you're not willing to do that, you can't go outside the box."

And that explains the third dimension of Bill Gates' new life - giving that "world-class curiosity" some room to run. His reading and learning have always been systematic. It's his nature. His father and sisters recall how young Bill would refuse to leave his room to come to the dinner table because he was too busy "thinking." But for many years, as he built Microsoft, his field of vision was of necessity rather narrow. One of the most important experiences that jostled him out of his single-mindedness was his first meeting with Buffett, on July 5, 1991. As Gates tells the story:

My mom called me at the office to come out to Hood Canal for a Fourth of July barbecue because she wanted me to meet Warren Buffett. And I said, "Mom, I'm working." But she insisted. So I took a helicopter so I could spend my couple of hours there and then get back quickly and work on software.

Then I met Warren, and I thought, "Oh, wow, this guy isn't just about buying and selling stocks and businesses. He is thinking about how the world works." And he asked me questions that I always wanted somebody to ask me, about why hadn't IBM (IBM, Fortune 500) been able to do what we had done, and how software gets priced, and why does one company have a defensible position. He wanted to understand the dynamics of the industry. To me it was way far away from, "What is your company worth?"

Then he explained to me about how Wal-Mart (WMT, Fortune 500) had not only changed things in its business, but how it had an effect on newspapers because they thought of their advertising differently than individual local stores had. And he talked about how banking really worked in terms of credit risk. The whole time all I could think was, "Hey, I'll be smarter about running Microsoft after I talk to this guy." And so I stayed the whole day.

Ever since then, Gates has tried to make more time to broaden his knowledge, and his capacity to absorb ideas has served Microsoft and the foundation well. But now reading, learning, and blue-sky brainstorming will be considered an integral part of his job description, and no doubt they will yield something.

Think of his third office, the one equidistant from Microsoft and the foundation, as the billionaire-adult equivalent of his own room. It's a place for him to spend time exploring his own ideas, and occasionally trying to find an appropriate entity to pursue them, whether it be Microsoft R&D or someone at the foundation or one of the foundation's many corporate and nonprofit partners. He'll focus on ideas related to his philanthropy, but he also will spend a lot of time with the staff of Ph.D.s and inventors at Intellectual Ventures (IV for short), Nathan Myhrvold's Seattle-based skunkworks for discovering patentable new technologies. Previously IV hosted brainstorming sessions for foundation scientists, and Gates is an informal member of a group of IV partners and investors with more general interests that meets regularly. He plans to participate even more frequently after July 1.

"I'm not going to create a company," Gates vows. "The foundation is the top priority. But there are some other things that I might help along. The scientific brainstorming with Nathan's group has led to a new nuclear energy startup, and I'm a funder and advisor to that thing. It won't be a huge amount of time, but the truth is, cheap energy that's environmentally friendly is a breakthrough that is more important for the poor than the rich. And the poor need fertilizer, more reliable seeds, and better agriculture too. They can't cut back their eating, because that's called starvation. So I'm investing in that."

Myhrvold loves the irony of it all: "It's so funny: Here's a guy who never went to class when his poor dad was paying the Harvard tuition, and now the sheer love of learning has sucked him back in, hard-core. It's not like he needs a job. It's not like he's thinking, 'Oh, that would look good on my résumé.'"

His place in history

It's too early, of course, to judge the legacy of Bill Gates. He's only 52. His kids aren't even out of elementary school. And he has only just stepped away from Microsoft, a company that once put IBM in its place, and which some would say is the most significant company to come along since General Electric (GE, Fortune 500).

Nor do we really know what - or even whether - Gates thinks of his place in history. As outgoing Gates Foundation CEO Patty Stonesifer puts it, "The Gateses by nature believe that the unexamined life is the one that's worth living. They don't like to talk about themselves. It's all about rational responsibility, not grand idealism."

Buffett, who knows him as well as anyone, says the notoriously competitive Gates will have to find new ways to judge his accomplishments rather than by market share or in dollars. "He'll be competing with his own standards," Buffett says. "In the end, he is going to want people to look at the Gates Foundation 100 years from now and say, 'This guy did it the way it should have been done.'"

With all he did at Microsoft, Gates has a tough act to follow. "Bringing personal computing to billions has totally changed the world, and it's changed it, net-net, way for the better," says Myhrvold. "So even before you look at what his foundation has done for Africa or for the poor, he's already done more for the good of the world than essentially anyone else in our lifetimes."

Melinda Gates isn't at all surprised by Bill's transformation from feared empire builder to enlightened philanthropist. "I think the foundation, because it's not all about business and competition, allows other dimensions of Bill's personality to come out," she says. "He's incredibly funny and has an unbelievably wry sense of humor. He also can be very emotional when he sees the pathetic living conditions of so many people. He's a genuinely nice guy. I think more of what I see at home and what we see inside the foundation will come out. That will be a really nice thing for him and for the world."

To which her husband would likely say, "That's the stupidest thing I've ever heard in my life."

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