Bill Gates sat down with Bloomberg Television anchor Erik Schatzker at the Sibos conference in Boston today, where they discussed Microsoft Corporation (NASDAQ:MSFT)’s strategy, the Ebola outbreak, his philanthropic efforts, financial payment systems in Africa and more.
On whether Microsoft CEO Satya Nadella is moving fast enough, Gates said, “I’m very happy with what he’s doing. I see a new sense of energy. There’s a lot of opportunity there, some things the company isn’t the leader on, and he sees that he needs to change that.”
On Ebola hitting the U.S., Gates said, “…the fact that this Dallas patient was identified, the contacts are being traced, I feel confident the CDC is very much on top of that. I wish every country had a health system like that…the US government’s really stepping up on this and I think that is going to let the world get on top of it.”
On whether we’ll see him courtside at the Staples Center cheering on the L.A. Clippers with new owner Steve Ballmer, Gates said, “I’m not a guy who spends a ton of time watching sports games, but my friends who own teams, I enjoy spending time with them. So at some point probably.”
Bill Gates Says He’s Very Happy With Microsoft’s Nadella
ERIK SCHATZKER: I am here with Bill Gates. We know him from Microsoft. We now know him from the Bill and Melinda Gates Foundation. Bill, it’s great to see you, great to see here in particular because we know the Gates Foundation for its work on infectious diseases, child health, nutrition, agriculture, education. The list goes on. Why does Bill Gates care about finance?
Bill Gates: Well it’s all about helping the poorest. And one thing they don’t have access to is bank accounts. The fee structure if you have small amounts of money is just too high. And we got involved in some traditional micro lending but just didn’t see how that could scale up and get inexpensive enough. So now we’re involved in trying to make sure we get a very efficient digital payment structure set up for all the poorest in the world to get financial products that work for them.
SCHATZKER: What are you doing?
Bill Gates: Well the idea is that typically through the cell phone you should be able to send money to your relatives. You should be able to track the money that’s coming in, set aside money to buy seeds the next year. And there are countries where this is beginning to take off. Kenya, Bangladesh, even Somalia, maybe the last country you’d expect. Up in Somaliland, almost half of the GDP is done digitally.
SCHATZKER: I don’t need to tell you that the poor have been unbanked for as long as there have been banks. Why is this time different?
Bill Gates: Well it’s really the digital revolution. The poorest have bought cows, stored gold, put currency under their mattress, but they are getting cell phones. And the cell phone capability of identifying who’s using the cell phone, letting you look at your spending patterns, that’s going to be common sense. People are going to have help and lots of innovative products competing on top of this digital currency platform.
SCHATZKER: So if technology, mobile phones for example, digital money, helps to increase access to financial services at the same time as it lowers the cost of delivery, why is philanthropy needed?
Bill Gates: Philanthropy should just be here to bootstrap this. There are a lot of regulations in this area, and understanding how those regulations can make the cost of remittances where you’re sending money back to your family and your country of origin, how right that has about a 5 percent overhead on it. We think we have a role to make sure that particularly for the smaller transactions the regulations don’t impose those very high costs.
Once this gets going, then we’ll step up to the applications and say, okay, what is – how – how does a savings application help the mother make sure money’s focused on the kids? How does it help them stay in school, set money aside for the uniform or – or for good future planning?
SCHATZKER: Some of what you just described, the need to move money from place to place, the cost of doing so, the overhead as you put it, makes me think, believe it or not, of bitcoin because some people have said, hey, bitcoin is the answer to those problems. Are you a believer?
Bill Gates: Well bitcoin is exciting because it shows how cheap it can be. Bitcoin is better than currency in that you don’t have to be physically in the same place. And of course for large transactions currency can get pretty inconvenient. The customers we’re talking about aren’t trying to be anonymous. They’re willing to be known. So bitcoin technology is key, and you could add to it or you could build a similar technology where there’s enough attribution that people feel comfortable this has nothing to do with terrorism or any type of money laundering.
SCHATZKER: What kinds of people or private enterprises right now are helping to solve the same problems you’re interested in?
Bill Gates: Well in some countries the mobile companies have been fantastic. In a few other companies, it’s been the banks. In some countries it’s a startup company that’s neither a bank nor a mobile company. In Bangladesh the B cash (ph) offering runs across any phone and they’ve gotten the regulations so that they have a product that we think will get very, very pervasive. So entrepreneurs are there.
The enablement this creates, if you want to put in say electricity in a city, collecting your bills is one of the reasons why the underspending in infrastructure in these areas is – is a real thing holding back the economy.
SCHATZKER: You mentioned banks. Are the legacy institutions, for the most part banks, credit card companies, payment processors, friend or foe?
Bill Gates: Many of them want to have these additional customers, but they have to embrace the idea that the fees are going to be a lot lower, and so they have to find a way to service these new customers. Now that means these customers aren’t going to be coming into their branches and they can charge a higher fee when you want to actually cash out. But if it’s a pure digital-digital transaction, then you should be paying less than a percent to move that money from you to a merchant or from you to a friend even with meeting all the regulatory requirements.
SCHATZKER: Don’t you expect them to stand in your way to protect their margins?
Bill Gates: Well ti’s a competitive field and governments have a real interest in seeing this happen. Governments often want to make payments to the poorest. And if they can identify them and get that money out to them efficiently, countries like Mexico and Brazil have shown that’s a way to lift people up. So the government, if they understand this, will usually want to create a competitive framework that draws people in to – to this. So I think the capitalist framework with a little help from the government will work well.
SCHATZKER: Profit motive will take over.
Bill Gates: Yes, although banks are going to have to change their business model if the profits they’ll be seeking will be different than the profit sources they get today.
SCHATZKER: What about the risks? Security on the one hand and the potential for abuses like we saw in subprime on the other hand.
Bill Gates: Yeah. The whole financial market, you can have deposits that get lost. You can have money stolen. You can have misrepresentation. All those things have to be thought through in this new model. Now when it’s tiny bits of money that are moving around and it’s more of a savings-oriented approach, the room for abuse is much lower there. But honesty, making sure that the people who really hold these deposits are able to stand behind them. Some of those basic requirements will still be necessary.
SCHATZKER: Bill, a lot of people say Apple Pay is going to transform the financial services industry. What do you think?
Bill Gates: Well Apple Pay’s a great example of how a cell phone that identifies its user in a pretty strong way lets you make a transaction that should be very, very inexpensive. So the fact that in any application I can buy something, that’s fantastic. The fact I don’t need a physical card anymore, I just do that transaction and you’re going to be quite sure about who it is on the other end, that is a real contribution. And all the platforms, whether it’s Apple’s or Google’s or Microsoft, you’ll see this payment capability get built in. That’s built on industry standard protocols, NFC. And these companies have all participated in getting those going. Apple will help make sure it gets to critical mass for all the devices.
SCHATZKER: Have you asked or considered asking Tim Cook to help you with what you’re doing?
Bill Gates: No. The – the kind of basic things underneath aren’t the things that Apple Pay was involved in. Apple Pay will take anybody they’ve signed up for the payment instrument. So they’re not involved in driving the efficiency and the super, super low fees for low amounts of money. Now of course when we get these things as they branch out into other countries, having interoperability for people who happen to buy their devices will be worth doing.
SCHATZKER: Here’s a question for you. You were talking about wallet PCs and digital money 20 years ago in your book The Road Ahead. How come Microsoft hasn’t entered this market already?
Bill Gates: Well Microsoft has a lot of the banks using their technology to do this type of thing and the mobile devices that I did had (ph) a payment capability and storing the card in a nice secret way, that’s going to be there on all the different platforms. So the visions we’ve got, Microsoft had a really good vision in this. My time on – on this area is all foundation focused.
SCHATZKER: Sure, but you’re advising Satya Nadella, the new CEO, on technology and strategy. Should Microsoft be a player in this business the way that Apple has become a player now and Google has its own digital wallet product and PayPal is being spun off from Ebay?
Bill Gates: It – it’s certainly – Microsoft should do as well or better. But of all the things Microsoft needs to do in terms of making people more productive in their work, helping them communicate in new ways, it’s a long list of opportunities Microsoft has to innovate. And taking Office and making it dramatically better would be really high on the list there. That’s the kind of thing I’m trying to help make sure they move fast on.
SCHATZKER: Is Satya Nadella moving fast enough?
Bill Gates: I’m very happy with what he’s doing. I see a new sense of energy. There’s a lot of opportunity there, some things the company isn’t the leader on, and he sees that he needs to change that.
SCHATZKER: You’ve been outspoken on Ebola. You’ve donated $50 million to the fight against Ebola and you’ve been more optimistic about the chances of containing and controlling the outbreak in West Africa. But we last heard from you on that subject before the patient was diagnosed in Dallas. What do you think now?
Bill Gates: Well I think that reminds people we do have an ongoing tragedy, and it’s really awful. There’s 22 million people in those three countries and we need to get this under control because not only are people dying of Ebola there, the health systems are shut down. So all the other diseases, measles, malaria, there’s even more deaths taking place there.
At the same time as we get it shut down in those three countries, we need to make sure it doesn’t spread to other countries. Now the richer a country is, if you have a good primary healthcare system, you should be able to handle that. So the fact that this Dallas patient was identified, the contacts are being traced, I feel confident the CDC is very much on top of that. I wish every country had a health system like that. There are parts of Africa that don’t, so we’re helping them build up the capacity that if a few people happen to come in with the disease they’d be able to get on top of it.
We helped Nigeria, and if – and there was a case that went up there, and fortunately now all the contacts have been traced and right now there’s no Ebola in Nigeria. So the US government’s really stepping up on this and I think that is going to let – let the world get on top of it. But we should have had better primary healthcare systems and that’s a long-term task this reminds us to keep investing in.
SCHATZKER: That’s a very hopeful perspective, Bill. What if people don’t see it your way? What if panic takes over?
Bill Gates: Well I would say that if the US government didn’t have CDC, didn’t have the Department of Defense, they weren’t working with other countries to get volunteers to come in, then the treatment capacity would not get to the point where as people get sick they’re able to come in and be treated and not infect other people. So without this US leadership on this, you could see large numbers of people not just in these countries but a lot of spread.
So this is a very big challenge we’ve been faced with. I think our tools and response and generosity is going to be up to the challenge even though the death toll will be – will be quite significant. I’m just impressed that the US really, despite all the other world leadership things they’re doing, really put this to the top of the list and even got the Army and their top people involved. And our foundation is partnering with them to help in any way we can.
SCHATZKER: Bill, so much of the work that you do is in the developing world. It makes me wonder, what do you think of this country’s prospects?
Bill Gates: Well the United States is an amazing country with great opportunities, and I get to see all the innovation that’s taking place here. The issue my wife and I decided to focus our US philanthropy on is education, whether it’s the economic strength of the country or the commitment to social justice that every kid will have an opportunity to have great success. The fact that our education system is so weak particularly in the inner cities means that we’re not exercising our full potential. So that’s been a huge effort for us. It’s another place where technology could come in, but we’ve got to get the policies right. We’ve got to be willing to change things, help teachers learn from other teachers. It’s a critical issue.
SCHATZKER: Do you see signs of improvement yet?
Bill Gates: I see points of improvement. So the overall aggregate numbers of how good American students are at math or graduating from high school or college, those have not improved a lot in the last 10 years we’ve been in this. But if you go visit a charter school, you can see that the right practices are doing a great job even for inner city kids. If you go see the latest in technology – I was in New York City a few days ago seeing personalized math learning called School of One. That really has a lot of promise. So I’m optimistic about the next 10 years, but no, the reform movement has not yet made a dramatic improvement in our education while other countries are doing a far better job.
SCHATZKER: Bill, for all the work that you and your wife Melinda do in this country in education for example or overseas, financial services for the poor, as I mentioned before nutrition, agriculture, child health, you’ve said, in fact you said it just a couple of days ago, that you can’t spend your money fast enough. What do you do about that problem?
Bill Gates: Well I don’t think I – I say I’m worried about the rate of spending. We’ve picked important problems and we are lucky that we can help provide resources to the very best scientists working on malaria, the very best people going out in the field and working to finish polio eradication.
Despite all these challenges that Nigeria has with an election coming up and Boko Haram, even the Ebola that was solved there, we think in the next year we’ll get the number of polio cases down to zero. And that would be the last country in Africa that we’ve never eliminated polio in. So we’re moving fast to reduce childhood deaths, improve malnutrition, and a lot of that’s funding science. A lot of it’s funding heroes who go out and actually deliver to those in need.
SCHATZKER: I have one last question for you. Will we see you court side at the Staples Center cheering on the Clippers with Steve?
Bill Gates: I’m not a guy who spends a ton of time watching sports games, but my friends who own teams, I enjoy spending time with them. So at some point probably.
SCHATZKER: All right. I want to thank you very much for spending time with me here in Boston talking about an issue that’s very important to you, financial services for the poor. There are bankers here whom you need to talk to. I know they’re waiting to hear from you. Bill Gates, chairman – co-chairman of the Bill and Melinda Gates Foundation.