Forwarded from analyst Steve Harmon. >Microsoft CEO and longtime #2 (before he was CEO) gave a speech to >Congress about innovation. Now, say what you will about Microsoft's >innovation (or lack of) but clearly to me Ballmer has some very astute >observations. > >Here's Ballmer's words: > >Well, I want to thank Jay, I want to thank the speaker and all of you >for the opportunity to be here today and chat with you. It?s a real >honor to have a chance to share some thoughts on the economy and on >innovation, and hopefully spur some thoughts on how we all participate >in restarting long term economic growth. > >As Jay was telling my story, so to speak, I thought I?d put in one >parenthetic that might be of interest. When I got to Microsoft and we >were this tiny little company, we didn?t have the budget to put people >up in hotels, so I lived with Bill. And every time I sat down, in every >corner, nook and cranny of couches, tables, I?d find these little yellow >pieces of paper with Bill?s writing that had a bunch of people?s names >and companies? names and numbers. > >So, finally?I think of myself as pretty good pattern matching. Actually >I was sitting next to Congressman Frank, and we were both trying to see >which of the six states that are going to be still bigger than North >Carolina by 2015. So, we?re going through the pattern matching game, and >I just couldn?t figure out what these numbers were. > >So, finally I said to Bill, what is this? He says, Steve, I?m really >always worried about whether we?re going to have enough cash to pay >people. So, every night I write down everybody who works for us and how >much we pay them, and every contract we have and how much it?s worth. >I?ve got to count the pennies tightly and that?s why you?re here now. > >In this economic climate, whether you?re talking about businesses or >consumers, everybody I think is having the little yellow sheets of paper >out, and counting pennies pretty tightly. > >I?m going to make one thing clear up-front: I?m not going to claim to be >an economist. On the other hand, I think it?s sort of the responsibility >of every businessperson to really form a model of what?s going on in the >economy, if you?re going to provide proper stewardship to your business; >big company, small company, it?s important to have a model of what?s >going on, and certainly have been thinking a lot about the economy in >the context of how we think about and plan for the future of Microsoft. > >For the past 25 years, the world has certainly enjoyed incredible, >incredible global growth. Average incomes around the world grew at >unprecedented rates, millions of people moved from out of poverty into >the middle class for the very first time. > >I think that expansion was built on three things: innovation, >globalization, and debt, increasing debt. > >American technology was certainly at the heart of the innovation that >played the central role in the process. The PC, the Internet, fiber >optics: Those things were things that continue to keep America at the >forefront of technology, and really at the lead of a growing global >economy. > >But over time, over the last period of time, the balance has really >shifted. Instead of innovation and productivity driving growth, it?s >really been unsustainable levels, particularly of private debt, that >have been a key driver of economic growth. > >The hard truth is this, in my opinion: The private sector of our economy >has borrowed too much money, businesses and consumers alike, fueled by >the a lot of different things, some notion that housing prices would go >up forever, that you could borrow money cheaply. > >I gave a speech at Stanford Business School a few years back, and I was >talking, we?re a company that has been conservative, per the yellow >pieces of paper. We like to keep cash. And a very smart Ph.D. in the >audience puts his hand up and said, ?Why don?t you borrow money?? I >said, ?I don?t like to borrow money.? He said, ?But it?s so cheap; >you?re depriving your shareholders.? I think it reminds us that >essentially consumers and businesses alike have really borrowed too much >money. > >The bubble has burst. We can no longer rely on consumption by >refinancing our homes or inexpensive money to fuel economic growth, and >that?s certainly had a huge impact. > >At our own place, what we think about PC sales, they are discretionary >in most home budgets, the second, the third PC. Consumer electronics has >that characteristic. Fifty percent of capital spending in this country >is on information technology. Less capital, less spend on information >technology. No sector will be immune. > >There?s a natural tendency to want to blame somebody for the economic >crisis. In reality, I think you have to say we?ve all contributed to a >culture of spending and private debt. And I distinguish private debt and >government debt, because I think you have to be much more?the private >sector has less ability to be thoughtful, and the government sector >needs to be quite thoughtful. But there certainly has been too much use >of debt. > >At Microsoft, we?ve studied these developments. We believe this is a >once-in-a-lifetime economic event, but it?s not unique frankly in U.S. >history. The current situation looks a lot like several?not one but >several previous cycles of long-term private sector debt. > >In 1929, for example, just before the stock market crash, the private >debt-to-GDP ratio was 160 percent. Last year, private sector debt as a >percentage of the GDP: 300 percent; far more leverage. And you can see >it?s been a steady increase basically since almost the end of World War >II. > >In my view, what we now have will be a fundamental economic reset. The >economy is going to have to re-establish itself at a level of spending >that reflects the real value of underlying assets before we can all >start growing again at a healthy rate. > >This may not be the thing that people really want to hear, but it?s >certainly what we?re planning on, and it?s the truth on which we?re >basing sort of our model, if you will, at Microsoft. > >In our opinion, in order to reach the reset point, three things need to >happen. First, the economy must be deleveraged. Private debt as a >percentage of GDP has to be reduced. Restoring health to the nation?s >financial system is a fundamental part of this. > >Just for historical note, not only during the Depression, but actually >in 1837 and in 1873 we had similar style resets in the economy. We >actually have at least three historic periods that we can study in which >similar phenomenon occurred. I think it was 1873 where even the state of >Florida filed for Bankruptcy. So, we need to be thoughtful about being >students I think of the history. > >Second, confidence must be restored. The stimulus package, in my >opinion, is vital. It will provide a cushion as we reach the reset point >and it will help restart our economic engine. I certainly want to >applaud the steps that the House has taken under the speaker?s >leadership to quickly pass a strong stimulus package and to help shore >up our financial institutions. > >Third, America really has to return to growth that?s built on innovation >and productivity, rather than leverage and private debt. That must >happen. > >The good news is that the U.S. economy is still the world leader in >innovation. Our universities are the envy of the rest of the world. The >American workforce is the best on the planet, and U.S. companies >continue to drive technological progress in almost every industry. > >But the time has come when we need to renew our innovation capacity. > >We went back and studied what innovation companies did during the time >of the Great Depression. One company that stands out, if you study the >Depression, is RCA. > >Now, the fact that RCA is not around today, this has nothing to do with >their behavior during the Depression. There?s probably good learnings >for a lot of technology companies in that. > >But during the time of the Depression, RCA was probably the most >broad-based R&D-centric company in America. And while it cut costs >certainly to survive the Depression, it never retreated from its >commitment to core research and development. And as a result, after the >Depression had ended, it really led and the U.S. led TV technology >developments for the next 25 years. > >That was good for RCA; it was good for America. > >In my view, American companies aren?t going to be able to weather this >economic downturn just by cutting costs either. You may have heard that >Microsoft, our company has decided that we need to reduce 5,000 >positions. What you may not know is that at the same time we?ve decided >we?ll also create two to three thousand new jobs?mostly in the U.S.?as >we continue to push into new areas that require investment. > >In addition, despite the tough economy?I might even say because of the >tough economy?our company will continue to invest more than $9 billion a >year in R&D, because we think it?s that R&D spending that will cause us >to remain strong. > >People ask me, are you upbeat or not, and I say, about technology I?m >super upbeat. The industry that we?re in, information technology, stands >at the threshold of again a new revolution. > >I joined Microsoft essentially for the PC revolution. The Internet >revolution, we have the revolution of what I might call pervasive >computing. Computers that are as thin and light as this on which you can >have access to the world?s information will be kind of expected over the >next five and 10 years. > >So, being optimistic and positive about what technology can accomplish >is very, very important. > >If you take a look at it today, there is increasing ubiquity and power >in the computing platforms. A laptop today has more computer power than >a mainframe did when I came to Microsoft. Mobile phones today are more >powerful than the PCs that existed 10 or 12 years ago, at the start of >the Internet era. > >But over the next few years, we?ll continue to go into uncharted >territory as many-core chipsets and devices become common, and we >develop new ways to write programs to help us model the world?s climate, >the world?s population, the world?s energy needs; all of that will be >super possible. > >This is going to lead to breakthrough applications, more intelligent, >more aware of their environment, and where we can really help anticipate >the information you need and the capabilities that you really want to >have. > >The next few years are going to see dramatic changes in the way you >interact with technology: touch, gestures, handwriting, speech >recognition. Instead of telling my secretary to get me ready for my trip >to the House Democratic Caucus, I?ll just type it in or speak it to my >computer. It can look up, it turns out, who you all are, and where >you?re all from, and it?s got all?it?s all out there. We just need to >automate it in ways that real people can get access to information. > >Some of this I?m sure sounds a bit like science fiction, but we?re >rapidly nearing a time when interacting with technology really will be >like interacting with people, which will make technology more accessible >and really unlock the potential of computers to individuals and >communities to help solve tough problems. > >A third trend, as I talked about, is screens and displays. Literally >every wall, every tabletop, you?ll be able to roll up your computer, if >you will, and put it in your purse or put it in your pocket. That?s what >we have to look forward to. > >All of these trends are going to help create a computing platform that >extends from PCs and phones and TVs out into the massive storage and >connectivity out in the Internet. > >All of this will enable us to transcend the barriers that exist between >technology today, and seamlessly connect people to the information and >applications that you?re interested in, no matter where you are, no >matter what kind of screen you have in front of us. > >It?s very important. As the computing environment becomes richer and >more pervasive, and more universally useful, it will enable citizens to >be more active participants in our national economic recovery. If we do >our jobs right, the computer revolution will help amplify our ability as >individuals and as a nation to tackle the pressing problems of society: >education, health care, energy independence; and at the same time, >continue to enhance our productivity and economic competitiveness. > >They say GDP is consumption plus investment, plus government spending, >plus productivity growth and innovation, and I?m very bullish on what >will happen in our industry. > >Imagine, for example, an intelligent energy system in your home that?s >linked to a smart energy grid. With that infrastructure, your dishwasher >and washing machine would know to run when electricity is cheapest. That >kind of intelligence and control could really have a major impact on >residential power consumption, which is a very large piece of energy >consumption in this country. > >There are similar scenarios in healthcare, where genomic research will >open the door to personalized treatment; and in education for sure, >where technology will enable all teachers to use the very best teaching >methods and connect with students in new ways. > >The truth though, we can barely guess what is possible. With the kinds >of technologies we envision, other people, many people in many fields, >fields of science and social science and many, many others, will come >forth with an incredible outpouring of new ideas and innovation that >will continue to expand the universe of what?s possible. So, the >enablement not only of information technology and the productivity it >brings directly, but other new forms of innovation I think will really >be important for long term growth and prosperity across many, many >fields of endeavor. > >To harness this potential of this transformation, I think it?s going to >take a lot more than investment by the private sector. We need >investment and we need leadership by government as well. I don?t >understand all of the issues and interests that you have to deal with. >As I was sitting listening this morning, I understand more that there >are hundreds of unwritten things that citizens just don?t really know >about what it takes to catalyze these things to happen. But I would at >least like to offer a couple suggestions on some things I think are >important. > >First, we really need the federal government to invest in human capital, >in the citizens of our country. > >I sit here and talk, talk, talk about innovation, but it?s people who >turn ideas into positive and productive innovation. And in today?s >knowledge-driven world, innovation will depend on people who are >actually technologically sophisticated, have strong critical thinking >skills, have expertise in math and science and engineering. > >This is true not only for people who live in places like Seattle and >work at places like Microsoft, but live in places like Detroit, where I >grew up, and work for companies like Ford Motor Company, where my father >worked when I was a child. I think this is going to be true for anyone, >anywhere in this country, who hopes to earn a wage that can really >properly support their family. > >This means investment in education is critical, and I?m really >encouraged by the very heavy emphasis on education that?s in the >stimulus package. > >We really need to transform math and science education in America. We >need to improve teacher training, teacher quality. > >I was talking earlier in the day with some folks about just how many of >our math and science teachers don?t have the correct training and >accreditation, and that stands in the way of us really breaking through. > >For those who are already in the workforce, we need programs that >provide ongoing education and training, so they can be successful in >this knowledge-based economy. For those who are unemployed, we need new >technical skills training to give those people a start back up the >economic ladder. And we are going to need lifelong learning programs to >keep people fresh, as innovation and technology continues to power the >economy. > >The second thing we need?and I?ll tell the Speaker this was written even >before our meeting this morning?we need greater government investment in >our nation?s science and technology infrastructure. > >I came in, flew in red eye, was a little groggy this morning when I got >here. I sat down with the speaker at 8:00 AM, and she woke me right up. >She said there are four things I want you to make sure you understand >are a priority: science, science, science, and science. I was awake by >the end of the fourth science for sure, and I couldn?t agree more >wholeheartedly. > >Science and technology is the backbone for productivity and innovation; >has been, not always information technology, but science and technology >has been a driver of economic success. Government investment in science >and engineering as a percentage of GDP is half, in this country, what it >was in 1970, and it would be growing rapidly, particularly in countries >in Asia, off a small base albeit, but in places like India and China and >Korea the trend is the other direction. > >We need to pursue breakthroughs over the coming years in green >technology, alternative energy, bioengineering, parallel computing, >quantum computing. Without greater government investment in the basic >research, there is a danger that important advances will happen in other >countries. This is truly I think not only an issue of competitiveness, >but also in a sense of national security. Companies like ours and others >can do our fair share in terms of funding of basic research, but >government needs to take the lead. > >This is also a moment when government should invest, I think, in >information technology to help transform healthcare. We deliver >information technology that we think can help create a connected health >system that delivers predictive, preventive, and personalized care, a >system that I think can improve the health of Americans and reduce the >cost of health care in this country. > >Government support for innovative development, rapid adoption of >information technology in health care is important. I was talking to >Congressman McDermott this morning. Government has a big role to play, >including the fact that Medicare and Medicaid pay over 50 percent of all >health. If Medicare and Medicaid want to take on some issues and use its >authority to push health information standards, I?m sure this industry >and this area of technology innovation can move even more quickly. > >There?s always broadband. My number one encouragement to you is start >with government itself. Every school, every hospital, every government >building, is it wired, have we funded that infrastructure; very >important. > >This is a once-in-a-lifetime economic crisis. There is a lot of history >around that, and frankly if you stop and think about it, 1837, ?73, ?29, >2008, it?s almost exactly a whole lifetime between each of the major >economic difficulties that we face. But I think it?s also a >once-in-a-lifetime opportunity to think about our priorities again and >make the investments that put us on the right foot. > >In his inaugural address, President Obama said we need to assume more >responsibility and make the hard decisions that have been postponed for >too long. > >The president?s remarks actually reminded me of something I heard a lot >from my dad when I was growing up. My dad was an immigrant to this >country. He came from Switzerland after World War II. He went and was an >interpreter with the US military at the war trials in Nuremberg; came to >Detroit with some of the soldiers he had met there, who sponsored him in >this country; went to work at Ford Motor Company, was there for 30 >years. Never finished high school never went to college, but he had a >simple model: ?If you?re going to do a job, do a job. If you?re not >going to do a job, don?t do a job.? > >You could say, okay, that?s probably a good thing to tell a 10-year-old, >but what it really came to mean to me was that if you want to accomplish >anything at all, you?ve got to be committed, you?ve got to be motivated, >you?ve got to be tenacious, you?ve got to be smart. And, of course, >that?s not really just my dad?s message to me and my sister as we were >growing up; it?s really the essence of the American work ethic, and I >think it?s been passed down to millions of American children every >generation. > >This country has what it takes to succeed. We have talent, we have >technology, we?ve got the track record. We?ve got to be really honest >about where we are. We?ve got to take the kind of bold steps that the >vice president so well characterized in his remarks this morning, and we >certainly have to roll up our sleeves and put ourselves back on the path >of the kind of innovation that will drive the kind of economic success >that I know we all want. > >I thank you again for the opportunity. It?s been my pleasure. >-------------- > >Your thoughts? > >email me, see steveharmon.com > >______________ > >
-- ((Udhay Shankar N)) ((udhay @ pobox.com)) ((www.digeratus.com))
