| Introductory Remarks by Ed Crane | Remarks from Bill Gates | Q & A |

Cato founder and president Ed Crane (Right) with Microsoft CEO Bill Gates

Introductory Remarks by Ed Crane at a reception at Cato for Bill Gates, June 15, 1999

Thank you for coming. For those who don't know me, I'm Ed Crane, president of the Cato Institute and I'm delighted to see so many friends of Cato and friends of Bill Gates and Microsoft here.

Bill's in town for the Joint Economic Committee's National Summit of Technology -- it seems Congress has discovered that technology has been driving the economy and doing wonderful things for society and they want to get involved somehow -- maybe taxing technology, maybe by regulating it, maybe by litigating -- maybe all three.

Only in Washington could you develop a theory that says when a company tries to position itself so as to gain an advantage over the competitors in the marketplace, that is acting in an anti-competitive manner.

In my view, one of the great cosmic injustices of our time is that a person of the quality of a Janet Reno should be able to distract the attention of an individual who has been responsible for the creation of more wealth than anyone in human history.

We are delighted that Bill Gates has joined us for this reception, but you know, Bill Gates belongs in Redmond, Washington, not Washington, DC, not Babylon-by-the-Potomac.

Our auditorium is named after the great Nobel Laureate, F. A. Hayek, whose last book was entitled The Fatal Conceit, by which he referred to politicians and bureaucrats who had the lack of humility to think they could order societal affairs better than the spontaneous order of the marketplace.

Today, Bill Gates is in a battle with an entire department of the federal government that suffers from a terrible case of the fatal conceit. We wish him well in that battle and congratulate him on the incredible success story that Microsoft Corp. is. Please help me welcome Mr. Bill Gates.

Remarks from Bill Gates
Reception, Cato Institute
June 15, 1999

Bill Gates

Thank you for this opportunity to speak in Washington. . . With people like IBM and AOL ganging up in their activities but at the same time we have this trial that's trying to paint our industry as one with the complete lack of competition as though any product we create or anyone else could create would last forever. So it's a time where the free market principles apparently need defending and the people here, particularly Cato, have been great in helping us out with that. We appreciate your support. We didn't know that we'd need it. Now that we know, we'll have an ongoing relationship because the principles that really create wealth are not widely understood. Whether it's free trade or open competition, it's amazing that people don't appreciate those things. That is really the source of great things that are going on here.

I think there's an interesting impact that's taking place, which is that the digital economy will allow markets to work more efficiently than ever before. I think a lot of people in business underestimate the way that it will change the competitive framework in their business, not just in software. As consumers of products, it's all very very good news. It's an exciting time to be around and most of the reason for that is because of the great things happening.

Thanks for coming.

Bill Gates with Robert Levy, senior fellow in constitutional studies at Cato (Left)

Question & Answer:

Q: What do you think of the policy studies Bob Levy and others have done on the antitrust case?

A: Well, Bob in particular has done a great job articulating some of the insanity that's behind this case and he and I were just talking about it earlier today. It's a very strange thing to take a market like the browser market where we clearly were responding to customer demand, we clearly allowed our competitor to run on top of our system, we clearly allowed there to be more distribution of the browser than any product that there has ever been that I can think of. The creator of that browser managed to sell their company for $10 billion to a very, very strong competitor of ours as part of their overall competition and I think those, and many other things, Bob has been among the best in pointing out.

This is not a case where there is any shortage of crazy things to point out. Just last week we had the picture being painted of IBM being bullied by Microsoft. At the time in question, we were talking to them about a product that wasn't even on the market yet, they were 50 times our size and I know that very few meetings I ever went to with IBM did they not talk about how they could put us out of business whenever they felt like it. Very strong stuff. I always grew up thinking competition was like that and we managed to thrive in an atmosphere where IBM was a very strong company. But to have a court case that tries to turn that around and act like we we're the big guys and they were the small guys, some things you just never expect to see happen. And every week has little things like that happen. My lawyers know I get on e-mail and say, Wow, that's quite a turn of events that's taking place in that courtroom. I think there's been a lot of great things written and Bob in particular has been very articulate.

Q: Has your own political philosophy changed as a result of your recent experiences?

A: I wish the situation were more clear cut. The person who is by far the toughest on us, basically calling us a bunch of criminals, was Sen. Hatch. He really went after us in a very strong way. That is another thing that I didn't expect. I do think in general the fact that marketplaces work and that you've got to start with protecting wealth creation as the first thing in getting politics right. The Republicans do think about that as more a priority and it certainly made me think about those things.

I don't want Microsoft to become a political company. We are a product company building great products and I definitely think, personally, the company is more involved in supporting groups like Cato that explain to the world why these good things are happening. This is a great period in time because these products are creating a lot of jobs, they're creating a lot of freedom, and the fact that people are sort of missing from where that all springs from is disappointing. By supporting a lot of people in this room, hopefully that message will become a lot clearer over time. At the end of the day, we are not a political company. We're a company that's got to come in and think about making better products than all of our competitors.

(Left to Right) Former White House Counsel C. Boyden Gray, ABC News commentator William Kristol, and Bill Gates

Q: How has the antitrust case affected the public's perception of Microsoft?

A: When people do a survey of companies and they ask, Who's the most admired company?, we still come out on top on virtually all of those things. What's kind of fascinating is that some of the other companies that come out, ranked right along with us, are companies like AT&T, IBM, General Electric -- every one of the top five has had their day in the political vise.

I don't know will there ever be a company that has success at our level that doesn't get undue attention. When it started out as an FTC thing, I thought, Okay, we're successful, this is a sexy industry, they're going to take a look at us. So we went through that for about three years. Starting with the great proposition that their first investigation was that IBM and Microsoft were jointly monopolizing the market. Of course, IBM had divorced us and was proceeding on their plan to destroy us right at that time. So their timing was perfect.

Then when it got to the Department of Justice, that seemed like an unusual thing. Then when it got to Judge Sporkin and his reading books on the beach and inviting in anonymous defendants, it seemed kind of strange. And I have to say that when this Justice Department said they were going to bring a case against us for supporting the Internet and Windows, it took some time to take that seriously. I mean, what more defensible act have we ever taken than our support of the Internet.

And then it became clear that they were quite serious about doing that. I'm always surprised. I still find myself to this day thinking there's a lot of factors that had to line up in the Justice Department and their confusion about the principles and the facts and all these state attorney generals as well, giving them credit for independent thinking on these issues.

Then the whole process has been pretty amazing in terms of the PR driven aspects of it. It's not really a law suit -- if it was just a law suit it would be a bit of a different thing. So, probably, a little bit, it comes with the territory. I'd like to think that in the future if the Justice Department has a complaint about someone they wouldn't pursue it in quite the same way they've pursued this one. Maybe the rules on how those things are done can be made clear in terms of leaking and PR activities. But maybe not.

Q: Have there been any members of Congress, either Republican or Democrat, that have been particularly supportive or shown animosity toward Microsoft during the antitrust case?

A: Actually, the reception, the willingness to sit down and talk to us about a broad range of issues and take our opinion has really been unaffected by the case and there have been some politicians, Sen. Gorton, absolutely at the top of the list, who've been great about helping the company understand how things work in Washington, D.C., and standing up for us, talking about the great things that the company does. It's a pretty long list. The only one that's probably worth singling out is Sen. Gorton. But, overall, our political support has been quite good. If it was all subject to a vote, I think we'd do okay. As it is, it's entered into a bit of a different process and in that process we feel very confident that we'll do well in. But in the meantime, it is a distraction.

Okay, well, thanks again.

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