Q&A with Bill Gates and Richard Schulze: Communicate Your Dreams

Bill Gates, founder, chairman and chief software architect of Microsoft Corp., and Richard Schulze, founder and chair of Best Buy Co. Inc., engaged in a lengthy discussion at the Schulze Hall dedication on Oct. 20, 2005. What follows are excerpts from that discussion, with questions provided by College of Business Dean Christopher Puto and St. Thomas entrepreneurship students

Dean Christopher Puto: At another school I asked an entrepreneur benefactor what he thought we should be teaching our students. He said, "Teach 'em to fail." Surely, in each of your backgrounds, there have been setbacks and difficulties and times when you wondered, "Wow, are we going to make it?"Bill Gates: Certainly, when Microsoft is looking to hire people, having someone who has been out and had a business failure is very attractive to us because they had to go through a realization of, "Why aren't the customers coming in?"A few times I have found myself envying companies in the industry that are in very tough situations because it showed which of their employees would step up, take leadership and think through new models.We do have products that fail. Being honest with ourselves, we say, "Hey look, we aren't going to fire all those people involved." In fact, some of those people will emerge a lot smarter.

Richard Schulze: Failure is one of the best ways you learn, and the thing you ask about failure is whether those who actually do fail learn something from it. It's an important part of how we built our business. For me, if I were to say, "What would you say is the most important thing you need to be thinking about in your business?" it really wouldn't be that you shouldn't be afraid to fail. What it really should be is to reinvent yourself, and don't be afraid to reinvent yourself because any business is on a very fast-paced treadmill today.

Puto: What do you know now that you wish you would have known 30 years ago?Schulze: I would have placed more importance on the value of cultural competency as a building block within an organization that was more aggressive - that was more leading edge - that encouraged the value of becoming a company that listened very well to all of our constituencies. I was one of those leaders who had so much confidence in (his) own teachings, but I was very hesitant to go outside and bring in external know-how.  I used to look at the proposals and think, "How could they be charging that much money to do this little job?" I think I would have opened it up to outsiders a lot earlier in the game.

Gates: One of the things I was most naive about was talent. Early in the history of Microsoft our view was if you were very smart then you could take that intelligence and learn how to manage people, how to do business, how to do marketing. It was a very general thing, so we just wanted to get a bunch of smart people. In fact, we had this theory that you should never really have to work for somebody who wasn't smarter than you were. We had this kind of hierarchy, and it turns out that talent isn't that fungible. It took us a long time, with a lot of mistakes.

Student: How do you spur new and innovative ideas in your organizations?Gates: That is a big thing for us every day. We have some areas where we are out in front, like trying to do tablets or speech recognition. We have other areas where somebody got there before us. We have to be good with both leading and following while finding our way to the front of the pack as fast as possible. I go off and I have "think weeks," where I am just reading papers that people have sent to me. Three weeks from now I will have 300 papers with ideas that people want me to read.Always looking for the one idea that we can do before competitors keeps us on our edge.

Schulze: We have a strategy in our company that works much in the same way. Our leadership encourages, in fact licenses, our people on the floor to experiment with things: new concepts, new offerings, new products, new services. They are the closest person to the customer, so we have the opportunity to be able to test something quickly.

Student: What is most important for an entrepreneur to know about leading a start-up into a mature organization?Schulze: I would say the key is being able to communicate the dream; to exhibit the kind of energy and confidence you have in the opportunity; to convince others that you come in contact with that this has potential; to gather facts effectively; to present them fairly; to be upbeat about the opportunity; and to engage and include others in the process.

Gates: I agree. I'd also say that in the startup phase, get the toughest customers to say, "I really like this." If they don't like it, your idea probably doesn't have much merit. But if you've got them, will they help you refine it? Will they be an example to the other customers who look to them as leaders?You have to get those key customers so when someone else comes along with the idea that you've got the momentum, you've got the understanding and they'll always be behind on it. The clock is ticking pretty fast in the startup phase.

Student: If you were sitting in the audience today and you were a freshman in the entrepreneurship program or in engineering or liberal arts, what would you be contemplating for your future?Gates: There are companies everywhere and it is always amazing to me. Warren Buffet has just bought some of these companies that do art frames, and has built an amazing business just with a chain of stores that do picture frames. There are opportunities everywhere. I see two areas that are changing very rapidly. Information technology continues to stun people with the rate of improvement - these devices are going to be so much better year after year after year. The second area is medicine and biology, where we really can make breakthroughs on diseases and really can extend the expected lifespan for people. Understanding genetic information and the tools around that are just at the beginning. I would say those are two areas where there will be the most phenomenal successes, and will be very exciting to be involved with, because they are such change agents.

Schulze: Obviously all of you here at St. Thomas this afternoon are invested strongly in an institution that cares about the successful outcomes you will enjoy when you graduate from here. The one thing you will be missing as you go out the door three or four years from now has an awful lot to do with experience. One of the most startling statistics for me back in the early days when we were growing our company was the fact that about 16 out of 17 businesses fail. That is a huge number. And my personal takeaway is that failure is largely due to people who are just not prepared for all of the challenge - the change that is necessary to compete. As you have heard from Bill today, we have referenced a very fast-paced business environment. In the last 20 years we had to adjust to a national marketplace within the United States. And now it is a global challenge with new ideas and innovation. I guess another way of thinking about it is ... it ain't easy out there.

Puto: Today we are celebrating this wonderful school of entrepreneurship. Are there any closing statements you would like to make about entrepreneurship?Gates: The classic image of an entrepreneur is going out, starting a business and struggling in a business at first, and certainly Dick and I fit that classic mold. But what you are really doing is thinking through why things have gone this way, or what are the different ways something can be done? And it is always exciting for me when I get someone in the company who has an idea, or writes something down, and I say, "Wow, they aren't only doing their job, they are almost putting themselves in my position and thinking through the strategy and thinking what they would do." Some employees have that and some employees just don't. You don't need all entrepreneurs - in fact, if you had all entrepreneurs it would be a little crazy. Maybe about 5 or 10 percent would be the right mix. But those are the people who make the difference; those are the people who rise up into higher positions.

The fact that they think independently, that they are not just following along with how things should be done, that is so fantastic. I don't know why it is that many people who have the talent to do that don't take the risk. Almost everybody has it when they are young, and then there is something that sort of pushes it out. So it is having the confidence, the optimism. Don't let anyone shut off those creative juices - the sense that you really can think about things in a better way. It really is younger people who are going to come in and define the new rules of the game, so I am encouraging you to have that mindset.

Schulze: First of all, you are at the right school. The University of St. Thomas cares deeply about the success of its students - whether you take a position somewhere or have a dream to foster a new concept or new idea. Then as you move forward, you have a connection to this place. You have people you can call on for advice. I will push strongly for mentorship in this school. I think that people within the Twin Cities, within this community, would embrace the opportunity to connect with students directly - to have an open phone line for a student who has questions about next steps, challenges or changes in direction. To be able to raise concerns with someone is a really positive opportunity. We have an amazing business opportunity in the Twin Cities, and I know the business leaders here are willing to step out and help one another. I believe that the business community will clearly have high accommodations for what comes out of the University of St. Thomas: the quality, the intensity, the work ethic, the can-do attitude. You can make a difference.

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