Diane Francis in Davos

Saturday, January 28, 2006

Bill Gates

DAVOS - One of the highlights of the World Economic Forum every year is access to Bill Gates who is the world's richest entrepreneur and philanthropist.

He's optimistic as ever.

“The world is getting wealthier and wealth is being shared. The greatest surprise in terms of poverty reduction is China and now India where they have created the type of virtuous cycle of wealth creation the United States created,” said Gates to an audience of 150 CEOs.

By “virtuous cycle”, Gates refers to the process by which a nation provides some form of healthcare, where education is widespread, the economy is a meritocracy and governments promote entrepreneurship through policies. The “cycle” works this way: education creates technologies and entrepreneurs to exploit them who, in turn, pay taxes which government spends on more education and research to create more technologies.

“It's a wonderful bootstrap,” he said. “Now the question is who's outside that virtuous cycle and how do we drawn them in?”

Extending opportunities is the modus operandi behind Gates' philanthropy. The William and Melinda Gates Foundation has given away billions to health, education and other projects he has pledged to give away virtually all of his estimated US$80 billion wealth derived from Microsoft Corp.

The Foundation is funding research on diseases such as aids, TB and malaria which afflict the developing world. He has personally pledged more in these battles than any single country in Europe.

“We are five to seven years away from a pill which will replace the need for condoms to protect people from the aids epidemic. And we are 15 years away from a vaccine and that's only if we can attract the best scientific minds to the task,” he said.

Gates has also made education around the world, and in the United States, another preoccupation. Basic education, especially for females, in poor countries is a focus and in the U.S. he has financed dozens of high schools that provide more enriched and rigorous curricula to students,

“The U.S. has had the biotech, computer technologies and aerospace areas to itself, with small contributions from Europe. Now the most popular university major in the U.S. is phys ed,” he said. “But people from India and China are in science, math and engineering, making the U.S. and Europe a minority.”

The U.S. graduates 75,000 engineers a year and India, 325,000 annually.
Last year, Gates told a conference of U.S. educators that their system was “obsolete”.

“America's competitive advantage has been, and will continue to be, the top 25% of U.S. students who go to its best universities which are the envy of the world,” he said. “It will take China and India 40 years to replicate these great institutions.”

But Gates estimated that half of the other 75% of U.S. students face problems because they don't finish high school or do poorly, resulting in fewer opportunities.

“This means greater income disparities and the middle class will break down if we don't revitalize the education system,” he said.

So far, his Foundation and others have created 1,500 high schools, roughly 6% of the total, to address this issue. They are mostly located in New York City and California.

“Our schools are smaller, offer specialized curricula and more rigorous. We're big on small,” he said. “The only downside is we don't have good football teams but in some cases we've combined four of our schools to make one team.”

Despite the educational shortfall in the U.S. (a phenomena which exists in Canada but not to the same extent and is mostly in Atlantic Canada and Quebec), America will retain its economic pre-eminence in the future, he believes.

“Ten years from now Microsoft's major research and development will be in the U.S.,” he said,. “But we must have immigration policies that attract the geniuses to come here and pay taxes.”

“Universities are also very important and the concentration of talent is connected to the best universities. For instance, Silicon Valley's there because of Stanford and the University of California (Berkeley).”

The U.S. must continue to support its greatest universities.

“Every country should ask itself whether it is a great attractor of talent?” he suggested. “There are reasons why Silicon Valley exists near Stanford and the University of California.”

The issue of piracy has dogged Gates said Microsoft but it continues to expand operations, and sell software, in China which is the biggest culprit.

“As innovation happens there by homegrown software companies and entrepreneurs, there will be demands for intellectual property rights,” he said. “This will happen in 10 years or so.”

He also anticipates the eventual democratization of China in the same way as South Korea and Taiwan began as autocracies then morphed into democracies.

“China's creating a middle class which will want and get more and more freedoms,” he said,. “The Chinese government is thinking about how this can take place.”

He also mentioned the area of energy, of vital importance to Canada as one of the world's five biggest energy exporters.

“We need energy and we sucked out most of the oil in the stable places because that we easy,” he said. “It's easy to underestimate the scientific research taking place in the energy space, in nuclear, coal, oil, oil sands. But it's happening.”

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