Global CIO: Bill Gates Blasts China Over Corporate Software Piracy

Sep 25, 2009 (04:09 AM EDT)

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In a Q&A session at Carnegie Mellon University this week, Bill Gates said two of the five most-profitable businesses in China don't pay for the software they use. Those businesses, he said, are only two of many examples of a massive trend in that country—and although Gates smiled a lot as he discussed this topic and hid the famous temper he used to his advantage so well for so long, it was abundantly clear that he thought the Chinese software piracy was anything but funny.

(This column is an extended version of a blog post from yesterday.)

Speaking at the dedication of CMU's new Gates Center for Computer Science, Gates delivered a brief and gracious keynote address before taking questions from students in the audience.

In his remarks, Gates, stepping into the role of largely detached statesman, underscored by his frequent references in his talk to Microsoft as "them" rather than "us," talked about the enduring potential of computer science and the world-changing opportunities awaiting CS graduates in fields ranging from computational biology to robotics to materials science, vaccines, and in particular education.

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He spoke of robots being able in a decade or two to help care for the elderly, and of how genomic data is being manipulated and analyzed to create new and better vaccines, and how modeling techniques taken from the discipline of physics have helped medical researchers map and model the actions and spread of malaria, a disease to which Gates said he is devoting a great deal of his time and energy.

Gates also touched on the profound need for education transformation, and not surprisingly spoke passionately about how technologies can enhance learning experiences and offer more-customized approaches tailored to the needs of individual students. The Harvard dropout who has become one of the world's most powerful and influential individuals remarked on the irony of "how little technology has influenced education in spite of how much it has changed everything else."

After speaking for about 8 minutes, Gates took questions from students in the audience for the next 25 minutes. The first question was about education and drew an earnest answer, but the second seemed to light Gates's emotional fire a bit more as the student asked Gates for his opinion of open-source software.

Gates tilted back on his stool momentarily and gazed upward before discoursing on the richness of a free-market system that includes opportunity for both free and not-free software, which he said was a "very, very healthy dynamic." He said that some people choose to create open-source software and that's a good thing, while others "decide to start a company and raise some money and they hire people, and they pay salaries, and they pay taxes" and the difference is that this latter type of company has to be able to make very high-quality software in order to be able to charge and receive money for it.

"Look at big companies," he said, "and the databases they use. There are lots of databases out there, and some are free and some are not, but I assure you that the databases big companies use are very, very expensive."

Then, with his blood up a bit via his memories of the open-source wars of his youth, Gates enthusiastically responded to a question about how his foundation chooses which opportunities to fund, and the centerpiece of his story was that in the 1960's, 20 million children died every year from poor health. With advances in vaccines and nutrition since then, that number's been reduced to 8.8 million—still far too many, he said, but great progress has been made.

Next, a student from China studying in CMU's Tepper School of Business asked Gates for his views on copyright laws and policy with regard to software. And while the answer might have been cloaked in the velvet glove of a philanthropic statesman, underneath was a bare-knuckled expression of contempt.

Gates began his response by noting that the question of how intellectual property should be priced "is a very big issue and will be for a long time." He then connected that theme to one of his other current passions—healthcare in developing countries—and got a big laugh plus applause from the 1,200 people in the standing-room-only auditorium when he said, "I'm sure when people get my vaccines, they don't know to say, 'Ooh, thank God somebody paid for software."

Bringing China into the discussion, Gates said his experience has shown that almost without exception around the world, software piracy--"especially in business"--goes down as that country's affluence goes up. But the exception, he said, is China--and he went on to lay out a very specific accusation about Chinese corporate software-copying:

"What's unique to China is you have large businesses using software without paying for it. SUPER-profitable big businesses [he chuckles]. Take two of the five most-profitable businesses in China: they don't pay for their software.

"So that's a case where the Chinese have done something quite unique [he chuckles again; huge laughter and applause from audience]. But, I'm not complaining about it—I'm, you know, a big fan of China [big smile from Gates; big laugh from the audience], and a lot of great things are going on there [another big smile, and more audience laughter and applause], but, y'know, we've all got things to work on."

Anybody who thinks that one of the most competitive and driven people God ever put on this Earth would mellow out because he now spends his time running the world's biggest philanthropy instead of one of the world's biggest software companies should read those few sentences again.

Because Bill Gates ties, very directly and specifically, his current charitable work in improving the health and education of poor people around the world to the wealth he was able to accumulate at Microsoft. And then he quite visibly skewers the Chinese business culture that would have undercut his ability to create a wildly successful software company, from which Gates was able to amass a vast fortune most of which he's now pouring into his philanthropic work.

So while he was smiling outwardly as he triggered repeated laughter from the audience by saying "…the Chinese have done something quite unique . . . I'm, y'know, a big fan of China . . . a lot of great things are going on there," it was abundantly clear that he certainly did not find the subject amusing, or something to be "a big fan of," or "a great thing[s]."

Watch it for yourself on this YouTube video; the comments quoted above about China come in at about 28:38.

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

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