Bill Gates: A New Approach to Capitalism in the 21st Century

Transcript of Gates speech, and a Q&A at World Economic Forum in Davos, Switzerland

For the past 20 years, Microsoft has used corporate philanthropy as a way to bring technology to people who don't have access. We've donated more than US$3 billion in cash and software to try to bridge the digital divide.

But our greatest impact is not just free or inexpensive software by itself, but rather when we show how to use technology to create solutions. And we're committed to bring more of that expertise to the table. Our product and business groups throughout the world, and some of our very best minds in our research lab, including a special focus in our research lab in India, are working on new products, technologies, and business models that can make computing more accessible and more affordable.

In one case, we're developing an interface that will enable illiterate or semi-literate people to use a PC instantly, with minimal training or assistance. In another we're looking at how wireless, together with software, can avoid the expensive connectivity costs that far more than the cost of software or hardware is what stands in the way of computing access in rural areas.

We're thinking in a much more focused way about the problems that the poorest people face, and giving our most innovative thinkers the time and resources to come up with solutions.

This kind of creative capitalism matches business expertise with needs in the developing world to find markets that are already there, but are untapped. Sometimes market forces fail to make an impact in developing countries not because there's no demand, or even because money is lacking, but because we don't spend enough time studying the needs and requirements of that market.

This point was made eloquently in CK Prahalad's book, "The Fortune at the Bottom of the Pyramid," and that's had a huge influence on companies in terms of stretching the profit motive through special innovation.

An example of this is when the World Health Organization tried to expand vaccination for meningitis in Africa, it didn't go straight to a vaccine manufacturer. It first went to Africa to learn what people could pay. They found out that if they wanted mothers to get this vaccine for their babies, it had to be priced at under 50 cents a dose. Then they challenged the partners to meet this price, and, in fact, Serum Institute in India found a new way to make the vaccine for 40 cents each. It agreed to then supply 250 million doses to distribute through public health systems over the next decade, allowing it to also sell into the private sector.

In another case, a Dutch company, which holds the rights to a cholera vaccine, retained the rights for the developed world, but shared those rights, with no royalty, with manufacturers in developing countries. The result is a cholera vaccine made in Vietnam that costs less than $1 a dose, and that includes delivery and the costs of the overall immunization campaign.

Because many of today's advanced products have low marginal costs, whether it's software or medicines or media, so many things, this idea of tiered pricing to offer valuable goods for the poor in a way they can afford it, can be used more broadly than ever before.

These projects I think provide a hint of what we can accomplish if people who are experts on needs in the developing world meet with scientists who understand what the breakthroughs are, whether it's in software or drugs. Together they can help find poor world applications for the very best ideas.

Another approach to creative capitalism includes a direct role for governments. Of course, governments already do a great deal to help the poor in ways that go far beyond just nurturing markets: They fund aid research, healthcare; they've done great things. But I believe the highest-leverage work that governments can do is to set policy to create market incentives for business activity that improves the lives of the poor.

Under a United States law, recently signed by President Bush, any drug company that develops a new treatment for a neglected disease like malaria or TB can get a priority review from the FDA for another product they've made. If you develop a new drug for malaria, your profitable say cholesterol-lowering drug could go on the market up to a year earlier. This priority review could be worth hundreds of millions of dollars.

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