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When Craig Mundie joined Microsoft in 1992, it was to create and run the consumer platforms division where the company's non-PC platform and service offerings, such as the CE operating system, were developed. In 1998, chairman Bill Gates tapped Mundie as a technical, business and policy strategist. In 2000, President Clinton named Mundie to the National Security Telecommunications Advisory Committee and since 2002, Mundie has served as a member of the prestigious Council on Foreign Relations. He has also been a trustee of the Fred Hutchinson Cancer Research Center since 1998. Gartner Fellow, David Mitchell Smith, met with Mundie in his Redmond, Washington, office where they talked about some of the most important IT issues of the day. Interview conducted 3 March 2004
David Mitchell Smith: Thank you very much for joining me, Craig. Let me start with innovation. A lot of people are fond of saying IT is no longer an innovation-driven industry. Do you agree? Craig Mundie: No. I don't agree that innovation is dead or not a driver in the IT business because the industry moves in long cycles. To some extent, they're so long that people who are close to it every day don't notice where they are in the cycle.
We've been through two halves of the personal computer industry cycle. The first half is usually a grass roots phenomenon driven by some killer apps. In this case, word processing and spreadsheets. Once the platform is established, it becomes really valuable because people program it. That's been done fairly well for the PC. The new platform being established now is the globally inter-connected set of all intelligent devices. The first phase of that, the Internet, was driven by two killer apps — email clients and Web browsers. And the whole world has now agreed that the real question is, what are you going to do with them. I think there are many other innovations now that will come about in terms of how people programmatically capitalize on this platform. In doing so, they will fold in new models of programming, new models of user interface, and ultimately, just new models of how the computer is used to improve productivity and creativity and entertainment and the full range of things. So, I think we're at an up-tick, not a flat spot. Smith: Let's step back for a moment. What do you think has been the most important innovation, regardless of industry, over the last hundred years? Mundie: Well, it's easy to say computing. I actually would have told you it was sort of a toss-up between the broad deployment of electric power and computing.
What about the next really big things — as big as computing or penicillin or quantum physics. What do you think might be the next big thing that could change our lives? Mundie: One of the things I'm particularly interested in seeing what happens over the next few decades is the steady improvement in silicon technology. If people continue to move in that direction, you start to see nano-technology and the bio world coming together where you can manipulate and fabricate things at the scale of nature's core elements. I think somewhere in that primordial soup — nano-technologies, bio-technologies, and very small scale silicon fabrication capabilities — lays the basis of some type of new computer architecture. To the extent that computing is already a pervasive component in many aspects of our lives, if we had a computer that is fundamentally different or more powerful, maybe it would portend even bigger changes in the way that things get done. Smith: Technology has changed so many things in our lifetimes already. I tell my daughter that people didn't have computers of their own back when I was a kid, and we didn't have DVDs so you had to watch TV in real time. How has technology changed your everyday life? Mundie: On a personal level, when I joined Microsoft, my daughter stayed in Massachusetts because she was in the middle of high school. About that time, two-way pagers were emerging. So, I bought one for each of us. In 1992, it was fairly rare for a 13- or 14-year-old kid in high school to have a pager. But one of the things I found was that my daughter and I, even though she was in high school — you should try this out — that we could find each other and talk and answer questions with greater facility than most of the kids and parents in the same relationship who live together.
So I was enamored of trying to give people simpler access. About the time we bought WebTV, my family celebrated my parents' 50th wedding anniversary in Florida and I bought everybody who was there who wasn't a PC user, a WebTV box. And now, my mother-in-law, my mother, my aunt, my sister, her sons either still now communicate among the family using that or have graduated to a PC. There has been more interaction in our family as a result of giving everybody those simple mass email tools than there ever was in the 30 years before. So these are powerful things that are changing the way families communicate and, arguably, it's that continuous, instantaneous global communication which has transformed the planet to some extent. Smith: Business has also changed a lot as a result of technology. Where do you think business will be in 10 years from now in terms of what technology will do for it?
This goes back to your first question about innovation. We think we're at a high point now: internal business processes can be applied between companies and their customers and we have a level of business process automation that was not possible before. Arguably, the productivity gains could exceed all the gains contributed by IT so far, and I think we could have that much progress again in the next ten years as business process automation accelerates further. Smith: As you point out, productivity is becoming a big factor. In fact, one might argue that productivity is costing a lot of people their jobs. How will technologies that improve productivity further play out while people are having problems finding work?
I don't think there's anything really new in that situation. I mean, every one of the technological revolutions has initially been looked at as a threat to existing employment. But also in every case, it ends up increasing the aggregate economy and creating a basis for people to be retrained. It will be similar this time. The bigger questions, I think, for developed countries, is the effect of global markets and global resource pools that create a lot more capacity and competition for jobs. Smith: That is happening. Technology is helping the outsourcing of jobs to other countries. Do you think the standard of living of Western, advanced countries will decline in relation to the rest of the world as a result of it? Mundie: To some extent, countries are no different from individually successful people or companies. If you stay static, the world will essentially creep up around you. That is sort of a law of nature. The advanced economies had some singular capabilities accrued to their benefit on planet earth for a while. Now their job has to be to recreate those singularities, to decide what they are going to do to keep them ahead to create what everyone will copy. You always have to look for what your distinct advantage is going to be, and I think the United States and Europe are staring at that question right now. Smith: We often hear the phrase "information wants to be free." We've seen this develop with online music and video sharing. When I interviewed James Burke recently, he said he believes we ought to abandon our current copyright system, which is too difficult to enforce, for some kind of an automatic metering system. Would you agree?
I think there are two issues Burke blended together in that comment and I would tend to tease the two apart. Intellectual property rights — whether it is in media assets, computer software, pharmaceuticals, or other industries whose core value is essentially creation of intellectual property assets — need to be strengthened. They may also need to be simplified. It's way too complicated today on a global scale to enforce intellectual property rights, but many technologies have global appeal and global utilization. That's a real problem. On the other hand, Burke gets to a separate question of developing more efficient ways to pay people for use of their copyrighted assets. It's been done in such selected cases as ASCAP, BMI and SESAC as clearance houses for broadcast use of media, and the big question is if we need some kind of global mechanism for remuneration that would make things simpler. I think that's a business model question, not one that speaks to the efficacy of intellectual property as a concept. Smith: Some countries believe that open source software will help create competitive software industries for them. What do you think? Mundie: I'm fairly skeptical about that. I think it is true that each country — developed or developing — will need to have a vibrant local software economy because computers are going to be in everything and they need to know how to operate in relation to local laws, language and custom. So the idea software can be bought for this new world from one global source is impractical. There is an ongoing misunderstanding between the use of source code access as an aid in technology education, and in open source as a short cut for driving technology transfers into local commercial environments. The first approach has been the history of open source and that's an essential, positive benefit of code access. On the other hand, licenses that are restricted and don't allow for direct commercialization (of the source code) will not help achieve a sustainable local software economy. Our guidance and my personal guidance is to understand the difference, then try to favor things that don't break the virtuous cycle that exists between government-funded research, academic research and having an intellectual commons.
You mention government funding. Compared to other countries, the U.S. is lagging in broadband adoption. The FCC recently stepped in to announce some new rules for the Internet and broadband. What role do you think governments should play in developing technologies? Mundie: I think government should focus on funding basic research. A problem in the U.S. is the slow decline in the percentage of the GDP channeled by the government into basic research — that is, things that have a long lead-time, are pre-competitive, and that essentially flow out for commercialization through academia, and then make their way into business. If you measure what U.S. government-funded research was at the height of the Cold War and measure it today, it's off by somewhere between 60 and 70 percent. I think that's been going on now for so long that people have lost sight of the fact it was these basic research assets — things like DARPA-funded research and universities and core research that was being done by major corporations — that contributed to U.S. pre-eminence as a technology supplier in many fields. I think this is one of the biggest challenges that the U.S. and other countries now face, to realize that they need to reinstate that level of investment in basic research, and then, let academia bridge the gap and let business commercialize what comes out of it. Smith: Now you see such things as the CIA getting into venture funding of companies starting up, for example, security technologies. How does that fit in with what you are saying? Mundie: IncuTel, I believe, is an activity the CIA put together, but that is a bit anomalous. Many, many government agencies, for years, have had a variety of ways to gain early access to new technologies, and when a lot of this research was being done through government-funded programs or specific firms who were leaders in their fields, it was easy to maintain that contact. Now that government has lost its way in terms of funding basic research, the burden of innovation has shifted to just a few companies — such as Microsoft in computer science and to the venture world which is a huge source of available money. As a result, the traditional relationships between government and new technologies have broken down, and these new models of engagement, I don't think, serve the needs nor take the place of the government actually helping to defray some of the cost of basic research. Smith: One of the things that came out of that basic research is the Internet which has gone through an amazing hype cycle over the last ten or so years. Do you think it's been over-hyped?
No. What I'm telling you is that the next computing platform is what I call the next phase of the Internet. Until now, the Internet was not a programmable platform; it was just a publishing environment. That was important because by having it as only a publishing system, it was able to scale on a global basis very quickly. Now that it's out there, it is the next computing environment and it's going to have to be programmed. Given its pervasive reach — you could say the unlimited potential for it as a programmable resource — I think it is hard to overestimate what will be done with it. In a way, it's like looking at early PCs. You'd say, "Wow, they're really important." Many people had a tough time realizing just how pervasive those things would be. I think this will go well beyond that. Smith: People have been talking for a long time about convergence of consumer electronics and PCs. Where are we in the development of that convergence? Mundie: I remember in my early days at Microsoft, in the early '90s, people ridiculed the stated goal of trying to put software into many forms of consumer devices. "Gee, I can't tolerate that," they said. "I don't want to have a blue screen of death on my television." What people missed was that we were not going to convert every other device into a personal computer, but rather that the PC would be among the most capable of the devices in an integrated family of intelligent devices and that the benefit would come from the connectivity. I think it is happening. We are at a point now where telephones, televisions, automobiles and to some extent, game machines, desktop computers, all of these things are at a level of software sophistication and connectivity that they will soon look more like a converged environment than not. Smith: Should enterprises and IT departments care about consumer technology? Mundie: Oh, I think they have to for two reasons. One, unless they're a people-less company, their employees are going to have this stuff and use this stuff. And their future employees, their kids are going to grow up completely steeped in this set of things.
Smith: I asked James Burke this question, but I would like to get an answer from someone more thoroughly steeped in technology: Take a peek into the future a hundred years from now. What do you think life will be like? Mundie: It's so hard to forecast that many technology cycles ahead, but I think the traditional roles of sovereign nations will be challenged against a planet that will operate on a more global basis. Even today we see problems — technologically based, environmentally based — and we don't have a global society or a global governance mechanism that's effective. It's hard to understand how important connectivity is. I mean, these are just other examples of the pervasive reach of technology and its changes in the basic modes of mass communication, education, business process automation, global operations. That's all clearly in the cards and yet very hard to forecast where native political notions and sovereignty issues intersect with connectivity and limit it. But, I think there's going to be some impact there. Smith: What is unique about being the CTO at Microsoft versus other companies? Mundie: Well, several things. One is I get to have these kinds of discussions with Bill Gates as part of my job, and I really enjoy that. Bill and I use some of our time together to have — not hundred-years-from-now conversations — but ones that essentially touch on some of these issues that transcend day-to-day business.
Also, just because of our place in the industry and in the society on a global basis at this moment, Microsoft finds itself stuck squarely in the middle of a very rapidly evolving technical environment. Yet we also recognize that we have a corporate social responsibility and a real effect on a global basis on many things that are technological policy issues. Smith: What is the best part of your job? Mundie: The best part of my job is the access to the people that I have both inside and outside the company. Some combination of my personal standing and credibility in the fields of policy and technology coupled with Microsoft on my business card really does provide a level of access and dialogue that most companies don't enjoy. That's a real privilege, but it is also a fascinating opportunity. When I travel, the people we talk to are the ministers and prime ministers of the countries because they care about this stuff and they recognize that Microsoft and its people have some interesting things to say. So they grant us a level of access that I think many industries and many companies don't enjoy. Smith: I want to thank you very much. Mundie: It's great. I'm happy I've had the opportunity to talk to you.
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