Jobs, Gates share D5 stage

By Jason Snell and Peter Cohen, Macworld.com

Note: See Macworld.com’s live coverage for updates

Apple CEO Steve Jobs and Microsoft Chairman Bill Gates are making a rare joint appearance at this year’s D: All Things Digital event; Macworld is providing live coverage of the session. Click refresh to see the latest update of our report.

The appearance of the two technology giants is certainly the marquee event at this year’s D: All Things Digital conference, an annual gathering coordinated by the Wall Street Journal. The interviews of top tech executives are conducted by the Journal’s Walt Mossberg and Kara Swisher.

History repeats itself, in a sense: Tonight’s meeting between Jobs and Gates has opened with videos originally recorded in 1984, 1991 and 1997, showing the two of them talking together. The video ended with Jobs and Gates entering from opposite ends of the stage.

Tonight’s hosts are Wall Street Journal technology columnist Kara Swisher and Walt Mossberg. Swisher started by asked the two men what each has contributed to their industry.

“Bill built the first software company in the industry. And I think he built the first software company before anyone in our industry knew what a software company was, and that was huge. And the business model they ended up pursuing ended up working really well,” said Jobs. “Bill was focused on software before anyone else had a clue. There’s a lot more you can say, but that’s the high-order bit.”

“First I want to clarify, I’m not Fake Steve Jobs,” said Gates, to peals of laughter from the audience.

The good old days

“What Steve’s done is phenomenal,” Gates continued. “Back in 1977, the Apple II, the idea that it would be a mass market machine and an incredibly empowering phenomenon. And the Macintosh, that was so risky. Apple really bet the company, Lisa hadn’t done that well, but the team that Steve built within the company to pursue that, some days it felt a little ahead of its time, remember the Twiggy disk drive and…”

Jobs interjected, “128K!”

“In a certain sense we build the products we want to use ourselves. He’s really pursued that with an incredible taste and elegance and had a huge impact on the industry. Apple literally was failing when Steve went back and reinfused innovation and risk-taking that have been phenomenal. So the industry has benefitted immensely from his work. I’d say he’s contributed as much as anyone,” said Gates.

Jobs called Gates and himself “incredibly lucky” to attract great partners and great people to work with. He agreed with Mossberg’s assessment that in a sense, he and Gates are standing in for all the people at both their companies.

Jobs ruefully recalled some of Apple’s early television advertisements. “We had a kitchen, with the wife typing in recipes and the husband looking on approvingly,” he said, to laughter from the audience.

Jobs and Gates also recalled Microsoft’s efforts to provide floating point computation in the Apple II’s BASIC programming language. “My partner, Steve Wozniak, brilliant guy. Writes the best BASIC on the planet. Perfect in every way, except for one thing: it’s just fixed point, not floating point. So we’re getting a lot of input, please make it floating point. I’m begging Woz, and he just doesn’t do it. He wrote it down on paper, never got around to doing it. So Microsoft had this very popular, very good floating point BASIC. And we went to them,” said Jobs.

Gates picked up the story from there. “It was $31,000 for the floating point BASIC. And I went down to Apple getting the cassette tapes to work,” he added.

Gates and Jobs both agreed that Microsoft made a huge bet with the Macintosh when Apple first introduced the new computer. “What’s hard to remember now, is that Microsoft wasn’t in the applications business then,” said Jobs.

“We made this bet that this paradigm shift would happen, to graphical interfaces, and that the Mac would be the one to do it,” said Gates. “The big bet wasn’t Mac versus Windows, it was character-mode versus graphics interface.”

Gates added that Microsoft eventually saw the benefits of that bet come home to roost when PC-compatible computers were outfitted with 386-era micprocessors.

The bad old days

Jobs recalls 1997, the year he returned to Apple computer after a decade running Next. “Apple was in very serious trouble. and what was clear, where if the game was a zero-sum game, where for Apple to win Microsoft had to lose, and if that was the case, Apple would lose,” he said. “A lot of people’s heads were in that place … There were too many people at Apple playing [that] game. It was clear that you didn’t have to play that game.”

“Apple had to remember who Apple was, because it had forgotten,” he said. Jobs’ decision was to call Bill up. “And we tried to patch things up.”

Gates said that since then, Microsoft has had a dedicated Macintosh application development group — the Mac Business Unit, or MacBU, which works very closely with Apple. “It’s a great business for us,” he said.

A good natured rivalry?

Gates and Jobs also traded comments about the Mac vs. PC television advertisements that pit actors John Hodgman and Justin Long against each other, as anthropomorphic Windows PC and Mac, respectively.

Jobs said the art of those advertisements is not to be mean, but for the guys to like each other. “His mother loves him,” said Gates, ruefully, about the PC character.

“PC Guy is what makes it all work,” added Jobs, but Gates seemed unconvinced.

Mossberg noted that Apple and Microsoft continue to vie for the hearts and minds of consumers — recently with the Zune, Microsoft’s iPod competitor, and Vista, Microsoft’s new operating system that has been pitted against Mac OS X in numerous head-to-head comparisons in magazines and tech Web sites.

Jobs reiterated a point he made with Mossberg during his interview earlier in the day: The iPod, said Jobs, is a response to the development of digital music players by Japanese consumer electronics makers, who, in Jobs’ opinion could create great boxes but not develop good software to manage them. The iPod and the Mac are both principally differentiated from their competitors by the software that drives them.

“So the big secret about Apple is that Apple views itself as a software company. And there aren’t very many software companies left. And Microsoft is a software company,” said Jobs. “We look at what they do, and some is really great, and some is competitive, and some of it’s not.”

Apple’s goal is much more modest than world domination, said Jobs. “We don’t think we’re going to have 80 percent of the market,” he said, doubtlessly disappointing legions of Mac enthusiasts. “We’re happy when our market share goes up a point.”

The future of computing

Jobs cited Apple alumnus Alan Kay next, and illustrated a key difference between himself and his colleague and rival. “Alan Kay said, people who love software want to do their own hardware,” said Jobs.

“I can resist that,” retorted Gates.

Jobs waxed philosophical. “In the consumer market at least, I think one can make a pretty strong case that outside of Windows on PCs, it’s hard to see other examples of the software and hardware being decoupled working super well yet,” said Jobs. “It might in the phone space over time, it might, but it’s not clear.”

Gates believes the future of computing is what he describes as “rich local functionality.” He points to single-function computers and network computers as examples of devices that didn’t sell as well as the industry expected. “It’s using local richness together with richness elsewhere,” he added.

Jobs agrees with Gates, and provided what he believes is a practical example of Apple’s innovation at work when it comes to providing users with a rich local experience combined with remote data: the Google Maps functionality embedded on Apple’s forthcoming iPhone, which ships in late June.

“The experience is unbelievable, way better than a computer. And that client app is the result of a lot of technology on the client. And you can’t do that stuff in a browser,” said Jobs.

Gates opined that in five years’ time, consumers won’t depend on a single computer — the’ll have multiple devices, such as a tablet with “voice and ink,” along with “a phone, a pocket-sized device.”

Jobs sees a history for the same computer we’ve grown accustomed to. “As Bill said earlier, the death of the PC has been repeatedly predicted,” he said. The PC will continue to be with us and will evolve, Jobs added.

Jobs forsees a “an explosion” of what he describes as “post-PC devices” such as the iPod. “There’s a category of devices that aren’t as general-purpose,” he said, “And that category is going to continue to be very innovative. And we’re going to see lots of them.”