Bill: Yeah. Windows 95 is when graphics interface became mainstream and when the software industry realized, wow, this is the way applications are going to be done. And it was amazing that it was ridiculed sort of in ‘93, ‘94, was not mainstream, and then in ‘95, the debate was over. It was kind of just a commonsense thing. And it was a combination of hardware and software maturity getting to a point that people could see it.

[Comment 1: Bill Gates goes on to discuss what he sees on the digital road ahead over the next five years. He notes there’ll be greater appearance of 3D interfaces, software replication of natural movements, and the continued presence of three areas for applications - PCs, mobile devices, and living room screens.

Comment 2: Steve Jobs often uses the short-hand expression, the “post-PC” era. Gates never does. These differences are reflected in the current PC guy versus Mac guy television campaign (picture below).]

Steve: The art of those commercials is not to be mean, but it’s actually for the guys to like each other. Thanks. PC guy is great. Got a big heart. 

Bill: His mother loves him.

Steve: His mother loves him.

Kara: I’m telling you, I like PC guy totally much better.

Steve: Wow.

Kara: I do. I don’t know why. He’s endearing. The other guy’s a jackass.

Steve: PC guy’s what makes it all work, actually

Steve: You know, what’s really interesting is–and we talked about this earlier today–if you look at the reason that the iPod exists and the Apple’s in that marketplace, it’s because these really great Japanese consumer electronics companies who kind of own the portable music market, invented it and owned it, couldn’t do the appropriate software, couldn’t conceive of and implement the appropriate software. Because an iPod’s really just software. It’s software in the iPod itself, it’s software on the PC or the Mac, and it’s software in the cloud for the store. And it’s in a beautiful box, but it’s software. If you look at what a Mac is, it’s OS X, right? It’s in a beautiful box, but it’s OS X. And if you look at what an iPhone will hopefully be, it’s software.

And so the big secret about Apple, of course–not-so-big secret maybe–is that Apple views itself as a software company and there aren’t very many software companies left, and Microsoft is a software company. And so, you know, we look at what they do and we think some of it’s really great, and we think a little bit of it’s competitive and most of it’s not. You know, we don’t have a belief that the Mac is going to take over 80% of the PC market. You know, we’re really happy when our market share goes up a point and we love that and we work real hard at it, but Apple’s fundamentally a software company and there’s not a lot of us left and Microsoft’s one of them.

[Comment: Another take on the success of the iPod is provided by Ms Jena McGregor, associate editor of BusinessWeek. She gave it during a conversation in 2007 with Andy Grove, co-founder of Intel. As recorded in Innovation fatigue and its causes, Ms McGregor notes that the innovation in the iPod was the lightbulb realisation by someone that songs could be sold for US$0.99 legally, music companies could be won over to sign up, and this could be spun together into a music copying, buying, distribution and identification system around the iPod and iTunes. In short, Jobs focuses in the iPod/iTunes software, McGregor on its business model.]

[Comment: A counter-point running through the joint interview is discussion of how Apple tends to couple software and hardware, whereas Microsoft builds software and leverages multiple relationships with hardware vendors and others. Steve Jobs expresses a fascination for coupling, which he says can produce product design integration and useful devices. Bill Gates says he can resist the attraction of coupling. Both confirm their passion for software and the software business.]

Bill: The question is, are there markets where the innovation and variety you get is a net positive? The negative is that in the early stage, you really want to do the two together so you want to do prototyping and things like that, you know, really as one thing.

And then take the phone market. We think we're on 140 different kinds of hardware. We think it's beneficial to us that even if we did a few ourselves, it wouldn't give us what we have through those partnerships.

Likewise, if you take the robotics market, very undeveloped. We have over 140 tiny-volume robots using Microsoft software. And the creativity, building toys, security things, medical things, we love the innovation and the ecosystem that's going to grow up-who knows when, but we're patient-around that and we'll have a great asset with this robotic software platform.

So there are things like PC, phone, and robot where the Microsoft choice is to go for the variety.

Apple, it's great. For them, they do what works super well for them. And there's a few markets like Xbox 360, Zune, and this year we have two new ones, the Surface  thing [pictured right] and this RoundTable, which is the meeting-room thing, where we'll actually, through subcontractors, but the P&L on the risk and all that for the hardware, the design is completely a Microsoft thing.

Steve: There’s a lot of things that happened that I’m sure I could have done better when I was at a Apple the first time and a lot of things that happened after I left that I thought were wrong turns, but it doesn’t matter. It really doesn’t matter and you kind of got to let go of that stuff and we are where we are. So we tend to look forward.

And, you know, one of the things I did when I got back to Apple 10 years ago was I gave the museum to Stanford and all the papers and all the old machines and kind of cleared out the cobwebs and said, let’s stop looking backwards here. It’s all about what happens tomorrow. Because you can’t look back and say, well, gosh, you know, I wish I hadn’t have gotten fired, I wish I was there, I wish this, I wish that. It doesn’t matter. And so let’s go invent tomorrow rather than worrying about what happened yesterday.

Bill: Well, I’d give a lot to have Steve’s taste. [laughter] He has natural–it’s not a joke at all. I think in terms of intuitive taste, both for people and products, you know, we sat in Mac product reviews where there were questions about software choices, how things would be done that I viewed as an engineering question, you know, and that’s just how my mind works. And I’d see Steve make the decision based on a sense of people and product that, you know, is even hard for me to explain. The way he does things is just different and, you know, I think it’s magical. And in that case, wow.

Steve: You know, because Woz and I started the company based on doing the whole banana, we weren’t so good at partnering with people. And, you know, actually, the funny thing is, Microsoft’s one of the few companies we were able to partner with that actually worked for both companies. And we weren’t so good at that, where Bill and Microsoft were really good at it because they didn’t make the whole thing in the early days and they learned how to partner with people really well.

And I think if Apple could have had a little more of that in its DNA, it would have served it extremely well. And I don’t think Apple learned that until, you know, a few decades later.

[Comment: Clearly, Bill Gates admires the Mac guy. But the Mac guy, Steve Jobs, admits that the PC guy, nee Bill Gates, knows how to build business relationships.

Here is a historical note on the importance of business relationships in IT as contrasted with going it alone in coupling hardware and software. As noted in The business of making money from IP, quoting from my 1994 article, IP strategy and the rise and rise of Bill Gates [PDF], IT companies must adopt a "three part strategy of creation, diffusion and licensing" following the "Silicon Valley business model" involving "relationships with customers and alliances between competitors." 

Further on relationships, responding to an audience-member question about how to build a great company, Steve Jobs strongly emphasises the need to be a “really great talent scout” and to “build an organisation that can eventually build itself”.]