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tv   Bloombergs Studio 1.0  Bloomberg  November 12, 2016 9:30am-10:01am EST

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emily: he got his start at microsoft by employee number 30. in three decades he went from gates top lieutenant, to microsoft's ceo. he is best known for bringing life to software conferences that will never be seen again. in 2014, he left microsoft after a 14 year reign. he took his enthusiasm from the boardroom to a basket of all join me today on bloomberg's -- to the basketball court with
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a deal to buy the l.a. clippers. ballmer,e, steve founder of microsoft, and owner of the la clippers. emily: steve, thank you so much for joining us. i heard a rumor about you that i could not believe to be true, which is that you were shy growing up. steve: that is a true rumor. emily: tell me about this. steve: when i was a little kid, if somebody's dad was at home, if i did not know the people, literally i would sit out in the car sometimes because i would be so nervous and shy. when i got to college, a friend of mine described it this way. hello, my name is steve, my hand as sweaty because i am so nervous to see you. over time, that has changed. emily: quite considerably, you brought life to software conferences that will never be seen again. where did that guy come from? steve: that is a very good
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question. there was a rate few -- breakthrough for me. that is when i was a football manager at harvard. it is not the loftiest position. you have to say hey, listen up a minute. you have to speak before a pretty unruly group. that is how i broke through. emily: your dad worked at fort, you excelled in math and science even early on. at harvard, some other kid named bill gates apparently lived down the hall. and you are better at math than him. steve: that is an extreme way to say it. on the putnam prize math competition, i did beat him our sophomore year. emily: how did you get to know him, what was your relationship in school? steve: we got to know each
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other, took math class together and brainstormed a little about what would -- what he was doing with microsoft. about a year after the company moved to seattle, he called to say we could use a guy like you. emily: so you joined microsoft in 1980. you are the 30th employee. was there a time in the first few weeks when you are thinking, i do not know if this places for me, maybe i should quit? steve: bill and i were arguing, i wanted to add a bunch of people, he did not want to add them. he said, you will bankrupt this place. i thought, why did i drop out of school? that is where i make up in my head, bill invented this computer on every desk and every home. he says steve, you do not under stand -- you do not get it. we will put a computer in every home. i bought into it and stayed almost 34 years. emily: you are his top
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lieutenant and became ceo in 2000. you tripled microsoft revenue. what was a like over from a founder ceo? steve: this was like my baby and bill's baby, we were growing up -- growing it and nurturing it. if it was raising of children, mom gets to decide more than dad. i take great satisfaction in the things we accomplished throughout the time, not just when i became ceo. build and not know how to work with anyone and i do not know how to manage bill. things lightened up some. things changed a lot in 2008 when bill left the company. he asked me, i am happy to help you, but i do not want you to need me. i can come and go. if you want me, great. but i have another life. i felt like, ok, we are not partners anymore. i think i did some of my very best work at the company after
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bill left. emily: like what? steve: push that into being, sustaining that investment. we started with the cloud. after bill left, we pushed into the hardware business, etc.. my successor is taking things to infinity and beyond. emily: how do you feel about after bill left, we pushed into the hardware business, etc.. my successor is taking things to infinity and beyond. emily: how do you feel about being asked about your successes and failures? steve: i am almost three years out, it is ancient history. have i had a lot of success, yes. things i would like to do differently, of course.
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i had a company with -- i left a company with $22 billion in profit. i think that was pretty good success. emily: what is your relationship with bill like today? steve: we have drifted apart, i have my life and he has his. microsoft really bound us. we started off as friends but got enmeshed around microsoft. since i have gone, we really have drifted a bit. emily: he was not happy about when you left. what happened? steve: it was not a simple thing for either one of us. i think that at the end of the day there were probably two things. a little difference and opinions on the strategic direction of the company, which i think is a challenge. number two, he and i always had
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what i would say a brotherly relationship in the good parts of the bad parts. towards the end, i think that was a bit more difficult, with strategic direction change. the rest of the board felt pressured despite the fact that profits were not going up. kind of a combustible situation. emily: does it bother you that you do not get credit for that? steve: sure and now. at the end of the day, i have the comfort of knowing that what i did, and feeling good about myself and everything else does not matter. emily: where did he want to take the company? steve: there is a disagreement about how important it was to be in the hardware business. the board was reluctant and supporting it. things came to a climax about what to do on the phone business.
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emily: he said, missing the mobile phone was one of the biggest mistakes in microsoft history. what would you have done differently? steve: i would have moved into the hardware business faster and recognize that what we had in the pc, a separation of chips, systems, and software, was not largely going to reproduce itself in the mobile world. i wish i had thought about the model of subsidizing phones through the operators. you like to point to this ring where i said iphones would never sell. that was because the price is $700 was too high. we should have been in the hardware business sooner, and we were still suffering from what i would say are the effects of the release of windows, which sucked up a huge amount of resource for longer than it should have
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because we stumbled over. when you have your best engineers nonproductive for a while, it takes its toll. emily: would you have bought nokia? steve: i certainly wanted to buy nokia. the board it first disagreed and then said the company should go ahead even though i decided to leave. if executed in a certain way, it made a lot of sense. the company chose to go another direction and that is the decision the company made. emily: you think they are wrong? steve: i see the stock price flying sky high and all you can say is the market agrees with the direction. i'm excited about that. emily: how do you think he's doing? steve: i think he's doing a fantastic job. he has really pushed on the cloud, building on the foundation of machine learning and artificial intelligence. revenues and profits have not been down, they have been pretty flat. but that is important to
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maintain as he read years -- regears the place. emily: he has been more open to partnerships and you seem to be. is that the right strategy? steve: i have no quibbles with anything he has done. should azure run open source software? absolutely. is it easier for him to communicate that than it would have been for me because i was identified as the competitor? sure. he's taking advantage of it and doing the right stuff. emily: how does life as the owner of a basketball team compared to life at microsoft? ♪
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emily: may 2014, you bought the clippers for $2 billion. how does life as the owner of a basketball team compared to life at microsoft? steve: it is completely different. comparing them may not be the most interesting or valuable thing. i love the game and love seeing us go out there and win, but there are other aspects to the job as well. how do i properly interact with our coach, our basketball staff, our players? what is my role? we have big decisions in front of us. arena, where do we go as far as changing the way sports is consumed it using digital techniques? not just ott but virtual reality and live statistics in addition to, let's go win some ballgames. emily: what are your hopes for a new season and not to talk
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smack, but how do you beat warriors? steve: i watch the warriors get beat by 25 points in their opening game. anyone can beat anyone on any given night. emily: the cavaliers and warriors are favored to get the finals for the third year in a row. does the league have a competitiveness problem and do they need to fix it? steve: i think our league is pretty competitive. over time. in any given year, there are players who are different -- difference makers. i think it is tougher to win it all if you don't have one or probably two of those difference makers. emily: how's the search for a new arena going? steve: we are searching. first question is what is out there for available lands, what would it look like to build the building? we have some good confidence that we can find land and build the building at a good price.
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i'm interested in building an arena, but before all is said and done, we will talk to the staples guy. i don't think it ever makes sense to enter renegotiation with a landlord unless you have an option. so we will have an option and it could be exciting. emily: let's talk about the class you are teaching now. you are drilling down on government. steve: when i retired in early 2014, my wife and i -- she has been working for 10 plus years on the issues of child welfare and what does it take to help support children who grow up in tougher circumstances? i am retired now, she said ok, i am your partner. i said, come on. the government takes care of that, all we have to do is pay our taxes correctly. she said no, we can do better than that. i put 10 years in. so he locked onto two things. we locked in on a focus on kids
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born in communities where their probability of living the american dream, having that sense of upside is very limited. but why the government project? because my wife challenged me. i said i have to figure out what government does. how much money does it take in? how was it worki? it gave me the idea that we needed to create something like a 10k or investor presentation. we are hoping to publish early 2017. emily: what are the most troubling things you found so far about the numbers? steve: government is making good progress and improvement in many ways. i was surprised how good i felt. not perfect, but much better about government and taxes. and i came away with two big things. number one, what i call the savings programs. not the transfers and entitlements, social security and medicare. we have to put aside enough
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revenue to match. those things have lost money every year since 1980. second thing we have to do consequently, that will help us get the debt under control. the third thing which jives with what my wife said, there are communities of people. let's say you are born in the bottom 20%. if life was perfect, there'd be a 20% chance you stay in the bottom 20%. the truth is, there are communities of people where that number is over 50%. that is just not ok. every kid should at least have the opportunity. what does it take for government and people with philanthropic and civic resources? what kinds of investments in not for profit and government programs -- it has been interesting. when you look at government, a lot of things are going well, but some things are really not. emily: the work you are doing and philanthropy compares to
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what mark zuckerberg is doing. talk to me about where you are going and who you are looking to help. steve: there are some great not for profits doing good work. we are trying to find the best of those who operate nationally and support them. that's number one. number two, we are very bullish on what they call place-based strategies, where you bring a community together and challenge everybody. the schools, everybody. number three, we are going to focus on certain cities. the ones we have connection to our seattle because we live there. l.a., because we own a basketball team there, and detroit, because i grew up there. so we will have geographic focus. emily: when you joined microsoft, you didn't get a single share. is that true? ♪
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emily: you mentioned you could never make the math work on salesforce. what do you mean by that? steve: it's too expensive. it's a fine company. is it a great company? i don't know. it is a fine company. in my opinion, relative to earnings potential, it is overpriced. that's my opinion. emily: do you think they are headed for a disaster? steve: the company is headed for a disaster. in my worldview, at some point in time, the market will ask companies to make profits commensurate with their market
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cap. amazon does not, either. they have great potential and it's a great company, but when will the market demand that? i can't say. when will it demand it from salesforce, i can't say. emily: is amazon getting a pass from wall street? steve: i think they are, because people believe powerfully enough in the future of earnings. but you can't tell me over the long run that market cap and earnings are divorced. that runs against my market view. emily: we can talk about twitter because you are still an investor. when you announced the stake, it was 4%. do you still own as many shares in twitter as you used to? steve: i think it's fair to say i remain a large investor in twitter. emily: what do you think about what they're going through? steve: i think twitter is an irreproducible asset. i don't think there's any
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vehicle that let you speak broadly to amass audience better than twitter. could the product be easier to use? of course the product could be easier to use and i think that is an important area. emily: do you see twitter having a future as an independent company? steve: i think twitter would be great as an independent company and i'm sure there are acquisitions that would make sense for the company, the product and shareholders. emily: what about going private? steve: going private is a distraction. in my opinion, they would be better served putting their money into innovation than all the work you take to go private. emily: what about jack dorsey having his two jobs? steve: i think it's easy to question. people like me would like more out of twitter. the ceo is clearly divided in the way jack spends his time, as a shareholder, it would be reassuring if he was entirely focused on twitter. emily: what would you like to see? steve: i would like to see them work on the things they need to do from a product and cost structure standpoint and be open to opportunities, to be
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independent, and to make a sale if that seems appropriate. emily: when you joined microsoft, you didn't get a single share. is that true? steve: that's complicated. i had a profit share, i never had stock options. it's written on wikipedia that i made money on stock options. never had any. i had three quarters of a percentage of the company and that has been the source of my ownership since then. emily: and you still own like 4% of the company? steve: i still own what i own. that is not a thing i disclose. with the stock at 60, you have to consider how good a job satya nadella is doing. emily: bill gates and others have sold their shares. you held onto your shares. why have you held on to them? steve: i believe in myself.+++
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i owned a company that i believe in and it's worth a bunch. the full recognition in the marketplace of the value was not necessarily recognized during my tenure, but it is now being recognized in -- now. i made a great investment by holding and i have a lot of loyalty. when i'm working at the place, if i start selling, what does that mean? it means i don't believe in the future of the company. i believe people on boards or who work for companies at least in leadership positions, they should have to hold all their stock. emily: at what point do you think you might sell? steve: that will be a decision i get to make. the longer i get out of the company, the more it is not mine anymore, the more i look at the value of the stock in what we are doing philanthropic lee, these things will change. emily: how do you manage your money and investments when she get to that level of wealth? steve: i do it pretty simply, i own microsoft, i own some
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twitter, i own the clippers, and i own a bunch of index funds. emily: comparisons have been de to you and tim cook, who also took over from an iconic founder and ceo. what do you make of those comparisons? steve: if you write it down on a piece of paper, founder replaced by non-founder, more business oriented ceo, the comparison is perfect. if you say most of the revenue and profit was generated under my watch, yes. tim's watch, yes, those things are true. i think people are trying to extrapolate that to and during the tenure, new product assets were not built. in my own case, i would say we got going in the cloud, got started in hardware and build assets in machine learning and artificial intelligence. so we were building those assets. apple is a lot more secretive.
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i cannot tell you what assets he is building or not building. the jury is out on everything, but the worst thing anyone says to me is if i'm being compared to a guy who has done great job at apple, so the it. emily: what do you want to write in chapter two of steve ballmer? steve: i want to have fun. and make a civic contribution. the work i am doing to publish this data, i call them civic contributions. the work we are doing with the clippers can be important civic leave -- civically, inside the los angeles area. i don't want this to sound silly, but spectator sport itself was not really my deal. i love watching my kids play and the clippers are more similar. i know the guys, i cheer, i see myself as an energetic guy but also very thoughtful, a guy who has come from being shy and nerdy to a guy who is not. the grounding part throughout the is the ability to think through hard problems and
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hopefully make a difference. emily: steve ballmer, former ceo of microsoft and owner of the clippers, thank you for being here. steve: my pleasure. ♪
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♪ >> welcome to the latest and greatest addition of this is bloomberg. ♪ -- welcome to the latest and greatest addition of "best of with all due respect." we begin with an analysis of the presidential race, and the result that shocked much of the nation. you cannot make up this plot twist, the presidential race ended last night with one final, plate shifting earthquake. hillary


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