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00:00When you're in Harvard you have a classmate named Bill Gates the guy who introduced this says you guys are both kind of weird energetic guys you should meet and you're the 30th employee of Microsoft. I became the kind of sales man on IBM. Why. I knew how to wear a tie. You're the biggest individual shareholder of Microsoft. I'm a loyal loyal dude. I still drive Fords. My dad worked at Ford and I still own Microsoft stock. Do you ever take any tips and give them giving to your L.A. Clippers coach . No. I hear their owners who do that and I'm not going to be that guy. Would you fix your time please. People wouldn't recognize me if my time was fixed but just things this way. All right . I don't consider myself a journalist. Nobody else would consider myself a journalist. I began to take on the life of being an interviewer even though I got a day job running a private equity firm. How do you define leadership. What is it that makes somebody tick . As we sit here today you are the owner of the L.A. Clippers . Let's talk about how you became an owner of the Clippers So you retired in 2014 from Microsoft as a CEO and the Clippers were more or less going to be available. You paid two billion dollars for the team the highest price then ever paid for a sports team in basketball where all the other owners happy with you because you elevated the value of all their franchises and I assume they paid you on the back whenever they see you. Now when I bought that I think there were two reactions though about the team. Number one yes as you describe yes our teams with this has been a great investment. The second was Oh my God I wonder if this guy is going to throw money in a way no way . That's good. And the league has plenty of rules so you can own me. It's it's hard to outspend anybody else. I think there was a little concerned about that. So you were living in Chicago area. Now you have a team in L.A.. Do you go down there and yell and scream like all the other fans. I do in fact we have 41 home games that probably made 38 this year and maybe another seven away game. So I make it to a lot of games and it's fun to be enthusiastic. I enjoy it. You know things are most fun when it's your kid playing second most. You know this owner thing is pretty good because you have a sense of the dynamics of the guys . So you go into the locker rooms and say well you know guys could do this better that you tell him anything in the locker room or you give me any tips. I got three principles. Number one don't talk to anybody after a loss. That's number one . Coach. Yes but not players. Number two you know pump guys up which I do usually with text after a game or sometimes a go doctor somebody after big games in the locker room when we lose or win our last game of the season in the locker room and I go to training camp at the beginning of the year give a little speech a little bit of a pump up I guess you're right. But you have coached young children in basketball. Do you ever take any tips and given given to your L.A. Clippers coach. No you know I hear their owners who do that and I like to be that guy. Well you're famous when you were at Microsoft for pumping up people you have a voice that projects and when you're watching the game do you yell and scream like anybody else. I yell and scream I become a little more moderate. So I preserve my vocal cords because you know it certainly can be a problem when you're there . Let's go let's get these guys. Yeah it can be an issue. So what's more fun running Microsoft or running the L.A. Clippers running the L.A. Clippers running Microsoft was a ton of fun and it was you know it's kind of inspirational because we were working on stuff that literally transformed the world and I got a lot out of that and the intellectual challenges were strong and I loved that and I thought a unique value to add but just for fun fun fun. There's really no stress running a basketball team except you really want to win let's talk about your background. You grew up in the Detroit area. Your parents were immigrants. Where were they from. My dad was an immigrant from Switzerland he left Switzerland after World War Two worked for the U.S. military as an interpreter at the war trials at Nuremberg because they were looking for German speakers who were not German citizens because they were afraid of that. And then he met his sponsor was one of the guys ise dad who he had worked with as an interpreter. I don't think he finished high school. He's never precise on that certainly didn't go to college but he worked at Ford. My mom actually is not an immigrant. Her parents were and they came from. I guess it was probably Russia at the time. OK. So you did pretty well in high school your valedictorian of her class. Yes. You went to Harvard and then when you're in Harvard you have a classmate that's down the hall named Bill Gates. It was interesting because the guy who introduced this says you guys are both kind of weird energetic guys you should meet. So we did. And the time we met was just about the time he was starting Microsoft plus or minus a month. I want to say. And that clearly was more than this is just going to be another random guy. I mean a guy starting his own company it was the second company a dumb one in high school. He was clearly special a special guy and I got to know him pretty well. You graduated magna cum latte and then you decide to go to Procter and Gamble. Did Procter and Gamble now very often Procter and Gamble gets a lot of very talented people in their young trading programs. Did anybody famous work alongside you. Well funny you should mention that a number of people did when I was there Scott Cook who started in to it was there Jeff Immelt who ran G.E. he and I worked together on Duncan Hines Brownie blueberry muffin and moist and easy snack cake mix. We were dynamic drivers of brownie mix sales. So he was a he was round Meg Whitman came right after I left. It really was a great a great place. You go to Stanford and you're gonna get your MBA and then you decide to leave and drop out of Stanford to go to this tiny startup in Seattle where he called Microsoft. What did your father say about that. Oh he he was apoplectic in a way. I mean he didn't try to stop me but I remember when I called home and my dad said What the heck is software. He'd actually been in vaults installing Wang systems or word processors but what software. And then my mom said why would a person ever need a computer. Now today you'd say that's crazy but one crazy in 1980. But they said OK OK we hear you. We hear you. If it doesn't work out you go back to business school right. Right. That never came back. So the summer ends and you stay there and you're the 30th employee of Microsoft. And ultimately you become I guess next to Bill Gates and Paul Allen the biggest shareholder. What are the jobs you had as you work your way up. Well I started out as assistant to the president. I was Bill's assistant basically chief cook and bottle washer. So I set up the accounting which there was some that we needed to professionalize. I was the H.R. department and I hired everybody when IBM came. The first time about their personal computer I became the kind of sales man on IBM. Why I knew how to wear a tie. I was about the only guy around the place that Bill said Well you have a guy in a suit. Why did you come to the meeting. So when did you realize this isn't a little startup that's going to be a nice little company in one part of the software world. It's going to be a dominant company in the world. By the late 80s I would say for sure I knew the company is going to be something. I remember when Andy Grove who when I ran Intel said Someday there'll be a hundred million computers that year sold Bill and I looked at each other and said he's nuts. He's not going to be one hundred million these days. There's 300 million plus computers all that year and your father and mother what did they say at this point. Yeah they got they got comfortable. When were you going public. They knew I wasn't gonna be broke. Bill actually offered me a decent starting salary with either 40 or 50 grand. I can't remember which looked good in that in that day and age so they knew that was a good choice. Now my dad still had a little skepticism . There were all these people and there was nothing physical you could get your what are all these people do. There's no there's no product. What did they all do. So that that was a confusing point. I mean he's a smart guy but he he'd always ask me that every time we went through the campus. You're the biggest individual shareholder of Microsoft is that right. Yeah that's right. So how come you didn't sell more shares because Bill Gates and Paul Allen have sold a large part of their shares . Well when I was CEO I just didn't think it was right. Somehow I didn't feel right to me I should stay invested I should stay there. But I still you know I'm a loyal oil. Do I still drive Fords. My dad worked for Ford and I still own Microsoft stock . So and in the year 2000 you become the CEO. Bill decides to shore up try to retired became the chief software architect but no longer CEO. So you now can run the place where you were surprised that Bill decided to retire. I was surprised. I was surprised Bill it asked me to be president in 1998 Knight said fine and that was another number two position and I was fine with that and then Bill came to me and said hey will you be CEO and I. I asked him Do you really want me to be CEO or do you really kind of want me to be a figurehead. Just just tell me. He says I really want you to be CEO and I would say was a CEO. Well because Bill you know stayed working every day till about 2008. And I would say I didn't feel like a total CEO probably until Bill wasn't working there every day in 2008 because there was a lot of shared responsibility. Talk about some of the things that happened while you were CEO. You moved into video gaming I guess x box. Yeah. We were saying what's the path for software if you will into the living room. And the only path that was really clear at the time was the video gaming systems. There was no way to be in the video game business not build the hardware. We'd been in the hardware business in a small way we'd had our mouse product a few other products along the way . And frankly I think we probably in many ways should have done more hardware sooner. While Uber and other investment that time that was actually criticized it was an investment in a company called Facebook. I think you invested about three hundred million dollars or so and why did you do that and did you regret not trying to buy the whole company. I did try to buy the whole thing. Zuckerberg came up to Seattle. We met down there. I put a concrete financial offer on the table but it's a little . Ross Perot tried to buy Microsoft from Bill Gates in like 79 and Bill said no. Founders really have a lot of love and passion around their stuff. And even though Facebook was tiny I think was 2009 and I offered a 20 plus billion dollars something like that. And Mark had absolutely no interest. OK so a couple other businesses they think the smartphone business that Apple has now more or less perfected at least the United States. You were skeptical that that would be a great business. Do you think Microsoft could have gotten into that business earlier . Yes we could have and should have we should have done. In my opinion we should have gotten in the hardware business and that's my I blew that one of the other things that happened during this period of time when you were the CEO was cloud computing your own neighbor Amazon built this big business under your own nose. Were you surprised that they had become so big and cloud they've had more success than I anticipated I didn't sell them short but they have had more success here's here's why . I'm not saying I was completely dubious it is very hard sometimes for big companies to do something very different. I call it doing a second trick at the time I would call Amazon a one trick pony it was doing this retail stuff it was doing an awesome job but to do a second trick you don't get a lot of companies who do that. That doesn't mean Microsoft's out of the game. You know we started this thing called Azure and Office 365 and my successor Satya has taken that thing to very much new heights and right before you left you tried to buy and you did ultimately after you left. I think they completed the Nokia acquisition and that was an effort to get in those smartphones that didn't work out. What do you think it didn't work out. I think out I think there were probably two reasons. Number one maybe it was late in number two after I left while the company went ahead and bought it. I don't think there was the same level of enthusiasm at the board level and management level for scaling up and investing there. OK. So you ultimately decided to leave and your successor is Satya Nadella. Were you surprised when he was selected. No no he was the recommendation that I made use the recommendation that Bill Gates made. I thought he was a candidate to replace me which is why we moved him into his last job which was running one of the big divisions and I was glad he got the job because he's done a great job . Now when you were there you dramatically increase sales and earnings were dramatically higher the stock price didn't go up . Why do you think there wasn't a correlation between the stock price and earnings and revenue. Probably two factors. Number one I took over at least at the worst time if you want your stock price to go up. I came in right at the heart of the dot.com bubble. Everything was sky high. The bubble breaks and oh by the way judge ordered the breakup of Microsoft that happens within several months of me taking over and things fall down. And then you have to build backup. That's number one . By the end of my tenure I had a certain kind of reputation with Wall Street and not not that favorable not about my performance but certainly people hey the guy's a grinder he's going to keep doing this thing but are all these new things going to actually break through profit wise. And number two I think mostly people on Wall Street would have said I overinvested I was spending too much money and the only chance to reposition the company really came when Sacha started. And you know he's done a good job of repositioning the company and investors minds. Since you've left the stock has gone up a fair bit and your net worth has gone up a fair bit as a result. You're the biggest individual shareholder of Microsoft is that right. Yeah. That's right . So how come you didn't sell more shares because Bill Gates and Paul Allen have sold a large part of their shares. Well when I was CEO I just didn't think it was right. Somehow I didn't feel right to me. It's not like I'm even with what I had done to diversify at that time. It's not like I was going to go broke if the Microsoft stock does poorly. And it wasn't doing poorly . And I ran the company. If I didn't believe and people knew I already had enough money I should stay invested I should stay there. When I left I still want the company. I did a little bit of stuff to diversify slightly I put some money aside for charity but I still you know I'm a loyal loyal dude. I still drive Fords. My dad worked at Ford and I still own Microsoft stock. You are well known for very visible and vocal expressions of your thoughts. It turns out I have something of a knack and part of that is getting in front of your troops and pumping them up and tell a story. At the end of the day at least I can I can get into the game and be verbal and both developers Developers developers DEVELOPERS DEVELOPERS DEVELOPERS DEVELOPERS DEVELOPERS DEVELOPERS DEVELOPERS so you retire off as the CEO at the age of 57. What did you decide you wanted to do when you left. I had not really given it a ton of thought until I left. I again had this sort of hardcore notion I supposed to just give it all for Microsoft until they leave. So I leave and what am I going to do. Well owning a sports team was attractive. So within a few weeks I went and visited Roger Goodell and Adam Silver the NBA and NFL commissioners. I thought that would be a fun thing to do. And my wife who'd been involved in philanthropic stuff really focused in on foster kids and disadvantaged kids and stayed in Washington. She said Come on dude time you got to get involved . So I did it first. I said C'mon government takes care of these problems . And she said no philanthropy has got a role. But it did intrigue me to what degree government really does help disadvantaged kids. I had a hard time finding the numbers which led to me starting this thing called USA facts and between USA facts our philanthropy the Clippers and having a good time which in my case means exercising and playing golf my life's pretty full OK. I don't play golf because my theory was if I had a meeting with you and you thought I was competent intelligent and you saw me on a golf course it would destroy the illusion of confidence. So I guess I don't play. But you're probably right. And I still play. So let's talk about the organization you started USA facts. How did you get involved in this idea and what is it now doing. So I said I really want a consolidated view of what government does. Where does the money come from. Where does it go. And oh by the way also what are the impacts if we're transferring wealth what is quality of life look like we're investing in education. What is the quality of the outcome how how good are or how well are our kids doing. What are your philanthropic goals. Would you say in terms of areas you want to focus on with the wealthy you have. Yeah we're single purpose. What can we do to improve the chances that kids born at the bottom of the economic total pool. Their parents are move up economically. You're always going to have some people who are at the bottom of the economic totem pole. It shouldn't just be the same people all the time. People should be moving up. People should have a shot at the American dream which is the chance to do whatever you want to do and that's not true for a lot of kids when they're born their probability of staying where they are economically is very very high. I don't think that's OK. There are a lot of reasons people point to education. Education is a part of it. There are a lot of reasons why kids can't get an education. And I think it's important to take a look at that chain and then try to find not only the not for profits to invest in. We think it's very important to try to stimulate the right behaviors by government and the right spending by government because it can make a huge difference. So if you look at back at your extraordinary career at Microsoft and now what you're doing. Any regrets or if you're happy with everything the way it worked out. I'm pretty happy with the way things worked. I mean I can go back and there's decisions I'd make differently if I was at Microsoft . But you know if I look at the span of work we went from a company that had two and a half million in sales and 30 people to a company and had one hundred thousand people and 80 billion roughly had sales and lots of profit. I can feel good about that even though there were mistakes. I started out the process with a lot of friends. I still have mostly the same friends as I did which I feel very good about that I'm in a very good place in my life now. Probably in a way the best ever. Although I wouldn't trade out anything I did in the past at least at this age. I like being a little less busy. That's good for me. I'm pretty pleased. So as a leader you are well known for very visible and vocal expressions of your thoughts. Is that a style you consciously adopted or it just happened that way. I was a very very shy kid very shy kid. I was a shy kid. When I got to Harvard and then I built my confidence as my as I built it because I was doing things and being successful I was shy when I got to business school. When I got to Procter and Gamble first day I started guy who wound up my roommate. He said it was like this. Hi my name's Steve Ballmer. My palms sweaty because I'm so nervous and so shy kid. And then I got better and better and I developed some confidence in public speaking and and it turns out I have something of a knack and part of that is getting in front of your troops and pumping them up and tell a story and I will do my best Well it's a weird environment because of course I don't have a lot of credibility. I'm an owner. For God sakes I I'm not an expert but you know at the end of the day at least I can I can get into the game and be verbal and vocal. What would you say is the most important characteristic to be a good leader. Commitment. You really have to have your head in the game and be committed to be a good leader. There's two parts of leadership. One is leading people and that's about commitment and people understanding you have commitment. The other part of leadership which doesn't get talked about much is you have to be a leader of ideas. The worst thing you could do both for your people in general is to say let's go. And you point that way and the truth is you should have gone that way. So leaders have to be leaders of ideas. The ideas compel the people but then the ideas have to be right and you have to stay committed if 20 years from today or twenty five years of that you're looking back on your life what would you want people to say was your legacy what you contributed to our country well yes the very specific question. What would I contribute to our country. What I hope we do is make some difference in the lives of kids. That's number two. Number one hey we democratized computing and putting that kind of power and capability for people to thrive to investigate to be smarter to to create more. I feel immense pride about that. I put that number one. I think that was not only something that affected this country but the world. Whatever we do philanthropically I hope makes a big big difference. It's hard to make a bigger difference than being involved in the popularization of computing and the five NBA championships you will have won that will be important as well. Right. Yeah that's kind of a zero sum game when we win them somebody else does it with them. So it's a little harder to say it's a broad contribution but in L.A. that would be a big contribution .

The David Rubenstein Show: Steve Ballmer

Steve Ballmer, former chief executive officer of Microsoft Corp. and current Los Angeles Clippers owner, talks about meeting Bill Gates at Harvard, his early years at Microsoft and subsequent rise to CEO in 2000. He also discusses philanthropy and his views on leadership with David Rubenstein in the latest episode of "The David Rubenstein Show: Peer-to-Peer Conversations," taped April 26. (Source: Bloomberg)

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