♪ david: when you are at harvard, you have a classmate named bill gates. steve: the guy who introduced me that you both are weird, energetic guys. you should meet. david: you are the 30th employee of microsoft. steve: i was the salesman for ibm. why? i knew how to wear a tie. david: you are the biggest individual shareholder. steve: i am a loyal dude. i still drive fords. my dad worked at ford, and i still own microsoft stock. david: do you give tips to your l.a. clippers coach? steve: no! i hear there are owners who do that, and i'm not going to be that guy. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way.

alright. ♪ david: i don't consider myself a journalist. and nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of 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 $2 billion for the team, the highest price then ever paid for a sports team in basketball. were all the other owners happy with you because you elevate the value of their franchises?

i assume they packed you on the back -- they pat you on the back whenever they see you. steve: i think there were two reactions. number one, yes. yes, this is a great investment. the second one is, oh my god. i wonder if this guy is going to throw around money. it is hard to outspend anybody else. i think there was concerned -- i think there was a little concerned about that. david: you were living in the seattle area. now you have a team in l.a. do you yell and scream like the other fans? steve: i do, in fact. i make it to a lot of games. it is fun to be enthusiastic. i enjoy it. things are most fun when it is your kid playing. second, this owner thing is pretty good because you have a sense of the dynamics of the guys. david: do you go into the locker room and say, well, you could do this better? do you give them many tips? -- give them any tips?

steve: i have three principles. don't talk to anybody after a loss. that is number one. coach, yes, but not players. number two, pump guys up. usually with texts after a gain. after big games in the locker room when we lose or win, our last game of the season, in the locker room. i go to training camp and give a little speech at the beginning of the year, a pump up. david: you have coached young children in basketball. do you ever take the tips and get them to your l.a. clippers coach? [laughter] steve: no! i hear there are owners that do that, and i'm not going to be that guy. david: you were famous when you were at microsoft for pumping up people. when you are watching the game, do you yell and scream? steve: i yell and scream. i become a little more moderate so i preserve my vocal cords. it certainly can be a problem. let's go, let's get these guys.

it can be in issue. -- it can be an issue. david: what is more fun, running microsoft or the l.a. clippers? steve: running the l.a. clippers. [laughter] steve: running microsoft was a ton of fun. it was inspirational. we were working on stuff to literally transform the world. i got a lot out of that. the intellectual challenges were strong. i love that. i thought i had unique value to add. but just for fun, fun, fun, it is no stress running a basketball team, except you really want to win. ♪ david: let's talk about your background. you grew up in the trade areas. your parents were immigrants. where were your parents from? steve: my dad was an immigrant from switzerland, left after world war ii, worked as an interpreter at the war trials in nuremberg. they were looking for german speakers who were not german citizens. they were afraid of that. he met his sponsor, one of the gis's dads who he had worked

with as an interpreter. i don't think he finished high school. he was never precise on that. he certainly never went to college, but he worked at ford. my mom's parents came from russia at the time. david: you did pretty well in high school. you were the valedictorian of your class. you went to harvard. at harvard, you have a classmate down the hall named bill gates. steve: it was interesting, because the guy who introduced us said you guys are both weird, energetic guys. you should meet. so we did. the time we met was just about the time he was starting microsoft, plus or minus a month. that clearly was more than this is going to be another random guy. a guy starting his own company. it was his second company. he had done one in high school. he was clearly a special guy. i got to know him pretty well. david: you graduated magna cum laude and decided to go to procter & gamble? steve: i did.

proctor and gamble. david: proctor and gamble gets a lot of talented people in their young training programs. did anyone famous work alongside you? steve: funny you should mention that. a number of people did. when i was there, scott cook was there. jeff immelt, who ran ge. he and i worked together on the blueberry muffins and snack cake mix. we were the dynamic drivers of brownie mix sales. he was around. meg whitman came right after i left. it really was a great place. david: you go to stanford and are going to get your mba. then you decide to drop out and go to a tiny startup in seattle called microsoft. what did your father say about that? steve: he was apoplectic in a way. he did not try to stop me. but i remember when i called home and my dad said, what the heck is software?

he had been involved installing wang systems, old wordprocessors. my mom said, why would a person never need to computer? you would say that is crazy, but it was not crazy in 1980. they said, we hear you. if it doesn't work out, you go back to business school, right? i said, right. then i never came back. steve: -- david: the summer ends and you stay there and ultimately become next to bill gates and paul allen the biggest shareholder. what were the perks as you work your way up? steve: i started off as the assistant to the president. i was bill's assistant. chief cook and bottle washer. i set up the accounting. there was some, but we needed it professionalized. i hired everybody. when ibm came the first time about their personal computer, i became the salesman on ibm. why? i knew how to wear a tie.

i was about the only guy around the place. bill said, you have a tie and suit. why don't you come to the meeting? david: when did you realize this is not a little startup that is going to be one company in the software world. it's going to be a dominant company? steve: late 1980's for sure. i knew the company would be something. i remember when andy grove said one day there will be 100 million computers a year sold. bill and i looked at each other nuts.aid, he is there will never be 100 million. now there are 300 million plus. david: what did your mother and father say at this point? steve: they got comfortable when we went public. they knew i would not be broke. bill offered me a decent starting salary. $40,000, $50,000. it looked good in that day and age. they knew that was a good choice. my dad still have a little skepticism.

-- my dad still had a little skepticism. there were all these people and nothing physical. he said, what do all these people do? there is no product. what do they all do? that was a confusing point. he is a smart guy, but he always asked me that. david: you are the biggest individual shareholder of microsoft? steve: that's right. david: how come you didn't sell more shares? bill gates and paul allen sold a lot of their shares? steve: when i was ceo, somehow it didn't feel right to me. i should stay invested. i should stay there. but i am a loyal dude. i still drive fords. my dad worked at ford, and i still own microsoft stock. ♪

♪ david: so in 2000, you become the ceo. bill decides to sort of retire and becomes the chief software architect, but no longer ceo.

you now can run the place. were you surprised bill decided to retire? steve: i was surprised. i was surprised. bill asked me to be president in 1998. i said fine. that was another number two position. and i was fine with that. and bill came to me and said, will you be ceo? i asked him, do you want me to beat ceo, or do you want me to be a figurehead? just tell me. he said i want you to be ceo. i would say, was i ceo? because bill stayed working every day until 2008. i would say i did not feel like a total ceo, probably, until bill was not working every day in 2008. because there was a lot of shared responsibility. david: talk about the things that happened while you were ceo. you moved into video gaming, xbox. steve: we were saying, what is the path for software, if you will, into the living room? the only path that was clear at

the time was the video gaming systems. there was no way to be in the videogame business and not build the hardware. we had been in the hardware business in a small way. we had our mouse products and a few other products along the way, and frankly, i think we in many ways should have done more hardware sooner. david: you made another investment that was criticized , an investment company called facebook. i think you invested $300 million or so. why did you do that? and did you regret trying not to buy the whole company? steve: i did regret not buying -- i did try to buy the whole thing. zuckerberg came to seattle. we met there. i put a concrete offer on the table. ross perot tried to buy microsoft from bill gates in 1979, and bill said no. founders have a lot of love and passion around their stuff. even though facebook was tiny, i think it was 2009, and i offered

$20 billion. something like that. mark had absolutely no interest. david: a couple of other businesses, the smartphone business that apple has more or less perfected, at least in the united states. you were skeptical that would be a great business. do you think microsoft could have gotten into that business earlier? steve: yes. we could have and should have. we should have gotten into that business, and i believe that. david: one of the other things that happen during this time when you were ceo was cloud computing. your neighbor, amazon, built this big business under your nose. you surprised they became so big in cloud? steve: they had more success than i anticipated. i did not sell them short. but they have had more success. here is why i think i was completely dubious. it is very hard sometimes for a big company to do something very different. i call it doing a second trick. at the time i would call amazon pony.trick

it was doing this retail stuff, doing an awesome job. but you don't get a lot of companies who do a second trick. we started this thing called azure and office 365. and my successor has taken the thing to very much new heights. david: right before you left, you tried to buy and it -- and ultimately, they completed the nokia acquisition. that was an effort to get into smartphones. that didn't work out. why do you think it didn't work out? steve: i think there were two reasons. number one, maybe it was late. number two, after i left, 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 in it. david: ok. so you ultimately decided to leave. and your successor is satya nadella. were you surprised when he was

selected? 2 steve: no/ . he was the recommendation i made. i thought he was the candidate to replace me, which is why we moved him into running one of the big divisions. i'm glad he got the job, because he has done a great job. david: when you were there, you dramatically increased sales and earnings were higher. the stock price did not go up. why do you think there was not a correlation between stock price, earnings, and revenue? steve: two factors. number one, i took over 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 by the way, a judge orders the breakup of microsoft. that happens within several months of me taking over. you have to build back up. that is number one. by the end of my tenure, i had a certain reputation with wall street. and not that favorable. not about my performance, but

certainly people, this guy is a greater, he is going to keep doing this thing. but are all these new things going to break through profit wise? number two, mostly people on wall street said that i overinvested and was spending too much money. the only chance to reposition satya started. he has done a good job of repositioning the company in investors minds. david: the stock has gone up, and your net worth has gone up as well. how can you did not sell more shares? bill gates and paul allen have sold a launch amount -- a large amount of their shares. steve: when i was ceo, i did not think it was right. it did not feel right to me. even what i have done to diversify at that time, it was not like i was going to go broke if the microsoft stock did poorly. it wasn't doing poorly.

and i ran the company. and people knew i already had enough money. i should stay invested. i should stay there. when i left, i still love the company. i did a little bit of stuff to diversify lightly. i put some money aside for charity, but i am a loyal dude. i still drive fords. my dad worked at fort, and i still own microsoft stock. david: you are well known for very visible and vocal expressions of your thoughts. steve: it turns out i have a knack. part of that is getting in front of your troops and pumping them up, and tell a story. at the end of the day, i can get into the game and be verbal and vocal. [cheering] steve: developers, developers, developers, developers, developers. developers, developers, developers, developers, developers.

[applause] steve: yes. [applause] ♪ ♪

david: so you retire at 57. what did you decide you wanted to do when you left? steve: i had not really given it a ton of thought until i left. i had this hard-core notion. just give it all for microsoft until i leave. so i leave, and what am i going to do? well, owning a sports team was attractive. 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.

my wife, who had been involved in philanthropic stuff, focused in on foster kids and disadvantaged kids in the state of washington. she said, come on, dude, time. you have to get involved. so i did. at first, i said the government takes care of these problems. and she said, no, philanthropy has a role, but it intrigued me the government does help disadvantaged kids. i had a hard time finding the numbers, which led to me calling -- starting this thing called usa facts, and between the clippers and having a good time, exercising and playing golf, my life is pretty full. david: i don't play golf. because my theory was if i had a meeting with you and you thought i was confident and intelligent and you saw me on the golf course, you it would destroy the illusion of

confidence. [laughter] steve: you are probably right, and i still play. david: let's talk about usa facts. what is this now doing? steve: i want a consolidated view of what government does. where does the money come from? where does it go? and by the way, what are the impacts? if we are transferring wealth , what does the quality of life look like? we are investing in education. what is the quality of the outcome? how well are our kids doing? david: what are your philanthropic goals in terms of the areas you want to focus on? steve: we are single-purpose. what can we do to improve the chances that kids born at the bottom of the economic totem pole, their parents are, move up economically? you will always have people at the bottom of the economic totem pole. it should not be the same people all the time. people should be moving out. -- moving up. people should have a shot at the american dream, which is the chance to do whatever you want to do. that is not true for a lot of kids.

when they are born, their probability of staying where they are economically is very high. i don't think that is ok. there are a lot of reasons. people point to education. education is part of it. but there are a lot of reasons why kids can't get an education. i think it is important to look at that chain and find, not only not-for-profit to invest in, we think it is important to stimulate the right behaviors by government and the right spending by government, because it can make a huge difference. david: if you look back on your extraordinary career at microsoft and now what you are doing, any regrets? or are you happy with the way everything worked out? steve: i am pretty happy with the way things worked out. i could go back and there are decisions i would make differently if i was at microsoft, but if i look at the span of work, we went from a company with $2.5 million in sales and 30 people to 280,000 people, $80 billion in 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 most of the same friends as i did, which i feel very good about that. i am in a very good place in my life right now, probably in a way the best ever, although i would not trade out anything i did in the past, at least at this age. i like being a little less busy. that is good for me. i am pretty pleased. david: 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? steve: i was a very shy kid. very shy kid. i was a shy kid when i got to harvard. then i built my confidence because i was doing things and being successful. i was shy when i got to business school. the first day i started a procter & gamble, my roommate said, hi. my name is steve ballmer. my palms are so sweaty because i

am nervous. so a shy kid. but i got better and better. i develop some confidence in public speaking. 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 telling a story. basketball is a weird environment. of course, i don't have a lot of credibility. i'm an owner, not an expert. but at the end of the day, i can get into the game and be verbal and vocal. david: what would you say is the most important characteristic to be a good leader? steve: commitment. you really have to have your head in the game and be committed to be a good leader. there are two parts to leadership, one is leading people. that is about commitment and people understanding you have commitment. the other part of leadership, which does not get talked about much, is you have to be a leader of ideas. the worst thing you can do is say, let's go. you point that way, and the

truth is you should've 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. david: if 25 years from today you are looking back on your life, what would you want people to say was your legacy, what you contributed to our country? steve: you ask a very specific question. what have i contributed to our country. what i hope we do is make some difference in the lives of kids. that is number two. number one, we democratized computing. putting that kind of power and capability for people to thrive, to investigate, to be smarter, 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 philanthropic ally, i hope makes a big

difference. it is hard to make a bigger difference than being involved in the popularization of computing. david: and the five nba championships you will have one will be important as well? steve: that is a zero-sum game. when we win them, somebody else does not win them, but in l.a., that would be a big contribution. ♪ >> i am scarlet fu, this is

"bloomberg etf iq," where we focus on the risks and rewards offered by exchanged rate funds. ♪ scarlet: primed to take stock. will the -- investors are sticking out positions in financials, often leveraged etf's. rattling the active and passive world. where does a manager fit in, and where does he see the value of smart well you -- smart