Every year, Bill and Melinda Gates write a letter describing what they see in their philanthropic efforts around the world — the opportunities, the challenges, and the things that need more attention. (For 2015’s letter, Bill guest-edited The Verge.) This year, that letter is focused on things that have surprised the pair; even as the news is dominated by headlines of scandal and conflict, Bill and Melinda are focused on the many areas around the world in which innovation is driving surprising positive change. “Using innovation to improve equity is what brings it all together,” Bill says.

Bill came on The Vergecast to talk about the letter, his work as a philanthropist, and how he and Melinda choose which initiatives to focus on with their foundation’s impressive team and enormous resources. It was a wide-ranging conversation, matching the letter itself: we touched on everything from measuring the contributions of women to data privacy to the rise of nationalism, and landed on a discussion of just how we should design a tax system around billionaires. It was a pretty deep 33 minutes.

You can listen to the entire interview on The Vergecast, and read the full transcript below, which has been lightly edited for clarity.

I want to start with an incredible and difficult question. The last time you and I spoke, in 2015, I said, “What phone are you using?” And you said, “A Samsung Galaxy loaded up with Microsoft apps.” So I’m going to ask the same question: what phone are you using right now? What’s your daily driver phone?

It’s still the same. It’s a Samsung phone with Android, but lots of Microsoft applications.

Are you a Note user? Do you use a stylus?

No, not on the phone I don’t. I use it more on my Windows PC than most people do, with OneNote Ink.

This year, [the annual letter covers] a pretty wide range. You’ve got everything about getting better data on the lives of girls, which I think is really important, to the rise of nationalism. There’s a section about making better toilets. Very basically, why do you write a letter like this? Who’s your audience, and how do you pick the topics you want to focus that audience around?

The main driver is what Melinda and I have seen through our foundation work. The foundation, in all the areas it works in, is trying to have better measurement, which is where you see the sexist data. It’s trying to drive innovation, so things like new toilets. Of course where to help kids in school.

This work takes us all over the world. We get to meet lots of innovators, study lots of numbers about what’s going on. This year, we picked nine things that were surprising to us, mostly positive things.

Do you think that spread is too much? There are some themes, and I want to talk about those, but it’s a pretty wide spread. Do you ever think you’re trying to do too many things? At some point, what you do is spend dollars. Could you spend your dollars in a more directly focused way?

We do have a significant-sized foundation. It’s got two dominant focuses: one is global health work and the other is the education work in the United States. Because we’ve been lucky enough to have the resources I got from Microsoft’s success, and from Warren Buffett’s success at Berkshire Hathaway, we can go in a pretty deep way in those two focus areas.

“We have an incredibly strong staff that’s got the same type of analytic power and skills as Microsoft had at any time.”

We’re the biggest spender on malaria and tuberculosis, and almost all the infectious diseases. We have an incredibly strong staff that’s got the same type of analytic power and skills as Microsoft had at any time.

Now, agriculture, or toilets, or financial services — as we’ve worked on global health with the poor there’s a few things that we decided that were extremely catalytic. Some, like financial services, rely on digital innovation and the prevalence of phones. So that kind of harkens back to the work both Melinda and I did at Microsoft. Some are things that no one else was doing, like the reinvention of the toilet. We were ambitious about engineering challenges, and we were able to draw in dozens of universities to propose designs that solve that problem.

I like the breadth. Using innovation to improve equity is what brings it all together.

The last time you and I spoke, in 2015, your letter was focused on looking into the future, looking into science and engineering. This year it almost seems like you’re pointing at things that should be obvious, but aren’t, at a global scale. You’re talking about Africa being the youngest population on the planet. You’re talking about the frenetic place of construction around the world — the way you frame it is, “We’re building one New York City every month for the next 40 years.”

But I’m very interested in the stats you say we don’t know: we don’t have great data around the lives of women and girls. Tell me why you think we need that data.

In all the work we do, the idea of gender equity is part of it. So when we go out and look at innovating with crops, [it’s] figuring out which of the crops the women are involved with. It’s that if we get cash into [women’s] hands, they tend to use it for school fees and nutritious food, more than if the father gets it.

“Using innovation to improve equity is what brings it all together.”

A lot of data hasn’t been broken down. Who controls the household wealth, and how much are the women having to do work — that doesn’t show up in GDP statistics. The educational data, of course, shows still a significant gap [in Africa]. The cellphone ownership data shows a big gap. That’s important because we’re trying to use the cellphone as a tool of empowerment for things like financial services.

[Verge deputy editor Liz Lopatto] pointed out to me that women are often saying these things, but they’re just not being measured or captured correctly. So the criticism is that the lack of data is based on the idea of who is collecting it. Melinda actually says in the letter, “What we choose to measure is what we choose to value.”

Does having the data help you go out and make a better argument? Does it help you decide how to allocate your foundation’s dollars? If the criticism is women have been saying these things are problems for a long time, what does actually quantifying that enable you to do?

For example, in our agricultural strategy, we’re taking the crops that women are involved with. Women are very involved in chickens, [they] can sell the eggs, or keep the eggs in the household, which has been shown to have huge nutritional benefits. Even though cows are bigger in dollar terms, milk and meat, our relative focus on chickens is much higher because of how they benefit the woman in the household.

Likewise, when we look at our financial services work and say, “Okay, is it going well?” we look at usage. We make sure we’re seeing not only overall usage, but also how much women are using it. It really does drive the things we do. Some things like tools for reproductive health, reducing maternal mortality, those are just inherently helping women. Other areas like savings or agriculture, you actually have to understand what is most impactful for women by seeing the numbers.

Measurement is a very basic thing, but when we entered the global health field, the measurement was actually very weak. Today, it’s the exemplar where through the Global Burden of Disease project, you can study the trends and the causes of death across all the countries in the world.

Now, in other areas, like education or savings, we’re trying to get the data sets to be as rich as over the last 20 years we’ve managed to achieve with our partners in health.

It’s interesting that this sort of duality in the letter, you’ve got this focus on women, and you’re saying if we measure them that it’s obviously clearer improvements. We can see patterns that we haven’t seen before. Then on the flip side, you write about an experience you had sitting with a group of young boys learning to process anger.

Do you see that connection as clearly as I do, that we need to improve both the lives of women by measuring their invisible contributions, and then on the flip side, helping young men process the roles and emotions that they need to have in the world?

Absolutely. The letter wasn’t long enough, but the gender data — although we framed it as seeing where there’s deficits for women — in many categories you see deficits for men. In educational achievement in the United States, more women are going to college. Less women are dropping out of high school.

So the gender data doesn’t always say, “Okay, we’re not paying enough attention to women.” Probably 80 percent of the time that’s the deficit it will show. But when you look at young black males, particularly where there’s no father in the household, the drop out rates, the rates of eventually ending up in jail are extremely high. Societally, that’s really unacceptable.

That’s where some brilliant people created this Becoming a Man counseling activity. In the case that I attended, it was young black males are coming in multiple times a week with this counselor who really understands the situation they’re in. It’s really connecting with them about, “Hey, you should have an image of yourself as being under control. The outcomes if you stay in school are way better than if you don’t.”

It was great to see that rapport between the peer group and that amazing counselor.

You actually participated in one of these.

That’s right. It was, I thought, a pretty profound day. It certainly touched me, that this idea of anger and the males in general, young males in particular, does anybody talk with them explicitly about, “Yes, anger is this natural thing, but how do you channel it? Do you pause and think?”

That’s not teaching somebody math, and yet it’s going to be a pretty important skill as you’re in high school.

“‘Anger is this natural thing, but how do you channel it?’ ... That’s not teaching math, and yet it’s pretty important.”

So all these boys were opening up about how they feel anger and sometimes they deal with it well, and sometimes they don’t. I thought that it was amazing to get that out there as a discussion. Of course, these kids have very tough situations, a lot of stress in their lives, but the results from this counseling group in terms of keeping kids out of gangs and eventually a lot less ending up in jail or dropping out, is pretty phenomenal.

You also write about the rise of nationalism. You framed it as the nationalist case for a globalized world, but when I read about young men being angry, I think about our social networks. We literally write about social networks and democracy every day. Do you think there’s a connection between that anger connectivity in the world and the rise of nationalism?

Well, the populist wave is slightly different in different countries, but some form of it is being seen in a lot of the upper-income countries.

Understanding the idea that being able to just find articles that you agree with, or that show how the group you are in is right, and the other group is just completely corrupt and wrong, and the leader of that group is particularly awful — the polarization in politics, whether that’s come partly because of these digital communications tools and is there some way you can moderate polarization without giving up the benefits of those tools? I think that’s a very important discussion that we’re having.

The creativity about that, what the solution looks like other than being mad — “Oh this person is responsible for this” — I haven’t seen as much recommended that we move forward on it.

But yes, I worry that the digital tools have contributed to polarization.

Specifically, we can’t go a day without Facebook being in the news for some reason or another. Do you worry as you connect the world, as you talk about putting mobile phones in the hands of poor people and unlocking all of these capabilities, that tools like Facebook, that the networks they connect to, that disinformation that might go out to them? Does that factor into the equation, or are you just saying, “Look, financial services are important. We need to give everybody a phone.”

Well, our foundation’s not funding the infrastructure of the phones. We’re just making sure that banking regulations and software gets set up so that you don’t have to go to a bank to do financial services. I do hope that the rich world that’s facing these challenges comes up with solutions so that we can once again view digital connectivity as an overwhelmingly positive thing.

“I worry that the digital tools have contributed to polarization.”

The foundation is not spending money on digital connectivity. That’s mostly the private market. The cellphone companies are driving that. We’re putting the applications on there to help in agriculture, health, and savings.

The idea of how the communications framework works and how you avoid it driving mob-like behavior and polarization. I’m part of that debate, but it’s not an area where we have to question should we give people bed nets or vaccines because of social networking.

Just to push you on it a little bit, in your letter this year you talked very specifically about giving mobile phones to the poorest people, where they do the greatest amount of good, which makes sense: You give people who don’t have access to computers or networks a computer and a network. You can see the step change there is very high.

But there is a flip side that we’re seeing in countries around the world. As you’d think about the positives that you can do with this technology, how do you balance it out? I mean you’re literally giving dollars away. How do you balance out the risk / benefit of, “Hey, I’m pushing for this in my letter this year. I want to give everybody a phone,” but there are these downsides from these companies that don’t seem to be great actors right now.

We’re not spending a single dollar on connectivity or getting the phones out. Our money is all about the applications that go on the phone in terms of kids learning, the health person being able to track down those who don’t have vaccines, being able to do savings. Those phones are out there and putting these pro-poor applications on the phones. That is not controversial.

How you make sure the communications apps that are also on those phones don’t lead to the same problems in terms of false information spreading, or polarization? Smart people in the media and in the tech industry should be debating, “Okay, how do you avoid those?” But our foundation, there isn’t a single thing we fund that is driving those problems.

I was just in Redmond, and I saw [Microsoft CEO] Satya Nadella. He once again said that he thinks privacy is a fundamental human right, something that Tim Cook at Apple says, too. Do you feel that strongly as well?

I haven’t found a person who’s against privacy. You know, your medical records, your tax records — everybody believes in privacy.

Now, making sure that you get the benefits of digital medical records without problems in privacy — making sure that we can see, “Okay, is this medicine having side effects?” [or] “Okay, does this course material work better than this other course material?” without violating privacy, that’s where you get into trade-offs.

You want to see which government programs are working. You want to see which curriculums or medicines are working. In the digital world, there’s the upside of being able to measure those things. You can design systems so you have the best of both worlds — you’re understanding how well a medicine’s working and who should or shouldn’t be taking it, without having to reveal any individual’s particular medical record.

“I haven’t found a person who’s against privacy.”

We give an example in the letter of 23andMe, where we saw that your selenium processing genes led to a much higher risk of [birth] prematurity. We were just looking at aggregated data, no individual records, yet that insight came because they have millions of those records. We could see that pattern without connecting it to any particular individual. That’s a miracle of seeing lots of digital data, and now we’re giving selenium to women whose diets don’t have it. We’re pretty optimistic that’ll cut prematurity in half.

You have a very unique global perspective. You’ve been around the world. There is a lot of action toward data privacy regulation around the world. Do you see the boundaries shifting?

I think the most private information is your medical record. I don’t think there are gigantic cases where people are saying that the privacy problems around medical records have been so great that we shouldn’t keep medical records at all, or you know, your tax records, your voting record.

Yeah, there’s a lot of regulation around privacy, which the industry is engaging in that. But in those very sensitive areas, actually, the track record so far isn’t super bad.

There’s already a push in Europe. It seems like there’s going to be a push in the United States. Do you see that?

There’s always been privacy rules. I mean, there’s rules about medical records.

I was 17 years old, and I was a page in Congress. [People] had gone in and seen which videos politicians had checked out at video stores, and were embarrassing them with that information. So they actually passed very narrowly targeted privacy legislation. That’s back in 1972.

The idea of your credit record, your grades, your medical record, your tax records [being private] is not new. Some of this stuff about, “Okay, which websites do I go to?” that’s a new area because now people are using the web a lot, and how that information should be protected is interesting. But it’s not as fundamental as saying, “Do I have HIV or not?”

It seems like you’re able to accelerate so many of your efforts by simply collecting data. The first thing we talked about was getting more data about the lives of girls and women, and yet there’s this parallel conversation around privacy and protection.

I’m very curious to see how that balance shakes out around the world.

Yeah, but the most basic data, like how many kids die of diarrhea, or how many people die of tuberculosis, doesn’t raise gigantic privacy issues like, “Okay, my country’s embarrassed. Don’t say that we have people dying of TB.”

The individual behavioral tracking for [ad] targeting, which you get into, that doesn’t really have anything to do with what the foundation does. But to say this is the first time there’s been privacy issues, well, the world’s been building databases about your bank account, and how you use your credit card, and what phone numbers you call, for my entire lifetime.

As I was reading about it and writing these questions, I realized I had some very basic questions. You have been a full-time philanthropist for a while—

Since 2008.

And you and Melinda are still some of the very wealthiest people in the world. You write at the end of this letter, the stirring call to action, you say, “Look, we can’t take it for granted. You have a responsibility to work harder to make the world a better place.” How does that work for you? I know you have a foundation, and you have a big staff, and are very smart, but when you say, “I want to make an investment into a smart toilet expo.” Walk me through the actual mechanics of how that is executed.

We have a team, which is our water and sanitation team. It’s got some people who have been out in the field that are super experienced. It’s got some engineering people that are super experienced. Actually, our head of it, Brian Arbogast, is a super capable ex-Microsoft person. So we go and we look around the world at what we call a shit-flow diagram to see where in a city is the sewage going? Is it being processed? Is it getting in the river?

“So we go and we look around the world at what we call a shit-flow diagram.”

We looked at the urbanization trends and we say, “Okay, this is a real problem in terms of disease and quality of life,” and we said, “Are other innovators working on this? Does the rich-world solution, which is a skewered approach, does that scale to work in African cities?”

It doesn’t, and [we] realized, “Okay, it’s a growing problem.” So then we did a challenge where we said, hey, anyone who knows how to get rid of the two bad properties of human waste — which are the smell and the disease-causing nature — but do that locally at low cost without too much energy at high reliability—

That’s important.

We had 20 different teams, mostly universities around the world, apply, and now that’s five years ago. We’ve nurtured four of those that are now being turned into products. When we did the Beijing event, it was the announcement that the very first products, five years hence, were now being shipped.

Now, they’re being shipped at a much higher price than we need to get to. We’re almost a factor of 10 more expensive per seat than we need to be. But we do think those costs can go down as we get into these pioneering markets and get more volume.

So what strikes me is that you’re describing something that I wish our governments would do. It’s interesting to me that you have the ability, you have the means and it sounds like you have an amazing team, to say, “We want to fix this. We’re going to go around the world. We’re going to collect this data.”

What do you make of the notion that our government should work harder? We’ve heard it a lot over the past few weeks now, that we should just tax folks like you at a 70 percent marginal tax rate, and that that money should be used to build infrastructure and services like this. Does that appeal to you? Do you think that’s just ridiculous? Do you think that what you’re doing on the private philanthropy end is more effective?

Certainly, the idea of government being more effective in terms of how it runs education or social programs, there’s a lot of opportunity for improvement there. In terms of revenue collection, you wouldn’t want to just focus on the ordinary income rate, because people who are wealthy have a rounding error of ordinary income.

They have income that just is the value of their stock, which if they don’t sell it, it doesn’t show up as income at all, or if it shows up, it shows over in the capital gains side. So the ability of hedge fund people, various people — they aren’t paying that ordinary income rate.

“I believe US tax rates can be more progressive.”

The one thing that never gets much press — the IRS shows the statistics for the top 400 people of the highest income and the rate they pay. Anyway, you should look at that. It’s about a 20 percent rate, so it has nothing to do with the 39.6 marginal ordinary income rate. So it’s a misfocus. If you focus on that, you’re missing the picture.

I believe US tax rates can be more progressive. Now, you finally have some politicians who are so extreme that I’d say, “No, that’s even beyond.” You do start to create tax dodging and disincentives, and an incentive to have the income show up in other countries and things. But we can be more progressive, the estate tax and the tax on capital, the way the FICA and Social Security taxes work. We can be more progressive without really threatening income generation — what you have left to decide how to spread around.

So tax systems are always being debated. [Thomas] Piketty actually is the one who put this idea of the wealth tax on the table. The only asset class that you have that traditionally is for real estate, which makes a lot of sense. Real estate is special in some ways. Certainly, we have a government that’s spending more than it’s taking in, so the idea that at some point, if you want to avoid massive inflation, you need to probably raise more money because what you need to do in terms of your medical care promises will make expenditures even higher than they are today.

So you’re not an adherent of modern monetary theory that says “Don’t worry about the deficit. We’ll just print the money and do it”?

That is some crazy talk.

I mean, it’s certainly out there. It’s gaining currency.

Well, that’s crazy. I mean, in the short run actually because of macroeconomic conditions, it’s absolutely true that you can get even to probably 150 percent of GDP in this environment without it becoming inflationary. It will come and bite you. That is the people you owe the money to, you will have a problem.

The thing that strikes me about this is in your letter, in your work, in what you’re doing, you are fundamentally trying to reduce inequity of distribution whether it’s health care, whether it’s education, whether it’s toilets. You’re doing it as a private philanthropist.

I think we are in this country and we’re talking about it right now, having a real conversation about the role the government, how powerful it should be, how it should collect revenue, and how it should redistribute that revenue.

How do you see your partnership with governments around the world changing?

In every country, the basic needs and the equity of progressive taxation is driven by the government. Philanthropy is tiny, and there are a class of things like malaria, where there’s no government that has capacity and has the problem because the rich countries have the capacity, but the poor countries have the problem. So there’s a few things like that, that philanthropy can come in and play a significant role, or the rich country generosity can play a role there because the market signal from the kids dying of malaria is very small.