A global recession may be looming, but Craig Mundie sees a silver lining in corporate retrenchment.

Microsoft Corp.'s chief research and strategy officer, who inherited part of Bill Gates’ job in July when the founder retired from day-to-day responsibilities, predicts that companies will be more receptive in hard times to investing in technology. As a result, he said, the sector may benefit from the downturn.

He also hopes the meltdown pushes smart young people into science labs rather than Wall Street offices.

Mundie is paid to look into the future and place bets in the form of long-range projects undertaken by Microsoft Research, a branch of the company that employs more than 1,000 scientists whose work may not appear on store shelves for a decade.


Mundie’s optimism regarding at least some areas of technology stems from his belief that innovation can save money. In flush times, he reasons, companies are more likely to tolerate inefficiencies. When the economy stalls, they look for ways to do more with less. And that benefits companies such as Microsoft, whose products are, not coincidentally, called productivity software.

It’s not unbridled optimism; the Redmond, Wash., company said this month that it would temper its hiring. But it still expects to grow. To that end, Mundie did his best to impress prospective recruits during his annual cross-country barnstorming tour of U.S. universities. It ended Friday at UC San Diego, where he sat down for an interview with The Times.

How has the recent economic turmoil affected the technology sector and Microsoft, specifically?

We are approaching it with caution. We see it as a pronounced global phenomenon right now. We’re still pretty optimistic about our business overall. We’ve chosen to moderate the growth rate of the company. But at this point, we’re still thinking about growth. I don’t see any significant adjustment of our college recruitment this year. I think that’s a good sign.


Our customers, large or small, they feel financial pressure. That changes their perception of using technology to cut costs. In a stable environment, this technology can be deferred. The receptivity of companies to buying solutions that will cut their costs and let them retain staff and improve productivity is higher in a tight economy. For some technology companies, it can be an opportunity.

How is Microsoft different now that Bill Gates is not there every day?

The transition by design was so gradual, it’s hard for me to see whether there’s been any change. What change has occurred so far has crept up on us. Because Bill and I make these plans with such a long lead time, the research investment and start-up activities we undertake are five and 10 years ahead of what’s visible in the marketplace. A lot of the future directions of the company were actually decisions that were made in the last few years. A lot of people don’t understand the lag that takes place between when we start research on something and when it shows up at Best Buy.

How important will entertainment be to Microsoft’s growth?


Our core business started out on the business side. As we introduced multimedia capability for the PC, it became a delivery platform for content providers. Not only is their authoring all digital now, but increasingly their distribution is all digital. And many of their new monetization opportunities are also digital. Microsoft will be an important provider of the technology that will allow them to do that.

We continue to think that games will be big and important. We announced a relationship with Netflix this year that lets people download movies and watch them on an Xbox 360. The entertainment and devices part of our business is still smaller relative to our other businesses. But its growth rate is higher.

How do you see video games playing into our future?

I personally, for a number of years, have been a big proponent of using games as a way to teach academic subjects. They’re teaching kids how to discover things. When you give a kid a video game, they never go looking for the instructions. Part of the interest is discovering things in those games. Those are the attributes you want in kids when you want them to learn. The other thing games provide is immediate gratification. I discovered. I learned. I got something for it. There’s psychological reinforcement. And in multiplayer games, you also learn through collaboration.


Do you see a problem with the quality of American computer science graduates?

It is a serious problem, especially in the U.S. For us, our raw materials are smart people. Our culture for the last few decades does little to celebrate engineers and scientists and a lot to celebrate entertainers and athletes.

Parents in the U.S. also are just more decoupled from the academic interests of their kids. They are less demanding of their kids academically and perhaps even encouraging their kids into whatever the parents see as the quickest way to make a lot of money. Taken together, that is creating a somewhat acute shortage of American kids growing up with any passion for math and science.

There is a silver lining in this economic turmoil. Perhaps fewer of our best students will now go to Wall Street. Maybe some will even stay and build things. We need smart people to tackle the hard, long-term problems society faces. It can’t be done by politicians and entertainers. It’s going to be done by engineers and scientists.


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alex.pham@latimes.com