In London, the Microsoft founder stoutly defended his company and personal philanthropy

Bill Gates played a characteristically straight bat to questions about philanthropy, managing a fast-growing company and Microsoft’s competition in business software at a lunchtime speech to Institute of Directors members in London yesterday.

Attendees watched a replay of a comedy video supposed to represent Gates’s last day in the office at Microsoft and starring Bono, Hillary Clinton, Barack Obama and Al Gore. Gates then gave a speech repeating familiar mantras about the rise of IP as a ubiquitous communications transport.

Matters were enlivened by a question-and-answer session and Gates was particularly interesting on the subject of managing staff.

“IQs can subtract rather than add up,” he said. “What’s more important is how you hire people in the first place and how you organise them. [For managers] it’s not so much [their] being an expert in all areas as how they work with people. In the early days, we said ‘read this book and be nice to people’, and sometimes that worked and other times it didn’t. A lot of non-engineers turn out to be good at asking ‘how do we make this better?’”

There’s still room for geniuses somewhere. You can create a special environment, and sometimes that’s worth doing, but if they want to move up, it’s not enough just to be smart. You have to follow the rules, work hard, talk to customers. If you’re a genius [without those other skills] we’ll pay you very well, equivalent to a vice president, but we won’t give you broad responsibility.”

Asked for his advice on dealing with stress, Gates joked, “There have certainly been moments of stress. I would say, try not to get sued by anybody … especially your own government … especially if it’s unjust.”

Turning to questions about his philanthropy, Gates praised the UK government as an example to other states:

“We need government aid to be more generous. The UK under both Tony Blair and Gordon Brown has raised assistance a lot. The UK has taken up the goal of 0.7 per cent of GDP [to be donated] which is a very generous level. It’s a bipartisan issue – David Cameron says he also believes in this.”

Asked about competition in business software, Gates rebuffed suggestions that there was no alternative to Windows or Office.

“People do have a lot of choices,” he said. “You can choose to use an old version [of Microsoft software] or an alternative. There’s a ton of stuff out there. You only get revenues when you make breakthroughs [and] if you don’t meet that test, shame on you. People should wish other parts of commerce were as innovative and competitive as software. Think what food would cost. This is the fastest-moving sector of all.”

Gates also nimbly handled questions about China and suggestions that it had preferred wealth creation over democracy. He suggested that countries such as South Korea and Taiwan had developed wealth and then made progress towards democracy.

Asked about his biggest influences, Gates mentioned Microsoft CEO Steve Ballmer and “my best friend”, the legendary investor Warren Buffett, who, in common with Gates, has at times been ranked as the wealthiest person in the world.