Yesterday I liveblogged the speech given by Microsoft CEO Steve Ballmer at the Sanford C. Bernstein Strategic Decisions Conference, and if you read that, you already know: Microsoft is planning to keep investing significant dollars in operating expense, despite the shock-and-awe felt by the Street.

But now that the transcript's available on Microsoft's web site, I'd like to point you to a couple of Ballmer's justifications for this expense. He says that it's important to be on the front end of innovation (not exactly the place Microsoft's been known to be these last several years) and that the hardest decision was, what to invest in? "   When I first talked to Bill Gates about this and some of our other senior technology guys, Ray Ozzie, they came back with a list of, I don't know, 70 things. I said, Bill, you can't have a list of 70 things. He said, but there's 70 things, Steve. And I said, you've got to pare it down. He said, no ... with an R&D budget that's going to come on $7 billion, we could probably afford to do 60 or 70 different things."

What are those 70 things, though? The one thing he talked about most: obliterating paper. You heard me right. Steve Ballmer told the investors gathered at his talk, "I look in this audience, and I see a lot of paper and pencil. Ten years from now, I won't see paper and pencil if we in the hardware industry do our jobs right. Pencil and paper will be replaced by superior technology that is digital." If he has anything to do with it, it will be Microsoft that profits from the death of paper and pencil.

8:02 a.m. As I wrote yesterday, Strategic Decision #1: Steve Ballmer's decision to speak today, "directly to investors." He'll be answering questions from the little guy and the question on everyone's lips: will he be defensive?

8:04 a.m. Ballmer wants to speak about the business from both the perspective of an investor and a manager, and he promises not to yell at the audience. Heh. He starts out by saying that the next 10 years has as much potential for world-changing strides in computers and software as the last 10 years, and he's excited to be part of a company which "invests, profits from, and takes advantage of the incredible opportunity there is to innovate."

8:06 a.m. The thing that will change in the next 10 years? Digital writing. "Pencil and paper will be replaced by superior technology that is digital. And somebody will have the ability to benefit from that technology." He already sounds both (a) angry and (b) frantic. Maybe it's just his thang.