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Losing a billfold, or having it stolen, will never be a happy experience. What a pain.

But with the advent of the "wallet PC," which I expect to become popular by early next decade, at least you won't necessarily lose everything inside your wallet just because you lose the wallet itself.

A wallet PC will be a pocket-size computer with a snapshot-size color screen that you will use in place of many essentials you carry around with you today -- money, keys, identification, credit cards, tickets -- as well as items that provide you with mobile information and communications, such as a watch, newspapers or other reading material, address and appointment books, photographs, calculator, portable telephone and pager.

If you lose your wallet PC, replacing the actual device may cost about what it does to replace a good camera -- several hundred dollars, at least -- so you won't want to lose yours.

On the other hand, replacing almost anything "in" the wallet, from money to photos, will be simple and inexpensive because the wallet will contain only digital information that can be traced, replicated or retrieved from another location.

When I talk about the wallet PC, some people express concern about its security; others want to know if anyone is making the devices.

Here's the situation. "Wallet PC" refers to an ideal, in the same way that the term "information highway" does.

Today there are hand-held devices that perform some of the functions of the ideal wallet PC, just as today the Internet suggests many features of the eventual information highway. And today's pocket computers may evolve into full-blown wallet PCs, just as today's Internet is likely to evolve into the ideal information highway.

To keep size down, wallet PCs will not have keyboards. They will understand spoken or handwritten instructions.

A high-end wallet PC will be able to identify your position anywhere on earth, thanks to signals from Global Positioning System satellites. They will enable the wallet PC to give you directions (even spoken directions) to any destination, whether you want to go home or to the nearest public restroom in a strange city.

Any wallet must hold money, and the wallet PC is no exception. But the funds will be stored and exchanged in digital rather than paper form.

"Your wallet will link into a store's computer to allow money to be transferred without any physical exchange at a cash register," I wrote. "Digital cash will be used in interpersonal transactions, too. If your son needs money, you might digitally slip five bucks from your wallet PC to his."

This will be convenient, you may be thinking, but if someone gets his hands on my wallet PC, what is to stop him from stealing my money as well as my information?

Wallet PCs will be password-protected and may require recognition of a thumbprint or voice "print" to operate. Without it, such a wallet PC will refuse to release money or information.

What about a hold-up? One reader wrote: "I am concerned about the security implications of people being held up while walking down the street and being forced to empty their bank accounts or even give up $200 to a thief who forces them to enter their security codes."

It could happen. It happens now.

Paper currency is an anonymous bearer instrument. Someone can steal cash and spend it freely, assuming the bills aren't marked or the serial numbers haven't been recorded. Digital cash can be safer. It needn't be anonymous. If someone transfers non-anonymous digital money, it can be known where it was transferred.

I am more concerned about privacy because the transfer of information cannot always be reversed. Somebody intent on reading your e-mail messages could brandish a gun and say, "Hand me your wallet PC and give me your password."

He would have access to your information until you invalidated the wallet PC by notifying authorities, who would broadcast a signal to disable it. This ability to invalidate a wallet PC will make you better off than you are today when someone can invade your privacy by stealing your briefcase or by stealing your laptop computer.

Microsoft is working on software for a generation of hand-held devices that are precursors of the ideal wallet PC.

We expect a number of hardware manufacturers to release pocket devices that will use this software, and we expect other software companies to develop applications that run on them.

A year ago we had a prototype that we and our hardware partners decided not to introduce. We concluded the hardware wasn't cheap enough and the software wasn't powerful enough.

People will not buy computers that are underpowered. It is stunning how fast computers based on the 486 chip have become obsolete. These were state-of-the-art a couple of years ago, but they're being pulled off the market now because no one will buy them even for as little as $800.

We took this lesson to heart and delayed plans to ship our software for hand-held units.

It will be another year or so before we have something with an appropriate balance of high performance, reasonable price, low power consumption and small size.

Questions may be sent to Bill Gates by electronic mail. The address is

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