Joi Ito's Web

Joi Ito's conversation with the living web.

At least Kerry has good taste in computers.

via Markoff

Ted Turner dinner interview. It was a great interview and quite funny. Worth a read.

This was a dinner talk and it was quite noisy so my notes are a bit sketchy, but here are some tidbits. My notes may be a bit inaccurate...

Q: What are you doing now that you don't have a job.

A: I worked for 50 years. I'm a philanthropist and I don't have as money as I used to so I march. I march for the rights of women.

The nuclear arms in the US and Russia are still on hair-trigger alert and I'm working to disarm these weapons.

Q: Who would you want to become the president of the US?

A: I'm for whoever speaks to our survival not our demise.

Q: So Who?

A: Who do you think?

The invasion of Iraq was the biggest debacle in the history of the world... except maybe the AOL Time-Warner merger.

They can't even get Haiti right, how are they going to get Iraq right?

It cost $200B. $100B to bomb it and $100B to rebuild it. All just to find some guy hiding in a foxhole...

Wars may have worked in the past, but now we have pro-football. Before there wasn't anything to be excited about so War was exciting. War isn't fun anymore.

9/11 wouldn't have happened if I had been president. We were having a cold war with Russia when I went to Russia to produce the Good Will Games. A few years later, the Berlin Wall came down.

My net worth went from 10-11B to 1B and a half.

The AOL Time-Warner merger was bullshit.

Q: You were quoted as saying that signing was as good as having sex for the first time.

A: I was just being a team player. It wasn't really. It was the stupidest move I've ever seen. Almost as stupid as the war on Iraq.

It was good for me. I ended up with 10% of the stock in AOL/TW. I was friendly with two other people who owned 10% each so it was OK for me.

But I probably shouldn't have done it. Gerald Levine was like Rasputin. He was my enemy. But he said he was my best friend. I said to him, "Gerald, I've never been to your home." But I was a team player. I always pulled for the team.

Q: Can you start a new empire from now?

A: No. I'm too old/tired.

I'm doing Bison.

Q: Why Bison?

A: Why not? They are the original American cattle. The meat has 1/2 as much fat as beef. I am going into the restaurant business and philanthropy.

I thought I could make a difference. I don't have enough money so I make speeches and make appearances.

Philanthropy is important. It's not about giving to the local church or orphanage. You have to shift to more important things. I've also wanted to be a fire chief.

Rupert Murdoch is is a bad journalist. Sloppy journalist. He runs Britain. I asked Tony Blair why he was allowed to have so much influence and Tony Blair said, "I wouldn't have my job without Rupert." He wants to rule the world. He has Britain, almost has Australia and he would like the US. He has no interest in helping anyone, in charity. He won't even give you an interview. He's not interesting in whether what he is doing is right or wrong.

The $1M / yr I was getting as Vice Chairman was just hush money.

Q: What would you have said?

A: A lot. Not of your business.

I was in New Mexico and Gerald Levine called me and said "I'm replacing you." "The hell with your contract." "I can sue you." "All you'll get is your salary. No discussion."

I helped get Lord of the Rings made. I said yes. A $300M decision. You have to have guts, but you have to be right. The president's got guts, but he's wrong.

You also need vision. My vision comes from thinking. I don't watch TV.

We split the money with Jim Baker 50/50. We used to open the envelops together as they came in because we didn't trust each other.

Bjorn Lomborg

What if hospitals only dealt with patients who made the most fuss. That's what it seems like we do with global resource allocation for global problems. Why don't we prioritize? What if we had an extra$ 50Bn to allocate. What would you spend it on?

HIV aids?
Climate age?

We need rational basis on our spending.

The Copenhagen Consensus was a group of leading economists who got together to try to prioritize based on best information available.

What we would do:

1- Prevent HIV - $27Bn will save 29M lives
2- Micronutrients - $13Bn will help more than 1/2 the world
3- Free Trade - would create more than $2000Bn / yr
4- Treat Malaria - $12Bn could come back 10X or more

What we wouldn't do?

Kyoto (global warming) is not a good use of money

Focus on high benefit projects.

We now have the list. We have to get the rest of the world on board.

Bill Joy

I think there will be a crisis or catastrophic event that will take our attention away from terror or war and as a positive response may redefine our focus of the century.

A global pandemic/epidemic - the positive response: New found respect for natural systems and focus on health.

Environmental tip. A phase change with a irreversible climate change - the positive response: Understanding balance with natural systems.

Over self-consumption like the oil supply - the positive response: Might help wastefulness and make it a century of efficiency.

The Agency Costs of Overvalued Equity - Michael C. Jensen

Here are my notes. They are rough notes and may be a bit inaccurate or unclear.

Any time two or more people try to engage in cooperative activities, there is a cost because they never have the same preferences.

Stock options should be adjusted to dividends and cost of capital or their incentives are not aligned with shareholders.

If you as a manager find yourself in a situation where your stock is overvalued. It sets up pressures that cause people to destroy value. When an executive commits fraud to deliver market expectation, they know it's overvalued. 70bn peak but was worth 30bn for Enron. They had a choice of defending the 70bn or confess that it's really only worth 30bn. The board and the investors won't feel that it is value reseting, but rather value destruction and would fire the CEO and look for someone who could perform. No easy way to correct. Probably prevent from getting there. If you're there, you've probably lost your job.

Enron could have stopped the run-up, but they didn't see the downside of the run-up. "Charlie and I get just as uneasy when a company is selling for more than the intrinsic value than when it is trading at less." - Warren Buffet.

Overvaluation is managerial heroin. Feels good at the beginning, but turns out really bad at the end. The pressures of the market cause messing with the gray area of accounting. People raise money to buy companies and destroy more value. Funding of risky investment.

For every $1 in the purchase price, $2.31 is lost in the value of the firm for Nortel when investors realized that the acquisitions were not adding value. Companies destroy value with acquisitions. They con the market into believing that they can add value so it postpones the day of reckoning, but it eventually comes and comes bigger. Bad acquisitions were overwhelmingly with stock. Auctions with multiple irrational people increasing irrationality.

Throwing stock options in is like throwing gasoline on the fire. The solution is in the governance system. Can't solve all problems with incentive systems. You need honest and intelligent people who are monitoring. Unwinding constraints. Lockups after vesting.

Why did the shorts shut down shop at the beginning of the turn-around and didn't correct the problems.

95% of waste from stock options went to people lower than the top five officers. Some people think it is costless to issue options, but this isn't true.


Solution for not having stock overvalued. Communicate your strategy. Don't forecast earnings in value. Publish audit-able metrics for strategy. Stop producing short term earnings forecasts. Would not even do rolling 12 month earnings forecast. Managers should not be in business of forecasting.