http://www.fortune.com/fortune/conferences/images/aspen.jpg Here are meeting notes from Brainstorm 2004.

Disclaimer: These are rough notes taken by Joi Ito and may not be completely accurate. That are personal notes and not taken as fact or republished as on the record comments.

The official conference page has a list of past participants.

Queen Noor just gave a great address. I'll try to find a stream. Sorry, I don't have a transcript, but I'll try to find out.

Teresa Heinz Kerry: "If you leave children behind, it has been for naught." "People want America to be great again." The republican party is totally different from the days of her late husband. Back then they used to even intermarry with Democrats. Back then they practiced the Socratic method.

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Now is tutorial session: The decline in America's reputation - Keith Reinhard w/ Pattie Sellers - What imact does it have on the U.S. and American brands? Reinhard will speak about a major new study.

Most people associate America with American's brands. Interesting to note that Carly Fiorina said that she didn't think that she suffered from America's bad imaged in response to a question by Martin Varsavsky.

"If you must talk, can you at least lower the volume..." - advice by foreigner to American about their voice.

The presentation made it clear that people outside of America have many negative feelings towards America and that most American's didn't care. The question they are addressing is, what can businesses in America do?

Tools to help Americans behave seems to be one of the answers...

Singaporean participant : suggesting that it's not just behavior of individuals, but that financial and business decisions made in America impact people in other countries that also affects opinions about America.

It's not business that's the biggest problem, it's US policy. It's the people who can cause changes in US policy and the only way to get people to change is to get them to understand what people think of the US. Most people don't know.

Chinese participant : doing all this work to get US image back will never get the image back to the original big brother image of the US and maybe the goal should be to just become a global peer.

African participant : is there a way for cultural exchange that is less superficial than movies and brands. Maybe people are more similar than we think. How about exchange programs that allow people to live together.

Japanese participant : Q: To what extent does change of government affect how people hate America. A: Resentment has grown over a long period of time, not just during this administration. "Insensitive, arrogant and materialistic." These issues we can address without just government change. Business could address non-government issues and also influence government.

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The Agency Costs of Overvalued Equity - Michael C. Jensen

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.

DON'T LET YOUR STOCK GET OVERVALUED. If your stock is overvalued, YOU ARE GOING TO BE IN TROUBLE.

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.

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Ted Turner

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

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 Levin 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 Levin 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 envelopes together as they came in because we didn't trust each other.

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Ashraf Ghani is Afghanistan's finance minister

Q: What's at stake in Afghanistan.

A: Positive and negative. Freedom from terror and freedom from drugs. Afghanistan can easily be turned into a mafia state. Afghan heroin has made it to California.

We have on our borders some of the largest energy producing states as well as nuclear states. The stability of Afghanistan could help stabilize this region.

Even people who's homes were accidentally bombed by Americans still welcome American soldiers. This is different than the rest of the Middle East.

We've been a trading people for a couple of thousand years. We thrive in networks, but not in hierarchies.

Q: Give us an update. The US media says Afghanistan is in quasi chaos.

A: Quasi chaos is quasi progress. US is not known for depth or understanding. They don't take push-back. They don't engage in debate.

Can't type fast enough, but he's giving a update on all of the great progress they are making.

Progress is good, but problem is expectations. Bush and Blair got up and promised a miracle.

70% of our people live under $1 a day. How do you convince people $1B is a small amount of money.

I'm not going to chase foreign aid and I want to get out of foreign aid in 10 years.

$1 of foreign investment is worth $5-$10 in foreign aid.

Kofi Anan is a great leader but the UN system doesn't work. There are lessons from Afghanistan that can help other countries.

Q: What is the prospect that you can get a grip on the drug mafia in Afghanistan.

A: They told me I had 0.1% chance of success. Cotton will not compete with poppy, but the T-Shirt will.

Poppy is a male crop. Women are not involved in the cultivation of poppy. What a family looks for is its overall income. How do we connect the women to the market. The management skills to get them to the value change.

Every drug producing center of Afghanistan is a center of cotton production. Tax incentives for textile companies would help. Security for textile cities.

Seasonal labor is the weak point of the drug industry.

They need to be given an assurance that things will get better.

It took Thailand 10 years. Afghanistan doesn't have 10 years because it could be taken over by the mafia before that.

Q: Moving companies to Afghanistan could help deal with this mafia issue which is putting the world at risk. They aren't coming because they are afraid?

A: July of 2002, there wasn't a single mobile phone in Kabul. Now my mobile phone from Afghanistan works here. The US spends $11B / yr security in Afghanistan. Security is not about spending money on military. It's about jobs.

Afghanistan is growing quickly. If it could be given a push....

Q: Are you optimistic long term with relationship between the region and the US.

A: The classic age of Islam needs to be understood. We didn't go through the medieval period. This is a confident culture. The extremists exist because of lack of open debate and dialog and this is because of the cold war. Most muslims are moderate. Go to muslim countries. You'll find people like you. We are in clashes. We are not focused enough on solutions.

I'll turn it around. Can you function without the Middle East? Can you exist without oil from the Middle East? If you can't exist without us, we need to focus on solutions.

The risk to my life is about 95% which is worth the risk of saving the millions of people of Afghanistan. I was educated by the people and it was a price I was willing to pay.

Q: You talked about the drug mafia but not about warlords? What do you do with the rest of the country where you can't protect people from the warlords.

A: The ministry of finance is collecting from every corner of the country and we have influence across the country. We need to look at diverse sources of power.

Up until now, monopoly of violence was the source of power. Rules are also power. These people are afraid. Human rights prosecution, etc. They are afraid. We haven't addressed these issues. 80% of Afghanistan has always been self-policed. Need to enhance the social capital of the regions. Communities that ensure security should get reconstruction assistance. Getting free of drugs should provide more assistance.

The answer is about understanding cold self-interest. We've rebuilt the country a hundred times in the past. We'll rebuild. But the rest of the world has to understand the issues to provide help.

Q: Are the terrorists working with the drug mafia.

A: Drug money is easy fast money. 4Bn in Afghanistan, 40Bn outside of Afghanistan. The ability for this to do harm is huge.