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Blindsided by Jonathan Gifford

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Better Than the Market?

There is a second, much more practical, flaw to the Skilling philosophy. If you own your own forest in order to make your own wood pulp, then your source of supply is as secure as it gets. You will have timber for wood pulp today, next year and in ten years’ time. Skilling argued that Enron’s markets were just as reliable: you could contract with Enron to supply timber in ten years’ time at a guaranteed price. The sophistication of Enron’s risk-spreading would guarantee that Enron could afford to fulfil the contract, even on such a long timeframe.

It must be remembered that the Enron vision is not the same as the ‘efficient market’ vision. Enron was not saying that markets would always supply everything as efficiently ...

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