David Rosenthal: commitment

Transcript context

…No, but I can speculate on it. There is a very interesting, almost innocent, early beginning of why you would offer energy derivatives that completely falls apart over time as everyone loses their head. Skilling's still outside when he pitches this idea. He's still at McKinsey at this point. Yes, for the moment. In this next thing, they realize this is a new concept they need to bring to the market. How are they going to bootstrap up this new derivatives market? They need the producers to get on board. They need to get the supply, the raw supply that they can then financialize, securitize, and turn into these derivatives. The way that they can really convince producers to want to do this is if they fund them. Just like an investment bank, they now start going out and doing these development deals and co-development deals with drillers, saying, hey, we'll fund you. We will finance your exploration, your drilling. As part of financing that, Enron is going to lock up the rights to then securitize the future production out of your assets. Which again, on its own, not a malicious strategy. Think about our Qualcomm episode. Hey, Sony, will you spin up a new venture that will co-invest in to make flip phones that use CDMA so we can prove to everyone else in the market that CDMA is a viable technology? We'll invest in it. You just have to provide these strategic assets, you can own half of it, blah-blah-blah. It is a common way to bootstrap an ecosystem to use your dollars to incentivize other participants to bring a thing into your ecosystem.…

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