Wretchard: I wonder if your co-students, and by extension the Ivy League MBA’s actually know what ‘risk’ means? It’s a nice statistical term, and one can look at a sheet of paper showing a ‘loss’, while discussing over lunch with friends.

There is an old family in Canada, who made their fortune from selling liquor across the border during the prohibition. They would have one of the sons manage the family money.

The last one managed to take an $8 billion fortune and turn it into $4 billion last time I looked.

Back in the 60′s and 70′s the Columbia river was dammed for hydro electric power generation. There was a treaty between the US and Canada regarding water flows and usage. This area has these facilities all along the river, lake levels are controlled by these interests, and in the past whole communities were moved out of the way of the rising water.

Last time around a trust was set up to own the facilities, sell and manage the power, collect the cross border moneys that were coming in, and in some way put the money back into the communities. Of course a pile of money like that attracts flies, and the board has been stuffed with useless parasites. Nothing out of the ordinary.

The problem is that these facilities need to be managed, the power sold, etc. Real work for smart people. They got pinched in some deal with Enron which ended up in court. There were (and continue to be) serious management failures with construction and maintenance. So our brilliant leaders came up with an idea. We can sell our hard assets, invest the money, make more from investments than running the facilities, and more interestingly shower the communities and their friends with cash.

A public meeting was held, and the consensus was that the leadership could easily be drowned and replaced by more amenable seat warmers, so the whole idea was squashed, and they still own the facilities.

Risk? What risk?

Derek