WEBVTT 00:00:00.000 --> 00:00:03.319 Welcome back to the Deep Dive. We are doing something 00:00:03.319 --> 00:00:04.919 a little different today. Usually when we look 00:00:04.919 --> 00:00:07.059 at a business failure, it's a story about bad 00:00:07.059 --> 00:00:09.740 timing or, you know, a product that didn't quite 00:00:09.740 --> 00:00:12.919 click or maybe a CEO who fell asleep at the wheel. 00:00:13.400 --> 00:00:17.579 But today, today we are looking at the grandfather 00:00:17.579 --> 00:00:21.640 of them all, the ghost that that really haunts 00:00:21.640 --> 00:00:24.300 every single boardroom in America. It really 00:00:24.300 --> 00:00:26.739 is. It's like the patient zero of modern corporate 00:00:26.739 --> 00:00:29.519 trauma. We are talking about Enron. And I know 00:00:29.519 --> 00:00:30.899 what you're thinking. I know the Enron story. 00:00:31.120 --> 00:00:32.719 Smartest guys in the room, cooking the books, 00:00:32.880 --> 00:00:36.780 jail time. But looking through this stack of 00:00:36.780 --> 00:00:38.039 research you've pulled together, I mean, the 00:00:38.039 --> 00:00:40.060 scale of the delusion is just staggering. It 00:00:40.060 --> 00:00:42.899 wasn't just a scam. It was a cultural phenomenon. 00:00:43.280 --> 00:00:45.500 That is exactly the right way to frame it. You 00:00:45.500 --> 00:00:47.640 have to remember, for six years running, Fortune 00:00:47.640 --> 00:00:50.000 magazine named Enron America's most innovative 00:00:50.000 --> 00:00:53.609 company. The rule. They weren't seen as criminals 00:00:53.609 --> 00:00:55.770 in the 90s. Not at all. They were like the Beatles 00:00:55.770 --> 00:00:57.670 of capitalism. They were trading water. They 00:00:57.670 --> 00:00:59.009 were trading weather. They were going to stream 00:00:59.009 --> 00:01:01.570 movies before Netflix was even mailing DVDs. 00:01:01.570 --> 00:01:04.629 They were the future. And now the name just means 00:01:04.629 --> 00:01:08.010 fraud. Plain and simple. But here's the weirdest 00:01:08.010 --> 00:01:09.909 part of the file you sent me. And it's the reason 00:01:09.909 --> 00:01:11.530 we are actually pulling this out of the archives 00:01:11.530 --> 00:01:15.079 right now. Enron is back. Yeah, we have to talk 00:01:15.079 --> 00:01:18.299 about that. It is the strangest coda to a corporate 00:01:18.299 --> 00:01:20.700 tragedy I think I have ever seen. I'm looking 00:01:20.700 --> 00:01:23.299 at this timeline in the source material. Late 00:01:23.299 --> 00:01:28.299 2024, early 2025. There's an Enron reboot, a 00:01:28.299 --> 00:01:32.299 micronuclear reactor. A crypto token. What is 00:01:32.299 --> 00:01:34.260 happening? It's essentially performance art meets 00:01:34.260 --> 00:01:36.359 late stage capitalism. But the fact that it went 00:01:36.359 --> 00:01:38.859 viral, the fact that people engaged with it, 00:01:38.900 --> 00:01:41.000 that tells you everything about how powerful 00:01:41.000 --> 00:01:43.780 the Enron brand still is. It's become this symbol 00:01:43.780 --> 00:01:46.060 for the ultimate grift. We are definitely going 00:01:46.060 --> 00:01:47.939 to get to the Enron egg and the whole satire 00:01:47.939 --> 00:01:49.859 thing later in the show. But our mission today 00:01:49.859 --> 00:01:52.359 is to understand how we got there. We need to 00:01:52.359 --> 00:01:55.120 go from the humble pipelines in Omaha all the 00:01:55.120 --> 00:01:57.810 way to the prison cells in Texas. I really want 00:01:57.810 --> 00:01:59.310 to understand the mechanics of the illusion. 00:01:59.730 --> 00:02:02.409 How do you hide that much debt? How do you convince 00:02:02.409 --> 00:02:03.989 the world you're profitable when you're just 00:02:03.989 --> 00:02:06.790 bleeding cash? It's a mix of incredibly complex 00:02:06.790 --> 00:02:09.650 accounting and, well, incredibly simple human 00:02:09.650 --> 00:02:12.169 arrogance. And it all starts with a culture clash. 00:02:12.449 --> 00:02:14.050 Right. Let's start at the beginning. Section 00:02:14.050 --> 00:02:16.729 one in our outline, the merger and the intestine 00:02:16.729 --> 00:02:19.629 mistake, which honestly, that sounds like a bad 00:02:19.629 --> 00:02:22.330 name. It does, doesn't it? Yeah. But to understand 00:02:22.330 --> 00:02:24.430 Enron, you have to understand the two parents 00:02:24.430 --> 00:02:27.550 that made it. Picture the landscape in the mid-'80s. 00:02:27.650 --> 00:02:30.469 On one side, you have Inner North. They're based 00:02:30.469 --> 00:02:33.009 in Omaha, Nebraska. Think Warren Buffett country. 00:02:33.370 --> 00:02:36.650 Okay, so very conservative, Midwestern. Extremely. 00:02:36.689 --> 00:02:39.210 They're a Depression -era success story. They 00:02:39.210 --> 00:02:41.530 run this massive natural gas pipeline network, 00:02:41.729 --> 00:02:44.669 and they run it like utility. Low -risk, steady 00:02:44.669 --> 00:02:46.909 returns. These are the guys who wear cardigans. 00:02:47.030 --> 00:02:49.030 They drink coffee at 8 a .m., they go home at 00:02:49.030 --> 00:02:52.830 5 p .m. Got it. Parent A. Safe. boring, reliable. 00:02:53.270 --> 00:02:55.770 Then you have Houston Natural Gas, HNG. This 00:02:55.770 --> 00:02:57.930 is the aggressive Texas counterpart. They are 00:02:57.930 --> 00:03:00.490 run by a guy named Kenneth Lay. They are ambitious. 00:03:00.629 --> 00:03:03.110 They're leveraging up and they are fighting for 00:03:03.110 --> 00:03:05.909 territory in a very, very volatile market. These 00:03:05.909 --> 00:03:08.150 guys wear cowboy boots and eat steak dinners 00:03:08.150 --> 00:03:10.129 and talk about conquering the world. So you have 00:03:10.129 --> 00:03:13.770 oil and water or I guess gas and gas. Gas and 00:03:13.770 --> 00:03:16.849 gas, but with very different pressures. So in 00:03:16.849 --> 00:03:20.229 May 1985, Inner North. the Safe Omaha Company, 00:03:20.449 --> 00:03:25.469 acquires HNG for $2 .3 billion. On paper, this 00:03:25.469 --> 00:03:27.370 makes total sense. Inner North had the North 00:03:27.370 --> 00:03:30.069 -South pipelines. HNG had the East -West pipelines. 00:03:30.330 --> 00:03:32.370 Put them together, and you have the second largest 00:03:32.370 --> 00:03:34.990 gas pipeline system in the entire United States. 00:03:35.129 --> 00:03:37.650 It creates a national grid. So it sounds like 00:03:37.650 --> 00:03:40.110 it should have been a boring, reliable, cash 00:03:40.110 --> 00:03:42.710 -printing utility business, a monopoly almost. 00:03:43.069 --> 00:03:45.229 It absolutely should have been. But the culture 00:03:45.229 --> 00:03:47.590 clash was immediate. The Omaha people and the 00:03:47.590 --> 00:03:50.289 Houston people, They just hated each other. And 00:03:50.289 --> 00:03:52.349 even though Inner North was the one buying HNG, 00:03:52.610 --> 00:03:55.030 Kenneth Lay, the guy from the smaller Acquire 00:03:55.030 --> 00:03:57.129 company, he manages to outmaneuver the Inner 00:03:57.129 --> 00:04:00.610 North CEO, Sam Signar, and takes control. Whoa, 00:04:00.710 --> 00:04:03.689 that's a serious power move, eating the Acquirer. 00:04:03.810 --> 00:04:05.789 It is. And it's the first sign that aggression 00:04:05.789 --> 00:04:07.830 was going to win out over conservatism in this 00:04:07.830 --> 00:04:10.009 new company. So Lay moved the headquarters to 00:04:10.009 --> 00:04:12.599 Houston. And he decides this new behemoth needs 00:04:12.599 --> 00:04:14.759 a new identity. The temporary name was just H 00:04:14.759 --> 00:04:17.300 &G Inner North Inc. Which is not exactly catchy. 00:04:17.439 --> 00:04:20.139 No, not at all. So Kenneth Lay decides they need 00:04:20.139 --> 00:04:23.120 a brand. And this is my absolute favorite detail 00:04:23.120 --> 00:04:25.240 from the early days because it just foreshadows 00:04:25.240 --> 00:04:27.339 everything. He didn't just brainstorm a name 00:04:27.339 --> 00:04:30.839 over lunch. No, no. He hired Lippincott and Margulies, 00:04:30.959 --> 00:04:33.759 a high -end consulting firm. They spent over 00:04:33.759 --> 00:04:37.019 $100 ,000 in 1980s money on focus groups, design 00:04:37.019 --> 00:04:39.759 studies, the works. Wow. That's probably a quarter 00:04:39.759 --> 00:04:42.060 million dollars today just to pick a name. And 00:04:42.060 --> 00:04:44.000 after months of work, they came back with a winner. 00:04:44.100 --> 00:04:47.750 They proposed the name. Enter on. Enter on. You 00:04:47.750 --> 00:04:49.670 know, it sounds futuristic. It sounds strong. 00:04:49.790 --> 00:04:53.029 Enter the future. The on switch. I can see it. 00:04:53.129 --> 00:04:55.709 Kenneth Lay loved it. He thought it projected 00:04:55.709 --> 00:04:58.149 power. He announced it to the employees. They 00:04:58.149 --> 00:04:59.889 began printing stationery. They ordered the signs. 00:05:00.069 --> 00:05:02.449 Enter on. And then just a few weeks before the 00:05:02.449 --> 00:05:05.930 stockholder vote in 1986, someone, and it was 00:05:05.930 --> 00:05:07.790 probably a low -level employee with a dictionary, 00:05:08.029 --> 00:05:09.750 raised their hand. Because they finally looked 00:05:09.750 --> 00:05:12.779 it up. They finally look it up. Enteron is a 00:05:12.779 --> 00:05:15.160 medical term. It specifically refers to the elementary 00:05:15.160 --> 00:05:18.399 canal, the digestive tract. Oh, no, the intestines. 00:05:18.720 --> 00:05:22.300 The gut. They had spent a fortune to name their 00:05:22.300 --> 00:05:24.899 massive new energy conglomerate the intestine. 00:05:25.240 --> 00:05:28.019 Invest in the intestine. We are flushing the 00:05:28.019 --> 00:05:30.860 competition down the, wow. Exactly. It's a total 00:05:30.860 --> 00:05:34.399 disaster. Lay was humiliated. They had to scramble. 00:05:34.459 --> 00:05:36.079 So they basically just chopped the middle letters 00:05:36.079 --> 00:05:38.800 out of the word. They removed the T and landed 00:05:38.800 --> 00:05:41.670 on Enron. It's a funny story, but does it signal 00:05:41.670 --> 00:05:44.230 something deeper? I think it does. I think it 00:05:44.230 --> 00:05:47.430 signals a tendency to prioritize the flash and 00:05:47.430 --> 00:05:50.610 the concept over the actual due diligence. They 00:05:50.610 --> 00:05:53.470 wanted a cool, modern name, but they didn't bother 00:05:53.470 --> 00:05:55.589 to check the dictionary. It's a small oversight, 00:05:55.769 --> 00:05:57.870 but it's so telling. It's style over substance 00:05:57.870 --> 00:06:00.569 right from day one. And speaking of oversights, 00:06:00.670 --> 00:06:02.889 even in these early days, there were already 00:06:02.889 --> 00:06:05.170 financial cracks weren't there. We tend to think 00:06:05.170 --> 00:06:07.750 of the fraud as a late 90s thing, but the sources 00:06:07.750 --> 00:06:11.389 point to an incident way back in 1987, the Valhalla 00:06:11.389 --> 00:06:14.829 incident. This is absolutely crucial. Enron Oil, 00:06:15.069 --> 00:06:18.009 a subsidiary, was based in Valhalla, New York. 00:06:18.170 --> 00:06:20.050 They were supposed to be doing boring hedging, 00:06:20.129 --> 00:06:22.750 basically just protecting the company from price 00:06:22.750 --> 00:06:25.910 swings in oil. But the traders there, they started 00:06:25.910 --> 00:06:29.449 gambling. They were engaging in huge unauthorized 00:06:29.449 --> 00:06:32.100 trading on the price of oil. And I'm guessing 00:06:32.100 --> 00:06:34.019 they were making a lot of money at first. Oh, 00:06:34.040 --> 00:06:36.459 they were bringing in huge profits. And because 00:06:36.459 --> 00:06:38.620 they were profitable, the executives in Houston 00:06:38.620 --> 00:06:42.060 didn't ask any questions. In fact, there is evidence 00:06:42.060 --> 00:06:45.040 that when auditors raised alarms about the complete 00:06:45.040 --> 00:06:47.660 lack of controls, Leah sent a message saying 00:06:47.660 --> 00:06:50.139 effectively, please keep making us millions. 00:06:50.680 --> 00:06:53.279 So the precedent was set right there. If you 00:06:53.279 --> 00:06:55.920 make money, we don't care about the rules. Precisely. 00:06:56.060 --> 00:06:58.779 But then, of course, the market turned. In 1987, 00:06:59.120 --> 00:07:01.810 the traders made a bad bet. A really bad bet. 00:07:01.910 --> 00:07:04.410 They tried to hide it. Enron Oil reported an 00:07:04.410 --> 00:07:07.870 $85 million loss, but the reality was much, much 00:07:07.870 --> 00:07:10.990 worse. The true loss was somewhere between $142 00:07:10.990 --> 00:07:13.790 and $190 million. That's enough to wipe out a 00:07:13.790 --> 00:07:16.110 company back then. It almost did. And it was 00:07:16.110 --> 00:07:18.490 the first concealment. It established a culture 00:07:18.490 --> 00:07:20.290 where earnings were more important than ethics. 00:07:20.730 --> 00:07:24.170 But Enron was still, at its core, a pipeline 00:07:24.170 --> 00:07:27.709 company. To become the Enron we all know, they 00:07:27.709 --> 00:07:29.850 needed a new vision. They needed Jeff Skilling. 00:07:30.139 --> 00:07:32.500 Enter the McKinsey consultant. Okay, section 00:07:32.500 --> 00:07:35.399 two, the shift. Jeff Skilling is the architect 00:07:35.399 --> 00:07:38.279 of the Enron legend. He wasn't an oil guy. He 00:07:38.279 --> 00:07:41.899 was a strategy guy, a true believer. In 1989, 00:07:42.139 --> 00:07:44.300 while he was still consulting for McKinsey, he 00:07:44.300 --> 00:07:47.399 pitched Enron a big idea. You have to understand, 00:07:47.480 --> 00:07:50.230 before this, natural gas was just boring. You 00:07:50.230 --> 00:07:52.569 dug it up, put it in a pipe, and signed a 20 00:07:52.569 --> 00:07:54.629 -year contract with a utility at a fixed price. 00:07:54.850 --> 00:07:57.410 It was a physical delivery business, pure logistics, 00:07:57.689 --> 00:08:00.189 moving molecules from point A to point B. Skilling 00:08:00.189 --> 00:08:01.689 looked at that and said, that's inefficient. 00:08:02.029 --> 00:08:04.649 He proposed the gas bank. Okay, let's unpack 00:08:04.649 --> 00:08:06.769 the gas bank, because it sounds simple, but it 00:08:06.769 --> 00:08:08.870 fundamentally changed the entire industry. Think 00:08:08.870 --> 00:08:11.970 of it like a normal bank, but for gas. A gas 00:08:11.970 --> 00:08:14.529 producer, a guy with a well, wants to sell gas, 00:08:14.709 --> 00:08:17.269 but he's afraid prices will drop next year. A 00:08:17.269 --> 00:08:20.040 utility, a power plant. Wants to buy gas, but 00:08:20.040 --> 00:08:22.579 they're afraid prices will spike. And Enron steps 00:08:22.579 --> 00:08:24.519 into the middle. Enron steps into the middle. 00:08:24.600 --> 00:08:27.360 They say to the producer, we promised to buy 00:08:27.360 --> 00:08:29.860 your gas at a set price. And they say to the 00:08:29.860 --> 00:08:32.419 utility, we promised to sell you gas at a set 00:08:32.419 --> 00:08:35.940 price. Enron becomes the market maker. They absorb 00:08:35.940 --> 00:08:38.580 all the risk. And because they're sitting in 00:08:38.580 --> 00:08:40.559 the middle of all these deals, they can start 00:08:40.559 --> 00:08:43.879 trading. They can trade futures, swaps, options. 00:08:44.019 --> 00:08:46.820 They don't just move the gas physically anymore. 00:08:47.039 --> 00:08:49.360 They trade the financial obligation of the gas. 00:08:49.600 --> 00:08:51.759 They turned a physical commodity into a financial 00:08:51.759 --> 00:08:53.740 product. I mean, Wall Street must have absolutely 00:08:53.740 --> 00:08:56.720 loved that. Oh, they went crazy for it. It unlocked 00:08:56.720 --> 00:08:59.120 massive liquidity and made the market more efficient. 00:08:59.360 --> 00:09:01.539 But it required a completely different mindset. 00:09:02.159 --> 00:09:05.039 In 1988, they had what they called the Come to 00:09:05.039 --> 00:09:07.299 Jesus meeting. That sounds dramatic. It was. 00:09:07.340 --> 00:09:09.840 It was the moment they decided to aggressively 00:09:09.840 --> 00:09:12.620 pursue unregulated markets. They weren't just 00:09:12.620 --> 00:09:14.360 a utility anymore. They were a trading firm. 00:09:14.860 --> 00:09:17.080 And Skilling was the guy leading the charge. 00:09:17.259 --> 00:09:20.059 He joined the company full time in 1991 to run 00:09:20.059 --> 00:09:22.919 this gas bank division. And he brought this aggressive 00:09:22.919 --> 00:09:25.500 up or out culture with him. And this leads us 00:09:25.500 --> 00:09:28.019 straight into Section 3, the innovation trap. 00:09:28.490 --> 00:09:30.669 Because once Skilling took over, they decided 00:09:30.669 --> 00:09:32.950 this model worked for gas, so it must work for, 00:09:33.009 --> 00:09:35.649 well, everything. Everything. Skilling had this 00:09:35.649 --> 00:09:38.450 philosophy he called asset light. He famously 00:09:38.450 --> 00:09:41.480 said in 2000 that... Business assets were an 00:09:41.480 --> 00:09:44.039 outdated means of a company's worth. Asset light. 00:09:44.159 --> 00:09:46.240 That sounds great in a boardroom. It means getting 00:09:46.240 --> 00:09:48.820 rid of the heavy stuff, right? The pipes, the 00:09:48.820 --> 00:09:51.240 power plants, the trucks. Exactly. He didn't 00:09:51.240 --> 00:09:53.860 want to own things that rust. He wanted to focus 00:09:53.860 --> 00:09:56.700 on intellectual assets, the trading algorithms, 00:09:57.000 --> 00:09:59.200 the deals, the market positioning. He wanted 00:09:59.200 --> 00:10:02.200 Enron to be a platform, not a utility. And that 00:10:02.200 --> 00:10:06.039 led to a massive, massive trading spree. In 1999, 00:10:06.440 --> 00:10:08.940 they launched Interon Online. Which was huge 00:10:08.940 --> 00:10:10.899 at the time. It was the first web -based transaction 00:10:10.899 --> 00:10:13.159 system for commodities. And they traded everything. 00:10:13.440 --> 00:10:16.220 I mean, everything. Not just oil and gas. They 00:10:16.220 --> 00:10:18.860 traded plastics, pulp paper, steel. They even 00:10:18.860 --> 00:10:20.759 started trading weather risk. Wait, weather risk? 00:10:20.779 --> 00:10:22.860 How in the world do you trade weather? They're 00:10:22.860 --> 00:10:25.710 called weather derivatives. If you're a ski resort, 00:10:25.889 --> 00:10:27.950 you lose money if it doesn't snow, right? If 00:10:27.950 --> 00:10:29.490 you're a theme park, you lose money if it rains 00:10:29.490 --> 00:10:31.970 all summer. Enron would sell you a contract that 00:10:31.970 --> 00:10:34.350 paid out if the weather went against you. It's 00:10:34.350 --> 00:10:35.929 actually the legitimate financial product now, 00:10:36.029 --> 00:10:38.649 but Enron was pioneering it at a massive scale. 00:10:38.889 --> 00:10:41.009 But then we get to the stuff that wasn't so legitimate, 00:10:41.110 --> 00:10:44.009 or at least where the hype completely outpaced 00:10:44.009 --> 00:10:46.669 reality. We have to talk about broadband. Oh, 00:10:46.690 --> 00:10:50.269 broadband. This was the absolute peak of the 00:10:50.269 --> 00:10:53.580 dot -com bubble. And Enron decided that bandwidth, 00:10:53.919 --> 00:10:56.179 the capacity to move data over the Internet, 00:10:56.360 --> 00:10:58.659 was just another commodity like natural gas. 00:10:58.860 --> 00:11:00.799 They thought they could create a market and trade 00:11:00.799 --> 00:11:03.179 it. They called it the Enron Intelligent Network. 00:11:03.440 --> 00:11:05.620 They did. They bought up tons of dark fiber, 00:11:05.759 --> 00:11:07.860 inactive fiber optic cables that were already 00:11:07.860 --> 00:11:10.580 in the ground. And they built this massive state 00:11:10.580 --> 00:11:13.320 -of -the -art facility. In Las Vegas, they claimed 00:11:13.320 --> 00:11:15.500 they could stream the entire Library of Congress 00:11:15.500 --> 00:11:18.139 anywhere in the world in minutes. And they made 00:11:18.139 --> 00:11:20.740 that huge deal with Blockbuster in 2001. This 00:11:20.740 --> 00:11:23.039 is one of my favorite details in the stack. They 00:11:23.039 --> 00:11:25.480 announced a 20 -year deal to stream movies on 00:11:25.480 --> 00:11:28.100 demand. It sounds exactly like Netflix, years 00:11:28.100 --> 00:11:30.620 before Netflix streaming. But the technology 00:11:30.620 --> 00:11:33.059 just wasn't there. The last mile connections 00:11:33.059 --> 00:11:35.039 to people's homes were still dial -up for most 00:11:35.039 --> 00:11:37.740 people. The deal collapsed almost immediately. 00:11:38.460 --> 00:11:42.460 But here's the kicker. Enron executives hyped 00:11:42.460 --> 00:11:45.500 this broadband division to the moon. The stock 00:11:45.500 --> 00:11:50.399 price soared. Executives sold $924 million in 00:11:50.399 --> 00:11:52.580 stock while telling the public that broadband 00:11:52.580 --> 00:11:55.799 was going to be worth $40 billion. And in reality? 00:11:56.080 --> 00:11:58.559 In reality, the broadband division was bleeding 00:11:58.559 --> 00:12:02.120 money. It reported massive, massive losses. The 00:12:02.120 --> 00:12:04.539 blockbuster deal never generated a single dollar 00:12:04.539 --> 00:12:06.600 of real profit. But because of their accounting, 00:12:06.820 --> 00:12:09.379 which we will get to. They booked imaginary profits 00:12:09.379 --> 00:12:11.179 anyway. It wasn't just broadband, though. They 00:12:11.179 --> 00:12:12.720 tried to do the same thing with water. Right, 00:12:12.799 --> 00:12:15.539 Azurix. This was Rebecca Mark's baby. She was 00:12:15.539 --> 00:12:17.740 a major executive, kind of a rival to Skilling, 00:12:17.840 --> 00:12:20.379 and she wanted to build a global water empire. 00:12:20.580 --> 00:12:23.399 They acquired Wessex Water in the UK. Which was 00:12:23.399 --> 00:12:25.200 actually a good company, from what I understand. 00:12:25.440 --> 00:12:28.379 It was a solid, profitable utility. But then 00:12:28.379 --> 00:12:31.340 they took Azurix public. They overpaid for assets. 00:12:31.659 --> 00:12:34.120 British regulators forced them to cut water rates. 00:12:34.240 --> 00:12:37.120 They took on massive debt. Azrix became a money 00:12:37.120 --> 00:12:39.460 pit. And Enron eventually had to suck all the 00:12:39.460 --> 00:12:41.639 cash out of it and sell it off for a huge loss. 00:12:41.940 --> 00:12:43.659 And then there were the international projects. 00:12:43.720 --> 00:12:46.139 I feel like this is where the asset light philosophy 00:12:46.139 --> 00:12:49.799 really crashed into the messy reality of the 00:12:49.799 --> 00:12:52.820 physical world. It definitely did. Take Dabhol. 00:12:53.200 --> 00:12:57.519 in India, a $2 .9 billion disaster. They built 00:12:57.519 --> 00:13:00.039 a massive gas -fired power plant in a region 00:13:00.039 --> 00:13:02.620 that couldn't afford the electricity. The Indian 00:13:02.620 --> 00:13:05.019 government got into a dispute with them, stopped 00:13:05.019 --> 00:13:07.899 payments, construction halted. It was a political 00:13:07.899 --> 00:13:10.340 and financial nightmare that dragged on for years. 00:13:10.500 --> 00:13:12.100 And my personal favorite of all the disasters, 00:13:12.480 --> 00:13:15.120 the Dominican Republic barge. Oh, this is a vivid 00:13:15.120 --> 00:13:18.000 one. They had a power plant mounted on a barge 00:13:18.000 --> 00:13:20.179 off the coast of Puerto Plata. It was supposed 00:13:20.179 --> 00:13:22.460 to provide reliable power to the local grid. 00:13:22.809 --> 00:13:25.490 But the soot from the plant's smokestack was 00:13:25.490 --> 00:13:27.690 blowing directly onto a nearby luxury hotel. 00:13:27.970 --> 00:13:29.690 So the guests are sitting by the pool eating 00:13:29.690 --> 00:13:32.289 dinner and just getting covered in soot. Exactly. 00:13:32.450 --> 00:13:34.990 Yeah. Blackening their food. And because of the 00:13:34.990 --> 00:13:38.529 currents, garbage from a nearby slum kept clogging 00:13:38.529 --> 00:13:40.429 the water intake for the power plant's cooling 00:13:40.429 --> 00:13:44.230 system. They had to hire men in rowboats to paddle 00:13:44.230 --> 00:13:46.529 out and literally push the garbage away with 00:13:46.529 --> 00:13:48.710 sticks. You can't trade your way out of that 00:13:48.710 --> 00:13:51.549 problem. No. That is the reality of physical 00:13:51.549 --> 00:13:55.500 assets. They are messy. Enrod didn't like messy. 00:13:55.700 --> 00:13:58.720 They liked clean, beautiful spreadsheets with 00:13:58.720 --> 00:14:01.460 big numbers on them. Which brings us to the engine 00:14:01.460 --> 00:14:04.779 room of the whole disaster, section four, the 00:14:04.779 --> 00:14:08.039 mechanics of the fraud. How did they make these 00:14:08.039 --> 00:14:10.860 messy failures look like record -breaking profits? 00:14:11.080 --> 00:14:13.220 New main tools, really. Mark -to -market accounting 00:14:13.220 --> 00:14:15.820 and special purpose entities. Okay, let's unpack 00:14:15.820 --> 00:14:17.820 mark -to -market because this sounds like legitimate 00:14:17.820 --> 00:14:20.059 accounting jargon, but they completely weaponized 00:14:20.059 --> 00:14:22.059 it. It is legitimate, but for certain things 00:14:22.059 --> 00:14:24.379 like trading securities. If you own a stock and 00:14:24.379 --> 00:14:26.519 it goes up today, you can record that gain today, 00:14:26.659 --> 00:14:28.899 even if you haven't sold it yet. That makes sense 00:14:28.899 --> 00:14:31.559 for liquid assets. But Enron wasn't using it 00:14:31.559 --> 00:14:33.720 for stocks. They were using it for these huge 00:14:33.720 --> 00:14:37.190 long -term deals. Right. Let's go back to that 00:14:37.190 --> 00:14:40.450 blockbuster deal. It was a 20 -year agreement. 00:14:41.610 --> 00:14:44.789 Enron's accountants basically estimated how much 00:14:44.789 --> 00:14:46.610 profit they thought they would make over the 00:14:46.610 --> 00:14:49.809 next 20 years. Let's say they just pulled a number 00:14:49.809 --> 00:14:53.309 out of the air, $100 million in future profit. 00:14:53.909 --> 00:14:56.730 Under mark -to -market, they booked that $100 00:14:56.730 --> 00:14:59.450 million as current income immediately. Before 00:14:59.450 --> 00:15:01.929 they streamed a single movie. Before they made 00:15:01.929 --> 00:15:04.210 a single dime. That's it. They signed the contract, 00:15:04.429 --> 00:15:07.129 popped the champagne, and booked the entire projected 00:15:07.129 --> 00:15:09.210 profit of the deal. So what happens when the 00:15:09.210 --> 00:15:12.649 deal falls apart three months later? Well, technically, 00:15:12.789 --> 00:15:15.070 you're supposed to write it down as a loss. But 00:15:15.070 --> 00:15:18.289 Enron didn't like doing that. So they had massive 00:15:18.289 --> 00:15:20.070 profits on their books that were actually just 00:15:20.070 --> 00:15:22.669 imaginary future earnings that never materialized. 00:15:22.730 --> 00:15:25.509 It completely disconnected reported profit from 00:15:25.509 --> 00:15:27.950 actual cash. They were reporting billions in 00:15:27.950 --> 00:15:30.840 income but had no cash coming in the door. So 00:15:30.840 --> 00:15:33.340 they were cash poor but profit rich on paper. 00:15:33.519 --> 00:15:36.080 And to hide the debt and the lack of cash, they 00:15:36.080 --> 00:15:38.220 turned to these special purpose entities. Enter 00:15:38.220 --> 00:15:41.120 Andrew Fastow, the CFO. He was the architect 00:15:41.120 --> 00:15:44.500 of the shell game. The SPEs. These had crazy 00:15:44.500 --> 00:15:48.299 names like LJM, Chuko. So Fastow created these 00:15:48.299 --> 00:15:50.700 off -balance sheet partnerships. The idea was 00:15:50.700 --> 00:15:54.899 simple but, well, nefarious. If Enron had a bad 00:15:54.899 --> 00:15:57.720 asset, say... that failing broadband business 00:15:57.720 --> 00:16:00.259 or a power plant in Brazil that was losing money, 00:16:00.419 --> 00:16:03.500 they would sell it to one of these SPEs. So Enron 00:16:03.500 --> 00:16:06.039 gets the asset off their books. Exactly. The 00:16:06.039 --> 00:16:08.299 debt associated with that asset disappears from 00:16:08.299 --> 00:16:10.100 Enron's balance sheet and they get to record 00:16:10.100 --> 00:16:12.460 a sale. So they book even more fake revenue. 00:16:13.049 --> 00:16:16.169 But who was running these SPEs? Who was on the 00:16:16.169 --> 00:16:18.850 other side of the deal buying this junk? Well, 00:16:18.850 --> 00:16:21.269 that's the craziest part. Andy Fastow. He was 00:16:21.269 --> 00:16:23.830 the CFO of Enron, representing the seller, and 00:16:23.830 --> 00:16:25.570 he was also the manager of the LJM partnership, 00:16:25.889 --> 00:16:28.029 representing the buyer. Wait, what? That is a 00:16:28.029 --> 00:16:30.629 massive, blatant conflict of interest. It's the 00:16:30.629 --> 00:16:32.470 definition of conflict of interest. He was basically 00:16:32.470 --> 00:16:34.470 sitting on both sides of the table, negotiating 00:16:34.470 --> 00:16:36.610 with himself, and he was paying himself millions 00:16:36.610 --> 00:16:39.029 in management fees from these partnerships. He 00:16:39.029 --> 00:16:41.470 made over $30 million personally from these deals, 00:16:41.549 --> 00:16:43.789 but the only way these... SBEs could afford to 00:16:43.789 --> 00:16:46.409 buy Enron's garbage was because they were backed 00:16:46.409 --> 00:16:51.490 by Enron stock. Ah, there it is. So as long as 00:16:51.490 --> 00:16:54.149 Enron's stock price kept going up, the shell 00:16:54.149 --> 00:16:56.350 companies had value on paper and they could keep 00:16:56.350 --> 00:16:59.210 buying the bad debt. It was a self -fueling cycle. 00:16:59.690 --> 00:17:02.450 It was a Ponzi scheme built on the stock price. 00:17:02.970 --> 00:17:05.789 The moment the stock faltered, the whole house 00:17:05.789 --> 00:17:08.539 of cards was destined to collapse. And while 00:17:08.539 --> 00:17:10.599 they were juggling these books, they were also 00:17:10.599 --> 00:17:13.500 wreaking havoc in the real world. Section 5. 00:17:13.759 --> 00:17:16.579 The California Energy Crisis. This is where the 00:17:16.579 --> 00:17:18.759 story gets really, really dark. This is where 00:17:18.759 --> 00:17:21.319 the smartest guys in the room became the bad 00:17:21.319 --> 00:17:25.359 guys. In 2000, California deregulated its energy 00:17:25.359 --> 00:17:28.440 market. It was a deeply flawed system, and Enron 00:17:28.440 --> 00:17:30.480 exploited it ruthlessly. We've all heard about 00:17:30.480 --> 00:17:32.240 the rolling blackouts. I mean, traffic lights 00:17:32.240 --> 00:17:34.279 going out, businesses shutting down, grandmothers 00:17:34.279 --> 00:17:36.859 stuck in elevators. And Enron traders were actively 00:17:36.859 --> 00:17:38.779 causing this. They had these strategies with 00:17:38.779 --> 00:17:41.700 names like Death Star and Get Shorty and Ricochet. 00:17:42.079 --> 00:17:44.380 They would intentionally encourage power plants 00:17:44.380 --> 00:17:46.779 to shut down for maintenance to create artificial 00:17:46.779 --> 00:17:49.259 shortages. And when supply goes down, the price 00:17:49.259 --> 00:17:53.009 goes up. It skyrockets. They were selling power 00:17:53.009 --> 00:17:56.529 at 20 times the normal value. They were extracting 00:17:56.529 --> 00:18:00.089 billions and billions of dollars from California 00:18:00.089 --> 00:18:02.609 ratepayers. And there is a specific piece of 00:18:02.609 --> 00:18:04.750 evidence that really just nails the culture here. 00:18:04.890 --> 00:18:07.710 The Grandma Millie tapes. These are recordings 00:18:07.710 --> 00:18:10.970 of Enron traders talking during the crisis. And 00:18:10.970 --> 00:18:13.809 they just destroy any defense that they were 00:18:13.809 --> 00:18:16.289 just, you know. providing liquidity to the market 00:18:16.289 --> 00:18:19.329 i have the transcript right here one trader asks 00:18:19.329 --> 00:18:21.549 they're taking all the money back you guys stole 00:18:21.549 --> 00:18:23.910 from those poor grandmothers in california and 00:18:23.910 --> 00:18:25.769 the other trader laughs and says yeah grandma 00:18:25.769 --> 00:18:28.869 millie man but she's the one who couldn't figure 00:18:28.869 --> 00:18:31.690 out how to vote on the butterfly ballot they 00:18:31.690 --> 00:18:34.109 were mocking the elderly voters in florida while 00:18:34.109 --> 00:18:36.069 ripping them off in california and then the line 00:18:36.069 --> 00:18:38.299 that really sticks with you jammed right up her 00:18:38.299 --> 00:18:42.059 ass for $250 a megawatt hour. It's just chilling. 00:18:42.180 --> 00:18:44.859 It shows a complete and total lack of empathy. 00:18:45.259 --> 00:18:47.660 To them, it was just a video game. They were 00:18:47.660 --> 00:18:50.180 high -fiving in Houston over creating blackouts 00:18:50.180 --> 00:18:52.400 on the West Coast. So you have the accounting 00:18:52.400 --> 00:18:55.519 fraud, the moral bankruptcy, and this financial 00:18:55.519 --> 00:18:59.519 house of cards. Eventually, gravity has to kick 00:18:59.519 --> 00:19:04.259 in. Section 6. The Unraveling. The peak was August 00:19:04.259 --> 00:19:07.740 of 2000. The stock hits $90 a share. Everyone 00:19:07.740 --> 00:19:10.680 loves Enron. But the skeptics were starting to 00:19:10.680 --> 00:19:13.240 circle. Right. Bethany McLean. She wrote a piece 00:19:13.240 --> 00:19:16.259 for Fortune magazine titled, Is Enron Overpriced? 00:19:16.359 --> 00:19:19.420 Such a simple question. She just asked, how exactly 00:19:19.420 --> 00:19:21.740 does this company make money? She looked at their 00:19:21.740 --> 00:19:23.440 financial documents and she couldn't figure it 00:19:23.440 --> 00:19:25.819 out. And the reason was because it was unfiguratable. 00:19:26.019 --> 00:19:28.519 It was nonsense. And then there was Daniel Scotto, 00:19:28.640 --> 00:19:31.000 a utility analyst. He suspended his ratings on 00:19:31.000 --> 00:19:33.480 energy companies in California, warning that 00:19:33.480 --> 00:19:35.700 they weren't going to get paid. He told investors 00:19:35.700 --> 00:19:38.599 to sell Enron. And Enron did not handle the criticism 00:19:38.599 --> 00:19:41.420 well. There's a famous conference call in April 00:19:41.420 --> 00:19:44.420 of 2001. Richard Grubman, a skeptical analyst, 00:19:44.680 --> 00:19:47.200 asked Jeff Skilling for a balance sheet. Skilling 00:19:47.200 --> 00:19:48.920 kind of dodged, said they couldn't produce one 00:19:48.920 --> 00:19:51.720 just yet. Grubman pushed back, saying, you're 00:19:51.720 --> 00:19:53.500 the only company that can't release a balance 00:19:53.500 --> 00:19:55.380 sheet along with your earnings. And Skilling's 00:19:55.380 --> 00:19:57.420 response to that? He said, well, thank you very 00:19:57.420 --> 00:20:00.059 much. We appreciate that, asshole. On a live 00:20:00.059 --> 00:20:02.000 conference call with Wall Street. It was the 00:20:02.000 --> 00:20:05.329 emperor has no clothes moment. CEOs of solid 00:20:05.329 --> 00:20:07.789 companies don't call analysts names like that. 00:20:07.849 --> 00:20:10.930 It showed the stress. It showed the sheer arrogance. 00:20:11.130 --> 00:20:14.250 And internally, people knew. Right. Sharon Watkins. 00:20:14.470 --> 00:20:17.470 The VP of corporate development. She wrote an 00:20:17.470 --> 00:20:20.369 anonymous memo to Kenneth Lay in August 2001. 00:20:21.029 --> 00:20:23.670 She warned him in black and white that the company 00:20:23.670 --> 00:20:26.769 would implode in a wave of accounting scandals. 00:20:26.769 --> 00:20:29.690 She laid it all out. The SPEs, the inflated profits. 00:20:30.069 --> 00:20:32.789 She knew. But Lay didn't fix it. He tried to 00:20:32.789 --> 00:20:34.890 cover it up. He was selling his own stock while 00:20:34.890 --> 00:20:36.890 telling employees to buy more. And that's the 00:20:36.890 --> 00:20:39.759 ultimate betrayal. The stock started free -falling. 00:20:39.839 --> 00:20:42.160 They tried to arrange a merger with Danagy, a 00:20:42.160 --> 00:20:44.640 rival, to save themselves, but Danagy took one 00:20:44.640 --> 00:20:46.200 look at the real books and ran for the hills. 00:20:46.400 --> 00:20:49.480 And then, on December 2001, Enron filed for Chapter 00:20:49.480 --> 00:20:52.220 11 bankruptcy. At the time, it was the largest 00:20:52.220 --> 00:20:55.599 bankruptcy in U .S. history. $63 billion in assets. 00:20:55.880 --> 00:20:59.200 Just gone. Thousands of employees lost their 00:20:59.200 --> 00:21:02.599 jobs. But worse, so much worse, they lost their 00:21:02.599 --> 00:21:05.990 pensions. Enron had encouraged employees to put 00:21:05.990 --> 00:21:10.089 their entire 401ks into Enron stock. When the 00:21:10.089 --> 00:21:13.109 stock went from $90 to pennies, their retirement 00:21:13.109 --> 00:21:16.569 savings just evaporated. Unbelievable. Let's 00:21:16.569 --> 00:21:19.869 talk about consequences. Section 7, the aftermath. 00:21:20.349 --> 00:21:23.140 The legal fallout was massive. Arthur Anderson, 00:21:23.400 --> 00:21:25.079 the accounting firm that signed off on all this 00:21:25.079 --> 00:21:27.839 fraud, was convicted of obstruction of justice 00:21:27.839 --> 00:21:31.599 for shredding tons of documents. Literally. They 00:21:31.599 --> 00:21:34.220 were running industrial shredders 24 -7. And 00:21:34.220 --> 00:21:36.000 even though the conviction was later overturned 00:21:36.000 --> 00:21:38.339 by the Supreme Court on a technicality, the firm 00:21:38.339 --> 00:21:41.089 was destroyed. The damage was done. The big five 00:21:41.089 --> 00:21:43.349 accounting firms became the big four. And the 00:21:43.349 --> 00:21:45.789 executives. Kenneth Lay was convicted of conspiracy 00:21:45.789 --> 00:21:48.069 and fraud. He died of a heart attack before he 00:21:48.069 --> 00:21:49.670 could be sentenced, so technically his conviction 00:21:49.670 --> 00:21:51.809 was vacated, but, you know, history judges him. 00:21:51.970 --> 00:21:54.170 And Skilling. Jeff Skilling got 24 years. He 00:21:54.170 --> 00:21:56.490 ended up serving about 12. He was the face of 00:21:56.490 --> 00:21:59.150 the arrogance, really. And Andy Fastow, the architect 00:21:59.150 --> 00:22:01.150 of the whole shell game. He cut a plea deal. 00:22:01.369 --> 00:22:03.569 He testified against the others. He got six years. 00:22:03.849 --> 00:22:06.430 And out of all this mess, we got the Sarbanes 00:22:06.430 --> 00:22:10.269 -Oxley Act. Yes. A huge piece of legislation. 00:22:10.569 --> 00:22:12.869 It made executives personally liable for the 00:22:12.869 --> 00:22:14.930 accuracy of financial statements. It tried to 00:22:14.930 --> 00:22:17.009 put some guardrails up to prevent this from ever 00:22:17.009 --> 00:22:19.690 happening again. And what about the actual assets, 00:22:20.009 --> 00:22:23.890 the stuff Enron owned? This is the irony. The 00:22:23.890 --> 00:22:27.109 boring stuff, the pipelines, was sold off and 00:22:27.109 --> 00:22:30.109 is still operating profitably today. It's valuable, 00:22:30.430 --> 00:22:33.910 real infrastructure. And the future, the broadband 00:22:33.910 --> 00:22:36.910 stuff. The famous Las Vegas broadband facility. 00:22:37.849 --> 00:22:40.069 It was sold for pennies on the dollar. It was 00:22:40.069 --> 00:22:42.029 bought by a guy named Rob Roy who started a company 00:22:42.029 --> 00:22:44.569 called Switch. Switch, the massive data center 00:22:44.569 --> 00:22:46.710 company. The very same. That facility is now 00:22:46.710 --> 00:22:48.750 part of what they call the SuperNAP, one of the 00:22:48.750 --> 00:22:50.950 most advanced data centers in the world. So the 00:22:50.950 --> 00:22:53.410 idea was right. The Internet did need massive 00:22:53.410 --> 00:22:56.450 bandwidth. Enron was just too early, too fraudulent, 00:22:56.450 --> 00:22:58.690 and way too focused on the stock price to actually 00:22:58.690 --> 00:23:01.430 build the business. That is a fascinating nugget. 00:23:01.509 --> 00:23:03.450 The vision was actually correct. The execution 00:23:03.450 --> 00:23:06.349 was criminal. Precisely. It's the story of the 00:23:06.349 --> 00:23:09.569 whole company in a nutshell. Now, we have to 00:23:09.569 --> 00:23:11.809 jump to the present day. Because if you thought 00:23:11.809 --> 00:23:14.950 the Enron story ended in 2001, you haven't checked 00:23:14.950 --> 00:23:19.329 Twitter, sorry, X lately. Section 8, the satirical 00:23:19.329 --> 00:23:21.950 reboot. This is one of the strangest codas to 00:23:21.950 --> 00:23:24.609 a corporate history I have ever seen. On December 00:23:24.609 --> 00:23:30.230 2, 2024, the at Enron account on X posted. We're 00:23:30.230 --> 00:23:32.819 back. Can we talk? And the Internet just lost 00:23:32.819 --> 00:23:35.680 its mind. It did. People had no idea if it was 00:23:35.680 --> 00:23:37.539 real, if it was a scam or what was going on. 00:23:37.640 --> 00:23:40.420 It turns out the rights to the Enron brand have 00:23:40.420 --> 00:23:45.279 been bought at an auction for $275. $275 to own 00:23:45.279 --> 00:23:47.779 the Enron name? That's a steal. And the people 00:23:47.779 --> 00:23:49.759 who bought it are linked to the Birds Aren't 00:23:49.759 --> 00:23:51.759 Real movement. For listeners who don't know, 00:23:51.799 --> 00:23:54.759 Birds Aren't Real is a Gen Z satirical conspiracy 00:23:54.759 --> 00:23:57.500 theory claiming that all birds are actually government 00:23:57.500 --> 00:23:59.480 drones. It's a huge piece of performance art. 00:23:59.660 --> 00:24:02.279 Exactly. So these performance artists resurrected 00:24:02.279 --> 00:24:05.519 Enron. They announced a new CEO, a guy named 00:24:05.519 --> 00:24:09.240 Conor Gatos. They staged a power summit on January 00:24:09.240 --> 00:24:12.420 6th, 2025. And they announced new products, the 00:24:12.420 --> 00:24:17.170 Enron Egg. The Enron Egg. a micronuclear reactor 00:24:17.170 --> 00:24:20.609 that is capable of powering a suburban home for 00:24:20.609 --> 00:24:24.089 10 years. Using 20 % enriched uranium, no less. 00:24:24.309 --> 00:24:26.630 Obviously, this is not a real product. It's biting 00:24:26.630 --> 00:24:29.670 satire on the tech industry's tendency to overpromise. 00:24:29.890 --> 00:24:32.670 It's skewering the clean energy hype cycles we 00:24:32.670 --> 00:24:34.609 see all the time. And they launched a crypto 00:24:34.609 --> 00:24:37.900 token, of course. Had to. Enron on the Solana 00:24:37.900 --> 00:24:39.980 blockchain. Which is just perfect. Enron was 00:24:39.980 --> 00:24:42.339 the original financialization of everything company. 00:24:42.519 --> 00:24:44.779 Crypto is the ultimate financialization of, well, 00:24:44.779 --> 00:24:47.579 nothing. The token's market cap spiked to $700 00:24:47.579 --> 00:24:51.880 million and then crashed 76 % in 24 hours. It's 00:24:51.880 --> 00:24:54.140 like they reenacted the Enron stock chart in 00:24:54.140 --> 00:24:56.319 speedrun mode. It's performance art reflecting 00:24:56.319 --> 00:24:58.740 reality in the most direct way possible. They 00:24:58.740 --> 00:25:00.859 even had the CEO get pied in the face, which 00:25:00.859 --> 00:25:03.220 mirrors a real incident where Jeff Skilling was 00:25:03.220 --> 00:25:05.700 pied in San Francisco after the collapse. So 00:25:05.700 --> 00:25:07.640 why do you think this brand still resonates? 00:25:07.940 --> 00:25:10.940 Why are kids who weren't even born when Enron 00:25:10.940 --> 00:25:13.619 collapsed making memes about it? Because Enron 00:25:13.619 --> 00:25:16.240 has become the archetype. It is the shorthand 00:25:16.240 --> 00:25:19.180 for corporate villain. It's the symbol of the 00:25:19.180 --> 00:25:21.240 suit -wearing sociopath who will destroy the 00:25:21.240 --> 00:25:24.720 world for a bonus. In an era of skepticism about 00:25:24.720 --> 00:25:28.480 capitalism, about tech bros, about AI hype, Enron 00:25:28.480 --> 00:25:30.839 is the patron saint of the grift. It really is. 00:25:30.920 --> 00:25:34.079 It's the ultimate cautionary tale that it seems 00:25:34.079 --> 00:25:36.500 nobody seems to actually learn from. And that 00:25:36.500 --> 00:25:38.619 leads us to the big question, doesn't it? So 00:25:38.619 --> 00:25:40.480 what does this all mean? We've walked through 00:25:40.480 --> 00:25:42.539 the history, the fraud, the blackouts, and now 00:25:42.539 --> 00:25:44.960 the memes. The takeaway for me is all about the 00:25:44.960 --> 00:25:48.559 danger of intangibles. Enron was obsessed with 00:25:48.559 --> 00:25:50.960 being asset light. They wanted to trade intellectual 00:25:50.960 --> 00:25:52.819 capital. They didn't want to get their hands 00:25:52.819 --> 00:25:55.079 dirty with actual pipes and actual plants. And 00:25:55.079 --> 00:25:57.799 today. Look around. We have crypto companies 00:25:57.799 --> 00:25:59.920 valued at billions of dollars with no actual 00:25:59.920 --> 00:26:03.039 product. We have AI companies trading on revenue 00:26:03.039 --> 00:26:05.220 multiples that assume they will own the entire 00:26:05.220 --> 00:26:07.839 future of the economy. We have a market that 00:26:07.839 --> 00:26:10.700 is completely obsessed with narrative over cash 00:26:10.700 --> 00:26:13.039 flow. We are doing it again, aren't we? We might 00:26:13.039 --> 00:26:15.339 be. I mean, Enron wasn't an anomaly. It was a 00:26:15.339 --> 00:26:18.619 preview. They were trying to monetize the idea 00:26:18.619 --> 00:26:22.740 of value rather than value itself. And when you 00:26:22.740 --> 00:26:25.460 look at how much of our modern economy is based 00:26:25.460 --> 00:26:28.359 on intangible assets, on brand value, and on 00:26:28.359 --> 00:26:31.000 speculative tech, you really have to wonder. 00:26:31.160 --> 00:26:33.980 Have we actually learned the lesson? Or did Enron 00:26:33.980 --> 00:26:36.990 just do it 20 years too early? That is a terrifying 00:26:36.990 --> 00:26:39.650 thought to leave us with. Next time you see a 00:26:39.650 --> 00:26:41.869 company hyped as changing the world, but you 00:26:41.869 --> 00:26:44.529 can't quite figure out how they make money. Yeah. 00:26:44.890 --> 00:26:47.210 Maybe go look for the pipelines. Look for the 00:26:47.210 --> 00:26:48.990 boring stuff. And maybe check if they named their 00:26:48.990 --> 00:26:51.329 company after an intestine. Always check the 00:26:51.329 --> 00:26:54.289 dictionary. That's it for this deep dive into 00:26:54.289 --> 00:26:56.789 Enron. Thanks for listening and stay curious. 00:26:56.869 --> 00:26:57.490 And stay skeptical.