Here, my early experience was a doctor who sent bushel baskets full of normal gallbladders down to the pathology lab in the leading hospital in Lincoln, Nebraska. It reminded me of a great story from Charlie Munger about a gallbladder surgeon in Lincoln, Nebraska that did far too much surgery which ended up resulting in unnecessary deaths. From the outside looking in, it seems that there is so much evidence of what was going on that they must have been willfully harming people, but I am not so sure.

It’s impossible to know what was going through Skilling, Lay and Fastow’s heads to know what is true but my impression is that it didn’t seem like a fraud to them. That’s part of it, but, as usual, the story, I think, is more complicated than that. The common narrative around Enron casts it as a giant fraud where the people at the top – Ken Lay (CEO), Jeff Skilling (COO then CEO) and Andy Fastow (CFO) – were knowingly misleading the many employees and investors that ended up losing vast amounts of money. What lessons can we draw from the story of the greatest blow-up of a single company in U.S. This seems inconceivable and, indeed, that is the point.

In 2019, that same #5 spot was occupied by Amazon so you can almost imagine the impact as almost akin to Amazon blowing up in 2019. In 2002, Enron was listed as the #5 company in Fortune 500’s list of largest companies. It’s somewhat hard to understand just how big a deal this was in retrospect. There is, perhaps, no better example than Enron.

At some point, though who can say win, the tide will come out and we will see who has been swimming naked.Įvery recession tends to have its share of frauds and “zombie” companies that finally collapse. Warren Buffett is famous for saying, “Only when the tide goes out do you discover who’s been swimming naked.” With the exception of Q1 2020, markets have been in an unprecedented 10+ year “high tide” bull market. Buy The Smartest Guys in the Room on Amazon

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