Enron, every mention
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tap a year for its mentions
every year anyone David Rosenthal 207Ben Gilbert 153Packy McCormick 3
Verbatim, from the transcripts: the passages where Enron comes up
Enron · Acquired
- ▶ 2:50:24 David Rosenthal The whole suite of settlements with a whole variety of banks, JP Morgan, Citigroup, various others, come in for a total of 7.2 billion dollars coming into this rotting carcass of Enron, which results in a distribution of six dollars and 79…
- ▶ 2:50:48 David Rosenthal So if you had bought Enron equity in those days between the collapsing of the Dinergy merger
- ▶ 2:51:10 Ben Gilbert You know, we should go in and buy some Enron stock.
- ▶ 2:53:56 David Rosenthal And after having listened to this acquired episode on Enron.
- ▶ 2:54:24 Ben Gilbert One is, uh, one of the best traders from Enron.
- ▶ 2:54:40 Ben Gilbert He went on to solve world peace or anything, but like a person went on to build something successful after Enron, which is worth calling out.
- ▶ 2:54:51 David Rosenthal Apparently, he was like a super, super young hotshot trader at Enron.
- ▶ 2:54:58 David Rosenthal Yeah, he got the largest cash bonus that Enron ever gave to anybody who wasn't a senior executive of, I think, eight million dollars.
- ▶ 2:55:25 Ben Gilbert Speaking of a seed to sort of start a firm, we didn't talk a lot in this episode about Richard Kinder, and we didn't because while he was as hard driving as the rest of the Enron execs, he was probably the most ethical and the most honest…
- ▶ 2:56:22 Ben Gilbert You know, he's really good at running and managing a pipeline business, and when he saw that that wasn't the focus at Enron anymore, got out and started his own pipeline business.
- ▶ 2:56:31 Ben Gilbert And David, do you know what other asset was bought from Enron to become someone else's something business?
- ▶ 2:56:37 David Rosenthal Well, I know UBS, where my first job was out of college, bought the trading assets out of Enron.
- ▶ 2:56:55 Ben Gilbert GE bought the wind business from Enron, and I believe even today is sort of the cornerstone of their wind energy business.
- ▶ 2:58:06 Ben Gilbert And Enron makes so clear that even long after you're a startup, it is possible to have all the window dressing around a business, but not a business itself.
- ▶ 2:58:16 Ben Gilbert They are undoubtedly a company, a corporation, lots of structure, lots of people, lots of activities, lots of reporting.
- ▶ 2:58:22 Ben Gilbert But what is the actual business inside of Enron?
- ▶ 2:58:41 Ben Gilbert Are the biggest pieces inside the company that are real businesses, generate real value for customers, and the ability to capture some of that value by the company.
- ▶ 2:59:16 David Rosenthal And had the company stopped there and just been a trading participant in the energy derivatives market, yes, there would have been value there.
- ▶ 2:59:34 David Rosenthal It's kind of a commodity, like, nobody dominates the industry, there's no, like, monopoly bank, but there's an oligopoly, and, um, they all do pretty well, and I think Enron probably would have ended up like that in the trading business.
- ▶ 3:01:55 Ben Gilbert Analyze Enron through, and even if you had tried to analyze Enron in 99 through a Hamilton-Helmer lens, you probably would have had a hard time coming up with power, which should have led you to the answer that this thing is at least…
- ▶ 3:02:24 Ben Gilbert It's almost like the company had a lot of things going for it.
- ▶ 3:02:46 David Rosenthal The company did really, really, really great for a really long time.
- ▶ 3:02:51 David Rosenthal The business, other than the underlying pipeline and then maybe the trading operations, but the business did not exist at the scale of the company for many years.
- ▶ 3:03:18 Ben Gilbert The question is probably how did Enron manage to accomplish what they accomplished?
- ▶ 3:03:21 Ben Gilbert Because no doubt they accomplished something that is hard to do.
- ▶ 3:03:25 Ben Gilbert I think that's actually an interesting framing, is they managed to achieve something that to date no other humans had been able to do, which is
- ▶ 3:03:48 Ben Gilbert There's lots of things that they did that were illegal, that they got prosecuted for, but there's a lot of things they did that were surprisingly legal.
- ▶ 3:08:45 Ben Gilbert Well, there's a point that I made earlier that I think is worth trying to put in tighter words, which is Enron's fatal flaw is that they borrowed from the future until there was no future left to borrow from.
- ▶ 3:08:59 Ben Gilbert They squeezed everything by doing mark-to-market accounting out of the next 20 years in any given deal that they did, and then they got into a bunch of markets, and they recognized all the potential upside
- ▶ 3:09:38 Ben Gilbert Well, yeah, that's why they were the seventh most valuable company in the world, because on paper,
- ▶ 3:09:42 Ben Gilbert That's what they were doing.
- ▶ 3:09:52 Ben Gilbert But when you're discounting the future cash flows of something to the present and then recognizing the value today, they were doing that first as revenue.
- ▶ 3:10:14 David Rosenthal Well, then you throw the special purpose entities into the mix where they're recognizing revenue on the way out, too.
- ▶ 3:10:19 David Rosenthal They were triple multiplying it.
- ▶ 3:10:37 Ben Gilbert Everything would go right in every situation, and every asset, every deal that they did would be the most valuable it could possibly be, and that they would continue to be able to do this number of deals in more geographies and more…
- ▶ 3:11:04 Ben Gilbert And I don't think they quite bumped up against that, but
- ▶ 3:11:20 Ben Gilbert Mark-to-market accounting in the situations they were doing mark-to-market accounting, and then applying a more-than-sector multiple on the business, that is the big issue.
- ▶ 3:12:34 David Rosenthal He was helping Enron perpetuate this incredible fraud, and he was directly embezzling and stealing money through all of the crazy partnerships and like the copper deals and like all of that stuff.
- ▶ 3:13:23 David Rosenthal And she didn't say this explicitly, but I thought about it, and I was like, Fastow stole about 40 to sixty million out of Enron directly, right?
- ▶ 3:15:55 David Rosenthal We're talking about Enron here.
- ▶ 3:16:27 Ben Gilbert And, like, Enron left behind a trillion dollars of claims to 30,000 creditors.
- ▶ 3:16:38 Ben Gilbert They're one of five or six big investment banks that work with them.
- ▶ 3:16:43 Ben Gilbert I think people forget the Enron scale.
- ▶ 3:16:48 Ben Gilbert This is like a terrible bunch of illegal stuff that happened, unethical stuff that happened, but the scale of Enron, I think because it happened 20 years ago, people sort of forget how big it was.
- ▶ 3:17:00 David Rosenthal I think also on that point, on a reflective note, studying the Enron history, it's crazy
- ▶ 3:17:19 David Rosenthal Like, you know, it was years and years before all this stuff came out in the Enron case.
- ▶ 3:17:38 Ben Gilbert I don't think there's a single interaction between Enron and a human, like mostly employees, where the human didn't make out versus the company like a bandit.
- ▶ 3:17:56 Ben Gilbert Every single person that walked away from, and Ron walked away with some kind of incredible golden parachute, or amazing sweetheart deal on an asset that they bought from the company, or sign this paper, and stay quiet, and here's a bunch…
- ▶ 3:18:10 Ben Gilbert And every person just pulled one over on the company and its shareholders over and over and over again.
- ▶ 3:18:17 Ben Gilbert And I don't think the company ever had a hard line with anyone.
- ▶ 3:22:15 Ben Gilbert So where does Enron fall into this?
- ▶ 3:22:18 Ben Gilbert Well, they managed to create very little value, and they captured far more value than they created by an order of a hundred to a thousand.
- ▶ 3:22:28 Ben Gilbert So, it's probably the first time that we've ever, on this show, seen someone capture more value than they created.
- ▶ 3:22:41 David Rosenthal I don't know enough about the energy industry to say whether the innovations in financialization, securitization, creating energy derivatives, whether the existence of all that, and Enron and its principles being
- ▶ 3:23:00 David Rosenthal Whether that generated enough value to offset the massive value destruction of Enron the company?
- ▶ 3:23:19 Ben Gilbert I think an interesting way to close is by describing what were the activities that they did that were like a legitimate, interesting business, value creative for customers.
- ▶ 3:23:27 Ben Gilbert And what was the illegitimate stuff they did?
- ▶ 3:24:46 Ben Gilbert So the one that's related to this episode is something that I unfortunately never got a chance to see because it has been over for eight years, but there was a limited run Broadway play called Enron the Musical.
- ▶ 3:24:57 Ben Gilbert And we will put a link in the show notes to the trailer for Enron the Musical.
- ▶ 3:25:37 Ben Gilbert The guy who plays Ari Spiros, who, uh, works for the SEC, is in Enron the Musical.
Not Boring (with Packy McCormick) - Extended Cut · Acquired
- ▶ 10:22 Packy McCormick So one of my dad's, my dad was a consultant, uh, at Arthur Anderson, uh, and luckily got out before Enron, thank God.
- ▶ 18:55 Packy McCormick That was a wild experience in itself because Bank of America's energy trading desk was all ex Enron people.
- ▶ 19:01 Packy McCormick Uh, and so they were not psyched to not be at Enron anymore and not psyched to be on a desk that didn't take physical delivery.
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