What went wrong with Enron?
I think it’s a pretty straightforward problem with Enron. The company had a core business that worked. It decided to move beyond that business, thinking that somehow the complexity itself would create profit. There were a handful of investment analysts who were deeply suspicious of Enron on the basic principle that if a transaction cannot be explained, then it probably isn’t profitable. But Enron managed to sell most of the world on the idea that if no one could understand their business transactions, then the transactions must be new, exciting and profitable. Enron’s house of cards eventually tumbled down. The real problem was not so much overall business activity that had gone sour; it was a complex, inner-related business structure that hid risks and collapsed when one piece started to go bad. What are the implications of the Enron downfall? The fallout from Enron will be measured over decades, not weeks. Enron has already changed the regulatory environment. The deregulation juggern
