# What did Enron actually do, as a business? **URL:** \ **Category:** Factual Questions\ **Created:** [August 16, 2012, 3:03pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673 "2012-08-16T15:03:36Z")\ **Posts on this page:** 12\ **Page:** 2
**Author:** ![Smapti](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/smapti/32/17938_2.png) [@Smapti](https://boards.straightdope.com/u/Smapti)\ **Post date:** [August 17, 2012, 3:16am UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/21 "2012-08-17T03:16:31Z")
> [@Jas09](#): > > So Grandma Millie was paying $250 per megawatt-hour rather than the \<$50 she was paying a year earlier. [“I’m taking your energy, bitch!”](http://video.google.com/videoplay?docid=1123018339252335553) ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [August 17, 2012, 6:34am UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/22 "2012-08-17T06:34:07Z")
I know at the time, I talked to IT consultants who mentioned that there was a client who was some large industrial plant (pulp&paper? Smelter?) in Washington or Oregon that found it cheaper to shut down, pay the workers to stay home, and sell their electricity allocation to California, than to produce product. The problem I heard was that the California legislators in a burst of free-market brilliance decided that they were aiming to discourage long-term price stability in the energy market; they thought having fluctuating prices meant there was more opportunity for profit and so more players would get in. They were right about “players”, but what they missed was that during the run-up to deregulation the regulated utilities saw no reason to invest in large expensive capacity since the market might undercut them. Nobody wanted to loan them money for that either. After deregulation, volatility actually discouraged new capacity, since infrastructure was a long-term cost and you could just as easily lose big as win big. So the market was perfect for manipulation, where you turn off some generators “for maintenance” and then charge highway robbery prices for your remaining output, since demand was relatively inelastic without enforced brownouts. ---
**Author:** ![minlokwat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/minlokwat/32/2844_2.png) [@minlokwat](https://boards.straightdope.com/u/minlokwat)\ **Post date:** [August 17, 2012, 1:09pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/23 "2012-08-17T13:09:23Z")
> [@BMalion](#): > > They were the smartest guys in the room. Actually it’s not a bad read. [Link](http://www.amazon.com/Smartest-Guys-Room-Amazing-Scandalous/dp/1591840082) In it the authors describe Enron as the perfect storm of “greed, corruption and incompetence.” The outright shenanigans they pulled such as deliberately manipulating the California electricity supply are explained in detail. Other fiascos include trying to merge with Blockbuster in some sort of video streaming project though the technology simply wasn’t in place. They tried to build a power plant in India despite warnings that the task was virtually undoable (it failed and cost the company billions). There’s also the story of the Enron ship sinking fast and Ken Lay famously polling folks about what color interior they should go with for the company’s private jet. It’s probably available at your local public library for the low, low price of nothing. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [August 17, 2012, 1:34pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/24 "2012-08-17T13:34:24Z")
I remember, just before they went bust, they announced a new business-trading communications “bandwidth”! It was another scam to fleece their investors. A bunch of worthless criminals-and their ex-president claimed he had no knowledge of what these crooks were p to. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [August 17, 2012, 2:13pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/25 "2012-08-17T14:13:24Z")
> [@Skammer](#): > > Not to mention their “Big Five” accounting firm, Arthur Andersen, which did not survive the scandal (in any recognizable form, anyway). Hence, it is now “Big-4”.😃 Malcolm Gladwell (Outliers) wrote an interesting article about consultingfirm Mckinsey’s influence on Enron: [http://www.gladwell.com/2002/2002\_07\_22\_a\_talent.htm](http://www.gladwell.com/2002/2002_07_22_a_talent.htm) > [@](#): > > This “talent mind-set” is the new orthodoxy of American management. It is the intellectual justification for why such a high premium is placed on degrees from first-tier business schools, and why the compensation packages for top executives have become so lavish. In the modern corporation, the system is considered only as strong as its stars, and, in the past few years, this message has been preached by consultants and management gurus all over the world. None, however, have spread the word quite so ardently as McKinsey, and, of all its clients, one firm took the talent mind-set closest to heart. It was a company where McKinsey conducted twenty separate projects, where McKinsey’s billings topped ten million dollars a year, where a McKinsey director regularly attended board meetings, and where the C.E.O. himself was a former McKinsey partner. The company, of course, was **Enron** He goes on to tell how Enron would hire the “best and the brightest” and just let them run wild doing what they want. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [August 17, 2012, 2:25pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/26 "2012-08-17T14:25:42Z")
> [@minlokwat](#): > > Actually it’s not a bad read. > > [Link](http://www.amazon.com/Smartest-Guys-Room-Amazing-Scandalous/dp/1591840082) > > In it the authors describe Enron as the perfect storm of “greed, corruption and incompetence.” The incompetence is the part that is often forgotten. The book goes into great detail about how much of the senior management had _no clue_ how their business even worked. ---
**Author:** ![BubbaDog](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bubbadog/32/333_2.png) [@BubbaDog](https://boards.straightdope.com/u/BubbaDog)\ **Post date:** [August 17, 2012, 2:33pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/27 "2012-08-17T14:33:19Z")
> [@msmith537](#): > > To elaborate, the energy industry isn’t some giant monolithic entity that controls all the powerplants in the USA and pulls a lever that decides how much the electrons in your home should cost. It is a complex network of suppliers, distributors and re-sellers controlled by a combination of private companies and government entities. > > Basically the way energy traders like Enron work is buy buying commitments to purchase energy when prices are low and selling those commitments when energy prices are high. The end result is they make money and your energy bills don’t fluctuate as much. > > Problem was, **they apparently sucked at it,** and hit that fact from the rest of the world. [Bolding Mine] This is a big misconception. They didn’t suck at trading at all. They were very good at it. The trade business was the seed business that injected the initial big wad of cash into the business and kept injecting money up to its demise. It was the management approved hype machine that took a billion dollar company and made it look like a 75 billion dollar company via ponzi style accounting moves that was the ruse and the ultimate cause of its demise. They were good at legitimate trading. They were also good at cheating at it. But strip away the management criminal moves and some of the occasional market manipulation moves and there was a medium size core of shrewd energy trading. They had every bit the ability to operate a legitimate trading company worth hundred of millions of dollars but chose instead to criminalize their business. ---
**Author:** ![BubbaDog](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bubbadog/32/333_2.png) [@BubbaDog](https://boards.straightdope.com/u/BubbaDog)\ **Post date:** [August 17, 2012, 2:48pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/28 "2012-08-17T14:48:29Z")
> [@ralph124c](#): > > I remember, just before they went bust, they announced a new business-trading communications “bandwidth”! > It was another scam to fleece their investors. > A bunch of worthless criminals-and their ex-president claimed he had no knowledge of what these crooks were p to. Actually they made a somewhat legitimate stab at bandwidth trading. They (erroneously) thought that the need for data transfer between large metropolitan areas would grow rapidly (true) and that the needed bandwidth capacity between those areas would require significant capital investment and construction (false). Their attempts to commoditize the bandwidth market were crushed by unwilling incumbent participants (Telcos) and the fact that new algorithms and techniques where allowing increased magnitudes of transfer over existing paths. It’s hard to develop a futures market for a product that has a precipitously falling price. ---
**Author:** ![Mister\_Rik](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mister_rik/32/491_2.png) [@Mister\_Rik](https://boards.straightdope.com/u/Mister_Rik)\ **Post date:** [August 17, 2012, 2:51pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/29 "2012-08-17T14:51:03Z")
> [@md2000](#): > > I know at the time, I talked to IT consultants who mentioned that there was a client who was some large industrial plant (pulp&paper? Smelter?) in Washington or Oregon that found it cheaper to shut down, pay the workers to stay home, and sell their electricity allocation to California, than to produce product. I believe it was Alcoa. We have really cheap electricity here in Washington, mostly from hydroelectric sources, and most if not all counties use the “[Public Utility District](http://en.wikipedia.org/wiki/Public_utility_district)” model rather than private power companies. So companies like Alcoa set up here because they need massive amounts of cheap electricity. ---
**Author:** ![phreesh](https://avatars.discourse-cdn.com/v4/letter/p/9fc29f/32.png) [@phreesh](https://boards.straightdope.com/u/phreesh)\ **Post date:** [August 17, 2012, 5:56pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/30 "2012-08-17T17:56:51Z")
Many of the commentators are underestimating Enron. There were many very smart, very competent people that worked there. Keep in mind they built one of the most valuable companies in the world. Yes, there was rampant criminality and subterfuge, but even given that, they were legitimately a very large and very valuable company with many hard-working intelligent, capable people who were shocked to discover the company they were working for was a significant criminal enterprise. Also, I don’t know about Alcoa, but Alcan in British Columbia was taken to court because it was selling its cheap power rather than using it to smelt aluminum (and generate local jobs) > **[Kitimat loses bid to block Alcan power sales | CBC News](https://www.cbc.ca/news/business/kitimat-loses-bid-to-block-alcan-power-sales-1.743935)** > > Kitimat, B.C., home of a storied Alcan aluminum smelter, has lost its latest bid to block sales of electricity from the dam that powers the plant. ---
**Author:** ![Bosda\_Di\_Chi\_of\_Tricor](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bosda_di_chi_of_tricor/32/16845_2.png) [@Bosda\_Di\_Chi\_of\_Tricor](https://boards.straightdope.com/u/Bosda_Di_Chi_of_Tricor)\ **Post date:** [August 17, 2012, 10:59pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/31 "2012-08-17T22:59:02Z")
Enron used to: [ul] [li]uniquely incubate multidisciplinary scenarios[/li][li]competently incentivize virtual scenarios[/li][li]proactively evisculate innovative imperatives[/li][li]synergistically utilize bricks-and-clicks data[/li][li] objectively promote proactive benefits[/li][/ul] In other words, they (EXPLETIVE DELETED} _everybody!!_ ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [August 17, 2012, 11:20pm UTC](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673/32 "2012-08-17T23:20:40Z")
A valuable and insightful contribution as usual, **Bosda**. [Previous page](https://boards.straightdope.com/t/what-did-enron-actually-do-as-a-business/631673.md?page=1)