Enron: Balancing sheets off Vibes

By Ben Chen
January 2025

Back in the 1990s, Enron got the same praise and admiration from corporate America as Nvidia does today. Wall Street investors couldn’t stop throwing money at this miracle energy company despite not knowing anything about their business model, drawing parallels to Nvidia once again. Enron was hailed as the future of energy. They weren’t just selling power, they were redefinding it. What does that mean? No one knows, but they pretended to understand.

At the helm of this golden child was CEO Jeffery Skilling, whose genius lay in turning accounting into disguising crystal ball interpretations. Skilling introduced “mark-to-market” accounting, which essentially means booking profits based on imaginary money Enron might make decades later. It was less about finance and more about vibes; if you felt profitable, you were profitable!

To keep the vibes up, Skilling spun losses into shady subsidiaries with names straight out of Star Wars: Chewco, Jedi, and LJM. These companies were essentially black holes where bets gone wrong disappear forever; out of sight, out of mind (and books). No need to worry though! Enron shares soared to all time highs, and executives were cashing out before you could say “SEC investigation”.

The brilliance of Enron wasn’t just in their accounting gimmicks. It was in their sheer confidence while teetering on the brink of collapse. Skilling reassured investors that everything was okay, and who wouldn’t believe the CEO of this money printer? Even employees were encouraged to pour all their savings into Enron stock, because what better to do with your hard earned money than betting it on a house of cards?

Enron’s downfall was inevitable. All it took was a single whistleblower, some investigative journalists, and a heap of unpaid electricity bills to pull back the curtain on this dumpster fire of a company. Billions of dollars evaporated overnight, and Wall Street’s golden child collapsed in a way that would make Chernobyl proud.

Enron’s legacy lives on in business schools around the world, where its story is taught as a masterclass in how not to run a company. It’s also a cautionary tale for investors; just because a company is “redefining” an industry, it could also mean the company is redefining fraud too. If anything, Enron proved that the line between genius and disaster was just a creative accountant away.