Two Tyler Retweets

Is this geeks-suits dynamic caused by stupid government regulations? If so, what would the effective reform package look like?

I like the "an/a" typo in the post because it shows Arnold's understanding that there's an important difference between "an easy way to make money" and "a way to make easy money."

My guess was that Enron's claim to fame was making a business model out of opacity. They replaced the standard M.O. of dummy corporations with a new twist we'll call dummy partnerships, engineered, not surprisingly by Arthur Anderson, the world's largest partnership, at least at the time.

Since the M.O. is the generation of vast amounts of disinformation and noise. I'm sure to some extent they were gaming the tax system, or the SEC rules, but they were also gaming the market itself. The logic seems to be that if you bury the liabilities under enough layers of dummy partnerships, the investing public won't be able to see them.

Enron generated profits by writing put options on their stock. So when the stock started to go down, they incurred losses on the put options, which drove the stock down further, and so on, with the result that they went from apparent soundness to bankruptcy very quickly.

If I understand correctly, the smarter thing would have been to write call options on their own stock, so when the stock went down they would at least make money on the call options, thus mitigating the loss.

Placing put options was like playing double-or-nothing, which is usually just a good way to go broke. (I love Edwin Silberstang's discussion of why this is a bad system in Vegas.)

The full interview with me, which is almost three times longer and covers not only Enron but also my development as a free-market energy specialist, has been posted here:

http://www.ethicsandentrepreneurship.org/20100924/interview-with-robert-bradley-jr/