Al Qaeda, Inc: The Enron Business Model

Charles Jannuzi jannuzi at edu00.f-edu.fukui-u.ac.jp
Wed Feb 13 18:28:13 PST 2002


The Ponzi analogy works for some because Enron had a pyramid scheme going. Ponzi, if anyone now knows the term, is used to describe just about any pyramid scheme or dodgy business venture which bilks the investors. And those informed investors in the Hayekian marketplace of information should know when something is too good to be true, but they never do.

The Enron pyramid attracted more glowing analysis and more stupid investors to keep the whole thing going. And opaque pyramids work until there is a liquidity crunch or someone at the top spills the beans.

I would argue the way US and UK companies use profit reports, takeovers (Tyco, GE anyone?) and the stock markets, which bid up their stock prices to inflate their overall worth so they can keep doing more of the same, is a pyramid (even as many companies don't pay dividends while managers and board members pull off insider deals ).

Sure it's not pure Ponzi. Hell, even the crime syndicates provides goods and services. I'm not sure the Al Qaeda analogy works very well though because if reports are to be believed, the man at the top blew his wad to achieve non-profit ends. I am interested, though, in seeing if Enron and Jack Welch's GE match up.

Charles Jannuzi



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