Explaining Enron to kids

Bill Sjostrom —  13 June 2006

The current edition of BusinessWeek has a humorous article (see here) on how to explain Enron to kids. Here’s an excerpt from one suggestion:

Once upon a time in the land of Enron, there was a king named Ken — well, actually, he wasn’t a king, but he thought he was. He had a friend, at least we think he was a friend, who was a prince named Jeff. King Ken and Prince Jeff ruled over the land of Enron. In this land they made…well, they made money for themselves. What else did they make? Not much else. However, this isn’t what they told the people of the land of Enron. They told the people that they were making lots of electricity and other invisible stuff. We don’t know how to make electricity and other invisible stuff, and neither did they.

Here’s the beginning of another suggestion:

Well, kids, amazingly enough, Enron worked just like the pie-baking bee for the local charity bazaar. Jill bakes four pies, while another Jill, who doesn’t actually exist, bakes 24 pies.

Once the first Jill’s four pies are delivered to the bazaar (minus the two she “lost” on the way), the nonexistent Jill’s “mom” records 24 pies as delivered, buys them all back using a check drawn on a fictitious account, then demands 24 full cash refunds because they “taste funny.” Flustered, the nice bazaar ladies cough it up. With each pie priced at $5, that’s $120 net, or a clear profit of $100.

Here’s my suggestion: Enron hired Rumplestiltskin as its CFO. Rumplestilskin used special purpose entities to turn straw into gold. Unfortunately, the king of Enron and his subjects consciously ignored the fact that Rumplestiltskin is a fairy tale and that it’s really not possible to turn straw into gold.