Sunday, June 06, 2004

who’s burning now, baby?

Recently, recordings of conversations among Enron energy traders were released to the media. These snippets painted pictures of arrogant and ruthless kids who weren’t afraid to disrupt the operation of an electrical generation plant in order to achieve the thrill of making a few more bucks. “Burn, baby, burn” chanted one, upon hearing the news that a forest fire would positively impact his long megawatt position. One can’t help but surmise that perhaps someone neglected to spank these kids when they tortured cats and charged their friends to see it, a few short years before.

There is a more enduring message in this spectacle, however, than the sickening thought of what happens when frat-boy mentality is coupled with too much power.

Consider the fact that it is a spectacle at all.

It is a spectacle because most of us find it revolting; it is a spectacle precisely because it is freakish in nature – it is an abberation of business, not business as usual.

To those who would call the Enron spectacle an example of “market failure,” I would point out rather that the whole debacle is a resounding market success, as witnessed by the fact that Enron is no longer around to bully the megawatt market. It is rapidly passing into history as less than a footnote, leaving a legacy of lessons learned with the absolute conviction that only comes from having paid such great price for them. We now pronounce the name “Enron” in a similar tone as we do “Benedict Arnold.”

Traders know that betting against fraud is a sure winner and Enron certainly did not disappoint. One of the beauties of free markets is that its participants ensure -- collectively, through the individual application of good sense by those with a stake in the game, a self-correcting action which, if allowed to work, reduces the damage done by rogue entities. As a result, Enrons always wind up crashing and burning.