How to Explain ENRON to Your Children

Tuesday, February 20, 2007

The following system can be used to explain the biggest corporate bankruptcy (that is, until WorldCom, a few months later). Simply explain each economic system in terms of what happens to your two cows.

Feudalism:
You have two cows. Your lord takes some of the milk.

Fascism:
You have two cows. The government takes both, hires you to take care of
them, and sells you the milk.

Communism:
You have two cows. Your neighbors help take care of them and you share the milk.

Totalitarianism:
You have two cows. The government takes them both and denies they ever existed and drafts you into the army. Milk is banned.

Capitalism:
You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell them and retire on the income.

Enron Venture Capitalism:
You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more.

WoWism:
You have two cows. You take pictures of the cows, digitally modify them and post them up on the blog. You receive several insulting comments which causes you to post a separate message about how you were just trying to contribute and that there is nothing wrong with digitally modified images of your cows. Your post is ignored, save one comment from a incest porn site. You sell the cows for beer money.