Peter Elkind and Bethany McLean on what drove Jeff Skilling and brought down Enron

Just as he had when Enron was riding high, Skilling labeled ExxonMobil a "dinosaur" - as thought it didn't matter that the oil giant was thriving while Enron was nearly extinct.  "We were doing something special.  Magical."  The money wasn't what really mattered to him, insisted Skilling, who banked $70 million from Enron stock.  "It wasn't a job - it was a mission," he liked to say.  "We were changing the world.  We were doing God's work."

In the public eye, Enron's mission was nothing more than the cover story for a massive fraud.  But what brought Enron down was something more complex - and more tragic - than simple thievery.  The tale of Enron is a story of human weakness, of hubris and greed and rampant self-delusion; of ambition run amok; of a grand experiment in the deregulated world; of a business model that didn't work; and of smart people who believed their next gamble would cover their last disaster - and who couldn't admit they were wrong.

~ Peter Elkind and Bethany McLean, The Smartest Guys in the Room, p. xxi

Derek Van Shaik on the Dunning-Kruger effect

An easy way to spot a novice in a field is when they claim to know everything within that field.  A true expert knows the vastness of the field and how little they know within the vast field.  Ever hear someone say, "I know just enough to be dangerous?"  That's typically said by someone who is starting to come down from the peak of Mount Stupid and begins to acknowledge how little they know on the topic.  However, there are some people who work in a field who stay at the top of Mount Stupid by subconsciously shielding themselves from learning anything further, because learning can be intimidating, humbling and cause insecurities since it reveals how little they know.  Since they don't experience this Valley of Despair, they don't get to reach this inclining Slope of Enlightenment to gain real competence and expertise, which builds authentic confidence.

~ Derek Van Shaik, "What The Top Of Mount Stupid Looks Like - FTX's Caroline Ellison," YouTube, November 17, 2022

Terry Duffy on the baggy shorts image of Sam Bankman-Fried

When you have the greatest quarterback of all time and a supermodel wife doing a commercial, picking up the phones saying, "are you in?, are you in, are you in?".  To me it looks like a pump-and-dump scheme if you watch that commercial, and I watched it again today.  People get very influenced by people like Tom [Brady] and his wife and others - or his ex-wife.  So, no, I'm not surprised.  And I'm not surprised by the baggy shorts and the big t-shirt because it's a gimmick.  And most people that wear a gimmick are also selling a gimmick.

~ Terry Duffy, CEO of CME, CNBC interview with Melissa Lee, 5:00 mark, November 22, 2022

Jesse Powell on how Sam Bankman-Fried was in conflict with the crypto industry

Most people want good things.  They got into the space to change the world and really help people and to push crypto forward.  They're not here, first and foremost, to make money.  I think Sam saw crypto as a means to an end, and most people in this space see crypto as the end goal...  That's what we need to deliver to humanity.  So his ideas certainly were in conflict with the rest of the industry.

~ Jesse Powell, "FTX Meltdown and the Future of Crypto," Reason.com, 22:20 mark, November 16, 2022

Tim Price on judging character and minimizing the risk of fraud

If people are determined to commit fraud, there is probably not much any of us can realistically do to stop them.  We do recall what won us over to investing in Vietnam, however, some years ago – apart from the extraordinarily attractive valuations and growth prospects of this admittedly frontier market.  We met with the chairman and chief executive officer of the country’s largest securities broker.  We confessed that we had some questions about the standards of corporate governance in the country.  She responded that they had indeed experienced a fraud perpetrated by the bank manager of a local bank.  As a result he had been executed. 

There are, however, certain steps one can take at least to minimise the risk of control fraud and the related risk of catastrophic capital loss.  One is obviously to develop an acute judgment of other people’s character.  One is not to invest in banks.  One is to allow oneself to be naturally drawn to superior allocators of capital, running shareholder-friendly businesses in which they already have a meaningful equity stake.  And one is to diversify anyway, because you simply never know.

~ Tim Price, "There Is Nothing New Under the Sun," Price Value Partners, November 21, 2022

Warren Buffett and Charlie Munger on cryptocurrencies (2018)

Warren Buffett: There's nothing being produced in the way of value from the asset.  You also have the problem that it draws in a lot of charlatans... who are trying to create various sorts of exchanges...  It's something where people who are of less-than-stellar character see an opportunity to clip people who are trying to get rich because their neighbor's getting rich buying this stuff that neither one understands.  It will come to a bad ending.  Charlie.

Charlie Munger: Well, I like cryptocurrencies a lot less than you do.  And so to me it's just dimentia.  And I think the people who are professional traders who go into cryptocurrencies, it's just disgusting.  It's like somebody else is trading turds and you decide "I can't be left out."

~ 2018 Berkshire Hathaway Annual Meeting, May 5, 2018

Jeffrey Tucker on Sam Bankman-Fried marketing FTX with social justice causes

He was a physics major who got a lot of social justice in his head and began to realize that he was looking for a new angle on how to market cryptocurrency.  And the anti-government philosophy of the usual crypto crowd of "buy bitcoin to get away from the government and secede from the Fed and have your own private money and change the world toward freedom," he went the opposite direction and realized that he could market his little business with some version of ESG and DEI and all the fashionable social justice causes.  So he came up with this idea of effective altruism.  And so he wasn't in it to make money for himself.  He was in it to support good causes and to give all of his money away.  And he drives an inexpensive car and he dresses in a shabby way, and it was all virtue signaling within the crypto space.  And this was new, actually, for the crypto world which had usually been about kind of a cowboy anarchism: "let's get away from the government to do our own thing."  He went the opposite way.  So he developed very tight relations with the left basically.

~ Jeffrey Tucker, "FTX cryptocurrency scandal is just the beginning," Will Cain Podcast, 0:15 mark, November 15, 2022