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Tuesday, February 5, 2008

Learning Finance from the "Smartest Guys in the Room"

I was looking for a movie to watch tonight. I going through our DVD library I hit this one. Maybe it was the 60 Minutes thing yesterday about Mortgages, but I guess I wanted to see what started a different economic mess.

"Enron: The Smartest Guys in the Room" is a documentary, and before you roll your eyes and start thinking about those horrible ones in school with the hand-cranked filmstrips, or Michael Moore knocking on doors looking for a sandwich (kidding!), this is pretty darn captivating stuff.

What separates this one for me is that it really is the people involved discussing in archival footage what went on. The sub-title sums it all up; "It's Only Business."

Enron wasn't always a punchline. It was the seventh largest company to ever declare bankruptcy. A company so powerful they created the California rolling power outages!

So what can we learn from the movie in regards to personal finance. I think that here are some great lessons:

  • 401K investments - Never over invest in your companies stock! People thought that they were missing out if they didn't. That they weren't showing company spirit! Meanwhile the Executive team was selling as fast as possible, often after telling the rank and file to buy!
  • Don't be afraid to ask questions - This is a great story of the Emperer Has no Clothes. When a couple (and it was VERY few) analysts asks questions on how they were really making money, Enron talked to them like they were too stupid to understand, and killed most probing into the company until it was burning. There are NO stupid Questions.
  • New Economy - There is no new economy. You have to make a profit, if you don't eventually, and sometimes in spectacular ways, you will run out of money. Money is finite...even when there is a lot of it. For your finances this means you cannot continue to charge things without paying it back, because...money is finite, whether it is yours or the banks!
  • Integrity is Everything - There are no get rich schemes, no magic new ways to riches. You certainly can lie for a bit to get ahead, but it will catch up to you, or if you are one of the very few and lucky, everyone around you.
  • Slow and Boring - Which stock would you rather own, Enron or GE. GE has been going nowhere for a long time, no rapid movement, but...it makes money day in day out. Any other kind of investing is gambling!

The other side note, which was interesting, Ken Lay died before he could go to trial. Given that he was never convicted, he is innocent, so no one can go after his estate. Pretty hard way to protect your family!

Slow and steady is boring, 5-10% a year is boring. But Personal Finance is not a Video Game that needs to go back to GameFly tomorrow. Risk=Rewards, but excess Risk=Broke!

How about you? Any movies inspire your Personal Finance choices?


Fiscal Musings said...

I was just talking with a co-worker yesterday about not having too much invested in company stock.

As far as movies go, The Pursuit of Happiness was really good and inspiring.

RacerX said...

That movie certainly shows a great example of going for your goals and not letting anything get in your way!

Thanks for visiting!

Mr said...

I really enjoyed that movie! I was only 14 or so when all that was going down so I only knew the broad parts of the story.

Mrs. Micah said...

Whoops, that was me...hit enter too soon.

RacerX said...

No problem Mrs M!

It really did send shivers down my spine with the way those guys did the California Power issue...really slimy stuff.

Sharon said...

Thanks for the link for 60 minutes...it was pretty interesting..

I absolutely LOVED The Pursuit of Happiness...I thought it was very uplifting.

RacerX said...

THe movie raises another point that is interesting, that maybe will turn into a post. How many companies would have given Chris the chance to even compete?

We put so much into the right scools, upbringing friend, etc., can we look past it and let someone show what they can do?

Thanks for commenting!

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