When You Take Things Too Literally...
Form Over Substance
In investing as well as life in general, it helps to go for substance over form.
In the case of Enron, they took form over substance to a whole 'nother level:
“Say you have a dog, but you need to create a duck on the financial statements. Fortunately, there are specific accounting rules for what constitutes a duck: yellow feet, white covering, orange beak. So you take the dog and paint its feet yellow and its fur white and you paste an orange plastic beak on its nose, and then you say to your accountants, ‘This is a duck! Don’t you agree that it’s a duck?’ And the accountants say, ‘Yes, according to the rules, this is a duck.’ Everybody knows that it’s a dog, not a duck, but that doesn’t matter, because you’ve met the rules for calling it a duck.”
We kid you not.
This was in the book - The Smartest Guys in the Room, quite an interesting read, definitely worth a read.
As always, "Come for the laughs, stay for the fun times".