Enron

**David Rosenthal** (0:00)
Obviously, the context is we're doing this episode because of FTX.

**Ben Gilbert** (0:02)
Right. It's a related party transaction, one could say.

**David Rosenthal** (0:05)
It's like LJM.

**Ben Gilbert** (0:07)
It's like, you know, the Raptors.

**David Rosenthal** (0:08)
You know what LJM stands for, right?

**Ben Gilbert** (0:10)
It's his kids and his wife, right? What a psychopath. Can't possibly be fraud if it's named after my family.

**David Rosenthal** (0:18)
I feel like this story is like American Psycho in Houston.

**Ben Gilbert** (0:21)
Yes. Oh my god, yes. Welcome to Season 11, Episode 7 of Acquired, the podcast about great technology companies, well, sometimes not so great companies, and the stories and playbooks behind them.

**David Rosenthal** (0:51)
Not so great companies and the stories and cooked books behind them.

**Ben Gilbert** (0:57)
There you go.

**David Rosenthal** (0:58)
That's a dad joke.

**Ben Gilbert** (0:59)
That is a dad joke. I am Ben Gilbert and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

**David Rosenthal** (1:07)
I'm David Rosenthal and I'm an angel investor based in San Francisco.

**Ben Gilbert** (1:12)
We are your hosts. Well, listeners, it brings me no joy to do this episode, but it seems all too appropriate in this moment in 2022 Today, we tell the story of Enron. It was the seventh biggest company in America by market cap. It was heralded as the pioneer of a new business model during a new technology era. Executives had endorsements or at least friendships and public appearances with multiple US presidents. It had the Houston Astros baseball stadium, Enron Field, bearing its name. It was even named Fortune magazine's most innovative company six years in a row.

**David Rosenthal** (1:52)
Including in 2001, the year it went bankrupt.

**Ben Gilbert** (1:56)
Unbelievable. Less than a year after its stock hit an all-time high, Enron filed for the largest bankruptcy in American history to that point. This story is every bit as crazy as the FTX story that we are all watching play out in real time. The parallels are totally uncanny. A financial trading company that got over leveraged thought they could do no wrong and got tangled up in a web of self-dealing to try and paper over their problems. Individuals profited richly while shareholders were none the wiser. The biggest difference really is that somehow Enron managed to do it all as a public company in plain daylight the entire time and with much bigger dollar amounts.

**David Rosenthal** (2:37)
We have a big thank you to say here. The idea for this episode came from our good friend and past Acquired guest, Andrew Marks. I was in New York on the way back from Lisbon and I had breakfast with Andrew. We were talking about FTX, of course, and everything going on. I was like, how can Acquired add to the conversation right now about FTX? And he was like, I've got a good idea. You guys should do Enron. And I was like, boom, that is what Acquired can add to this conversation.

**Ben Gilbert** (3:07)
Well, on the FTX note, suffice to say, we will definitely be appending a new intro to that episode.

**David Rosenthal** (3:14)
Indeed.

**Ben Gilbert** (3:15)
This is a great time to tell you about one of our very favorite companies, Crusoe.

**David Rosenthal** (3:21)
So, Crusoe, as listeners know by now, is a clean compute cloud provider specifically built for AI workloads. NVIDIA is one of their major partners, and literally, Crusoe's data centers are nothing but racks and racks of A100s and H100s. And because Crusoe's cloud is purpose-built for AI and run on wasted, stranded, or clean energy, they can provide significantly better performance per dollar than traditional cloud providers.

**Ben Gilbert** (3:46)
Yes, we talked about that on our ACQ2 episode with Crusoe's CEO, Chase Lockmiller.

**David Rosenthal** (3:52)
The other element that makes Crusoe special is the environmental angle. Crusoe, of course, locates their data centers at stranded energy sites. So, think oil flares, wind farms that can't use all the energy they generate, etc. And uses that power that would otherwise be wasted to run your AI workloads instead.

**Ben Gilbert** (4:10)
Yep. Obviously, it's a huge benefit for the environment and for customers on costs since Crusoe doesn't rely on the energy grid. Energy is the second largest cost of running AI after, of course, the price you pay NVIDIA for the chips. And these lower energy costs get passed on to customers.

**David Rosenthal** (4:26)
It's super cool that they can put their data centers out there in these remote locations where quote-unquote energy happens, as opposed to the other hyperscalers such as AWS and Google and Azure, who need to build their data centers close to major traffic hubs where the internet happens because they are doing everything in their clouds.