Five actionable lessons that investors can take away from this unfortunate bankruptcy are

 Don’t invest in what you can’t understand

Thanks to its heavy involvement with commodity derivative trading and Enron Online,
Enron had a very complicated business model that many investors did not fully
understand.
In fact, Warren Buffett – perhaps the most successful investor ever – claimed that even he
did not understand some of the transactions described in Enron’s financial statements:

 Avoid companies that employ fancy derivatives

what was particularly dangerous about Enron’s use of derivatives is that they relied on
these speculative contracts to generate earnings for their businesses. Because of the
company’s mark to market accounting scheme, these profits were recorded before the
derivatives matured – which could result in profit claw backs if the derivative’s
underlying instruments moved against the company.

 Beware of excessive leverage

Enron’s excessive amount of leverage magnified its poor financial performance. The
takeaway from this observation is to avoid businesses that have volatile business models
and excessive levels of debt

 Understand and assess counterparty risk

Enron’s shareholders were not the only ones who were significantly harmed by the Enron
scandal.

Many of the company’s counterparties also suffered extreme financial losses.

By and large, this is because they did not properly assess the counterparty risk that they
assumed when entering agreements
 The importance of management integrity
It is hard to overstate the importance of having high-quality management at the helms of
the businesses that we invest in.

Outstanding managers with great capital allocation skills and a laser-sharp focus on
building shareholder value have tremendous potential to deliver market-crushing total
returns over long periods of time.

Conversely, bad managers produce unsurprisingly bad results.

Enron is an extreme example of this.

Rather than simply failing to build shareholder value, Enron executives succeeded in
destroying billions of dollars of shareholder value