"All the signs are there."Bad CompanyRemember Enron, the American energy company that went belly up after it was exposed for perpetrating one of the biggest accounting frauds in history? According to an investment banker who once dug into its finances, it bears "intriguing" parallels with the tech industry's biggest darling: OpenAI.The ChatGPT maker was last valued at a whopping $157 billion after cinching another several billion in funding last October, making it one of the most valuable private startups, or unicorns, in the world. That's despite OpenAI never turning a profit, showing no clear road to profitability, and rapaciously burning through its mountains of money all the while.If that seems like a shaky foundation to continue stacking literal billions on, Benjamin Riley, who worked as a summer associate at the Energy division of investment bank JP Morgan, would agree. In 2000, Riley, who went on to found the AI think tank Cognitive Resonance, was tasked with valuing Enron's latest venture, The NewPower Company and that's where the worrying parallels started to arise."All the signs are there," Riley wrote on Bluesky. "High flying VC darling. CEO with known ethical issues. Predictions about the future that continue to spiral in their grandiosity."Feedback NotedAs Riley tells it, JP Morgan wanted to invest big time into Enron's latest business, so it fell to Riley and his colleagues to estimate its actual value. But when they combed through the finances of Enron's business, they couldn't justify it "because there was no business.""Enron had a ton of projections, a ton of guesses about what might happen in the future, but it was a pure startup," he wrote. "Yet Enron valued The New Power Co. in the tens of billions.""That's right, the NewPower Co. had no clients, nor any existing revenue, nor even a discernible cost model," Riley elaborated in an accompanying Substack post. "It was all vibes."Riley's boss agreed and pleaded the case. "The only justification for this deal is partnering with Enron, a company with a sterling reputation and culture of innovation," the team argued.But the higher ups at JP Morgan disagreed or "freaked the f*** out," in Riley's phrasing and threw tens of millions of dollars at Enron anyway. A year later, the entire company collapsed.It Goes DeeperThat kind of blind hype, Riley argues, is what's happening with OpenAI right now. But there are some other eerie similarities beyond investors' baffling eagerness to dump money into the startup like there's no tomorrow (and if fear-mongering industry talking heads are to be believed, maybe there won't be).There's Enron's "incredibly convoluted" corporate structure which mirrors OpenAI's "incredibly convoluted" (the following are scare quotes) "'nonprofit'" structure, Riley said. "Everything is opaque."Indeed, OpenAI was founded as a nonprofit but now operates as a for-profit company in all but name via its for-profit arm. The company recently announced plans to sophisticate its corporate structure even further by creating a for-profit corporation that would take full control of OpenAI's businesses.We should also take note, Riley said, of OpenAI's "previous restrictive policies on ex-employees talking about OpenAI" and the "massive turnover at senior levels of leadership of over the past year."That, Riley warned, is reminiscent of the discomfort he and his team felt when they called Enron's bluff: "Our colleagues were horrified we dare speak against Enron's good name."Share This Article