About this episode

The episode discusses the $1.65 trillion off-balance-sheet debt of major US tech companies and compares it to the Enron scandal, ultimately arguing that the debt is not hidden but rather disclosed in a way that is often overlooked.

Nikkei Asia recently reported that the five biggest US tech companies are carrying an estimated $1.65 trillion in "hidden," off-balance-sheet debt — and a lot of commentators have reached for the word "Enron" to describe the issue. In this video I look at whether that comparison holds up. It doesn't: unlike Enron, this debt isn't concealed through fraud — it's disclosed in the footnotes, it breaks no accounting rules, and much of what is going on is perfectly ordinary. But that raises a more interesting question than "will they get caught." If the aggressive stuff — the adjusted earnings, the leases, the stock-based compensation added back — is all sitting there in plain sight, does dressing up the numbers actually fool anyone? Drawing on the work of Aswath Damodaran, Richard Sloan, Robert Bloomfield and others, I dig into what the research says about whether markets reward clean accounting or aggressive accounting, why the debt isn't hidden so much as filed somewhere too tedious for most people to read — and why the real risk in the AI boom probably isn't the borrowing at all, but the enormous revenue it's all assuming will show up. Patrick's Books…

People in this episode

Host: Patrick Boyle

Topics covered

• Big Tech
• debt
• accounting
• financial analysis
• AI boom

Keywords

• hidden debt
• Big Tech
• Enron comparison
• accounting rules
• AI revenue

Mentioned in this episode

Organizations: Nikkei Asia, Enron

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