I know you don’t run a public company, but you can learn some things from this situation. Before the memory fades, here are some lessons that entrepreneurs can take away.

Don’t invest where you work.

Enron employees who did this got creamed. My financial advisor won’t even put people into stocks in the same industry as their job because if that industry goes south then why risk your job and your nest egg? But many entrepreneurs have most of their life savings in their company. Big mistake. Even Bill Gates sells off Microsoft. He divests 1% of his holdings per quarter no matter what. You should diversify as well.

Never blame THEM.

The defense of Ken Lay and Jeff Skilling rested on the premise that they didn’t cause Enron to collapse. Rather the debacle was the fault of journalists, short sellers and market analysts. But what’s worse, is that according to some reporters who watched the trial it’s possible the two actually believed this themselves. This is often called CEO Disease – where you start believing your own BS.

I’m not saying your business doesn’t suffer because of things beyond your control. What I’m saying is a healthy CEO will always be able separate what is under her control and what is not. When things go haywire, you have to look first at what you did or didn’t do to contribute to the problem and secondly what caused you to act that way. Then change what you can control. (If too much is going against you and it really is not under your control. Get out. Quick.) Don’t just sit there and blame “them”.

Don’t inflate your numbers or get too optimistic – even to yourself.

When a company like Enron needs to suck up to Wall Street they do it by inflating earnings. There are two parts to this. One, they minimize expenses and two they account for sales that aren’t really sales. I’m not suggesting that entrepreneurs do this in a criminal way. But it’s human nature to take comfort in rosy projections.

For example, you might figure out a way to meet this month’s bills and put off thinking of next month till later. Or you might be counting on sales that might materialize (but might not) or expect customers to pay you sooner than is likely. This will not solve your problems. At best it will just put them off, but it could make them worse.

Takeaways:

• Andy Grove (of Intel) said famously “Only the paranoid survive.” There are many ways to interpret this quote. I like to assume it means that I should be most suspicious of my own understanding of a situation. I try to second guess myself constantly to see if I could be assuming a “truth” that isn’t right.
• When it comes to projections, be conservative. Be Very Conservative.
• Expect the best but plan for the worst. You want all your surprises to be positive.