In the book Conspiracy of Fools written by Kurt Eichenwald published by Broadway Books, NY, 2005, the senior management of Enron changed the company from a gas distribution company to a trading company which tried to commoditize increasing parts of everyday life. Part of the reason was the senior management thought all business are similar. We have expertise in pipelines, what is the difference if we move into another commodity structure such as water. At Enron Water or Azurix they quickly found out – owning water infrastructure was not the same as owning pipelines. In England, what was thought as an easy return on investment, turned out to be less because the government changed the amount which rates could be raised. In Argentina where a system was bought, the former employees trashed the computer systems so no one would know who and what to bill. The former workers were government employees (will all the historical connections to that name) and it was very poorly told what would happen to their job and benefits.

In a Norm Brodsky article in the magazine Inc, he writes about looking at conditions and thinking they are similar conditions,but are they? They will be differences in economic and cultural conditions. What is the real competition? what price points do they offer compared to what you are thinking of? how does the local government embrace you or do they? are they willing to work with you or are you on your own? why can not someone else compete against you?

Linking to dividend paying stocks, while as consumers we want fair competition, as an investor you want the market tilted towards your investment. Why can the company continue to make money to be profitable and pay a dividend? It is not always an easy answer, but you need to know when the company thinks of horizontal expansion – what questions are they asking? is it really a similar business?

There are more questions than answers, till the next time – to raising questions