Enron became a giant middleman that worked like a hybrid of traditional exchanges. But instead of simply bringing buyers and sellers together, Enron entered the contract with the seller and signed a contract with the buyer, making money on the difference between the selling price and the buying price. Enron kept its books closed, making it the only party that knew both prices.

Over time, Enron began to design increasingly varied and complex contracts. Customers could insure themselves against all sorts of eventualities-such as a rise or fall in interest rates, a change in the weather, or a customer's inability to pay. By the end, the volume of such financial contracts far outstripped the volume of contracts to actually deliver commodities, and Enron was employing a small army of PhDs in mathematics, physics and economics to help manage its risk.