Enron convinced regulators to let it use "mark-to-market" accounting for illiquid assets like pipelines. This allowed them to book highly subjective, projected profits from long-term deals as immediate earnings, creating a facade of profitability that had no basis in actual cash flow.

Private equity giants like Blackstone, Apollo, and KKR are marking the same distressed private loan at widely different values (82, 70, and 91 cents on the dollar). This lack of a unified mark-to-market standard obscures true risk levels, echoing the opaque conditions that preceded the 2008 subprime crisis.

In private markets, there's a perverse incentive for both private equity owners and private credit lenders to avoid marking down asset values. This "mark to make-believe" system keeps valuations artificially high, hiding underlying financial stress and delaying the recognition of losses.

The absence of daily pricing in private credit removes an essential discipline. Mark-to-market in public markets acts as an honest, early warning system that forces managers to scrutinize underperforming assets, a mechanism private lenders lack.

Months before its collapse, SVB's insolvency was calculable using its own Q3 2022 earnings release. A simple mark-to-market adjustment of its securities portfolio revealed a negative tangible equity of $4 billion, a clear red flag missed by the market.

In a market crisis, liquidating positions isn't just about stopping losses. It's a strategic choice to create a clean slate. This allows a firm to go on offense and deploy fresh capital into new, cheap opportunities once volatility subsides, while competitors are still nursing their old, underwater positions.

During crises, Blankfein’s team ignored predictions about likely outcomes. Instead, they focused exclusively on identifying all possible (even low-probability) negative events and creating contingency plans. This readiness allowed them to react faster than competitors when a tail risk event actually occurred.

The most crucial skill for surviving financial crises is not investment selection, but the ability to trace the chain of cause and effect. Understanding who creates, packages, sells, and ultimately holds risk allows one to see systemic dangers like the 'risk waterfall' before they cause widespread damage.

Effective risk management is a proactive discipline, not a reaction. During good times, Goldman bought protection on assets considered perfectly safe (like AAA-rated securities). This discipline of having hedges when they seem like a waste of money is what provides protection during a real crisis.