Tom Friedman recently wrote an Op-Ed piece in the New York Times in which he believed that James Chanos, the man who short-sold Enron and made a bundle, is wrong to bet against the bubbles that are developing in China. Friedman gives a litany of reasons why he believes China is a sure bet, including: a government that has the will and the resources to tackle any problem that comes society’s way; millions of gear-heads in colleges and universities; sea turtles educated abroad who are returning to China to lay their eggs; and the expansiveness of China geographically, allowing it to maintain its manufacturing base indefinitely.

I think I understand, though, why Chanos is willing to short-sell China – and attempt to make another bundle: the fundamentals on hand about China’s economy do not add up.

Malcolm Gladwell wrote an article in The New Yorker some years ago about how Enron was able to fool American regulators, customers, its own middle managers and employees that it was a sound, viable albeit hugely successful company, right up until the day before the whole thing collapsed (bringing down Arthur Anderson, the audit giant, as well).

Gladwell wrote:

“If things go wrong with a puzzle, identifying the culprit is easy: it’s the person who withheld information. Mysteries, though, are a lot murkier: sometimes the information we’ve been given is inadequate, and sometimes we aren’t very smart about making sense of what we’ve been given, and sometimes the question itself cannot be answered. Puzzles come to satisfying conclusions. Mysteries often don’t.”

Most economists and investors approach China as if it was a puzzle to be solved. Those of us who have lived and worked here long enough understand China is a mystery. Though auditors and regulators were flooded for years with information from and about Enron, they all got it wrong, because Enron was essentially opaque – a mystery. But because Enron had a lot of gear heads running and working in it, everyone thought it could do no wrong.

China’s leadership increasingly thinks the same of itself. Investors shouldn’t buy the propaganda.