The Smartest Guys in the Room – The Amazing Rise and Scandalous Fall of Enron – by Bethany McLean and Peter Elkind.
I found the title of this book to be quite ironic, yet appropriate. Only ‘smart guys’ could pull off such a scandal such as the Enron fiasco, but you then have to ask yourself “How can SMART guys also be so blindly stupid?” If one were to truly believe CEO Jeff Skilling when he said that he never felt he was doing anything immoral, yet always thought he was acting in the best interests of Enron, how could that same person believe him when he abruptly resigns from the company months before its epic bankruptcy while cashing in $60 million of his stock options?
As authors McLean and Elkind tell us, the simple answer is greed. Even if you don’t believe in God nor the Bible, you have to give the author of the Good Book credit when he tells us that the love of money is the root of all evil.
The ironic thing is that the Enron story is so complex, that even the most prudent financial experts in the industry had a hard time deciphering the deception. Let’s be honest, the average layman gets a bit lost when reading things such as a company’s balance sheet or a 10k report, so when the financial experts kept telling everyone how great Enron was and that they were the visionary for the future, why would anyone doubt it? Even the employees (sadly) were so convinced of the positive spin, that they had the bulk of their 401k savings invested in their own company.
It was ironic that the co-author of the book (Bethany McLean) first started the ripples by throwing a small stone in the pond with an article in Fortune Magazine titled “Is Enron Overpriced?” It was all downhill for the energy mogul from there.
Unfortunately, the same reason why people never could (nor can now) really understand the complex financial irregularities of the company, is the same reason why this book falters a bit. The authors spend well over half of this book going over the ill-gotten deals that Enron procured in immense financial detail. Many of the chapters read like a 30-page financial statement. In other words, if you have a PhD in Finance, you might find the bulk of the material in the book readable, but for the rest of us, it’s just too much, and we get lost. I found myself skimming over many of the chapters describing the many endeavors that the company embarked on with the simple task of masquerading the fact that they weren’t actually making any money.
The chapters I found more interesting were the ones where the authors were describing some of the key players at the top of the Enron food chain, and how their misguided morals influenced not only how they did business, but how they lived their personal lives as well. It’s seems as though most of the senior players had gotten a divorce at some point while they were raking in millions, and I lost track of all of the illicit romantic affairs going on between the key players. It’s also fascinating (yet not surprising) to read about how most of the top-level employees hated each other, and the immeasurable amount of backstabbing that went on amongst the leaders.
The book I read was a ’10-year anniversary’ edition, and the authors discuss in the coda that, sadly, things in the business world haven’t changed as much as they probably should in lieu of the Enron scandal. As long as there is greed, there will always be corruption. In that sense, the Enron story should be a model for companies everywhere. Fortunately, I would say that more and more companies are embracing a culture of teamwork and truly being more philanthropic, but there are still companies out there that advocate that, in order to be successful, you have to step on everyone else’s neck to get to the top – even if that neck belongs to someone else in the company. Such was the culture that Skilling and his minions encouraged.
A fascinating, yet depressing story. Good, but overall, I would have liked more personability and less minutia around the many complex financial dealings.