The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron [Paperback]

 

 

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When I took delivery of this book I'd already read - and given good reviews to - two other books on Enron. So why a third? To semi-quote Josh Lyman, 'That's not being a fan, that's having a fetish.' So I settled to read this one out of a sense of 'you bought it, you read it.' And, whaddaya know, I couldn't put the darned thing down. Being two books ahead of the curve, I knew the story, knew the players - and yet this account had me glued. Why? well, as they say if you watch the video by the same name (also highly recommended) it's essentially a human tragedy, and the authors here manage to handle a huge cast of tragic characters (that's not meant to invite pity, folks) with extraordinary skill. The inevitable teach-ins about how the various scams were run are managed effortlessly. The style is immaculate. There's a sense of fairness running through it, which makes their moral outrage - when delivered - all the more compelling. The US of A had, for the past couple of generations, produced historians who write like angels; this two stand firmly in that tradition.

So, for once, believe the blurb on the jacket; if you have only one book to read, not just about Enron but about the hubris of the past decade, make it this one.

This is a great book about a truly remarkable part of our economic history. I have a minor physical complaint I might as well get off my chest: In their desire to make sure readers get bang for buck (fear not: you do), the publishers have elected to set this book in miniscule type, meaning firstly that you may need reading glasses if not before then after reading it, and secondly that while this looks like a 400 page book, if it were ordinarily typeset it would have the heft of an MM Kaye novel.

On the other hand, if over-length in a business book is the sort of thing that dissuades you, don't let it: this is one of the most riveting books on the history of finance you'll read, and it gets more and more addictive the further you go on.

As a number of reviewers have noted, it is simply staggering that Enron can have ever got where it got to at all, let alone stayed there for the best part of a decade, with all the ostenisble checks and balances that sophisticated capital markets provide. Staggering. In checks and balances I don't mean regulators, who will always be the last ones to find out where market-based moral turpitude is concerned, but investors, stock analysts, brokers, lenders, rating agencies and fund managers: people who don't just earn huge remuneration, but stake their reputations on being sceptical in the face of unconvincing bluster.

But as McLean and Elkind make clear in chapter after chapter, barely disguised and unconvinving bluster was, in large part, all Enron was. For all the "black box" accounting, it is simply inconceivable that Enron's true internal wiring could be kept anything like properly secret, since far too many people had to know about it. Internal and external to Enron there must have been junior lawyers, accountants, auditors, traders and marketers who all had to know what was going on, and people *do* talk: they gossip, they change jobs, they make inappropriate remarks. What's more, the existence (if not the detail) of many of the more toxic situations - the LJM Partnerships, the prepay contracts - were on the public record, so the burning question to my mind, which McLean and Elkind do not address, isn't so much how people could have been so greedy and deceitful (that's not hard to understand at all), but what sociological and psychological factors caused everyone else, collectively, to entirely suspend the critical faculties which they used to evaluate risks in the market. This is no idle query: accurately calibrating and understanding risk is the very key to making money on Wall Street: it's hardly an incidental oversight.

Making a pejorative moral assessment of the acts of the Skillings and Lays with the benefit of hindsight is futile, self-serving, and actually unjust: our moral view of corporate behaviour *today* is conditioned and informed by the example of Enron; before Enron, our moral view was ipso facto different - if it hadn't been, Enron couldn't have happened.

If we assume that, in the context of the markets, "moral consensus" is aimed at making sure people don't needlessly mislead, deceive or unfairly disadvantage each other, the far more interesting question is *how could the prevailing moral framework have failed so badly*? Why was it so inadequate at dealing with outcomes of actions we can now see (with the benefit of hindsight and our newly adjusted moral binoculars) are transparently odious?

And that prompts a deeper question yet: what could it be about *our* prevailing economic mores which could allow a disaster on a similar scale to happen again?

Had Elkind and MacLean ventured into that territory this would have been an outstanding book (it is still worth 5 stars in my view): as it was - and with an admirable absence of judgmental prurience - the writers stick to pure reportage, to the point where the epilogue ends rather abruptly without so much as a conclusion.

But that's small beer: this is a fascinating, rewarding read.

Olly Buxton

Not having read any other books about Enron, I came to this one not knowing what it was they were supposed to have done and ignorant of how it had all worked out. The book was published in 2003, so it doesn't cover the recent death of Enron founder Kenneth Lay, or the court verdict on former COO Jeff Skilling (guilty of 19 out of 28 charges). But it does do a fantastic job of explaining how a bunch of arrogant MBAs made a global phenomenon out of a company that didn't earn much cash and wasn't very good at providing the service its customers paid for. The title is bitterly ironic: Enron prided itself on its cleverness, but if stupidity has something to do with consciously walking towards self-destruction when you should absolutely know better, then the architects of Enron were phenomenally stupid.

I came to this book knowing little about corporate finance, and the authors are expert at doling out just enough information so that you can follow the insanely complicated financial transactions that made Enron appear to be far more substantial an entity than it really was. The characters are a fascinating rogues' gallery of people I wouldn't trust to sell fried dough out of a handcart on Boston Common: Skilling, arrogant, aggressive and downright unpleasant; Chief Financial Officer Andrew Fastow, blithely skimming off millions from the deals he oversaw that enabled Enron to borrow money from itself and chalk it up as earnings; Kenneth Lay, endlessly complacent and blissfully untroubled by the fact that his company was built on illusions practically from the start. My favourite moment of high comedy is when, just as the company is beginning to crumble, Lay gives a speech to Enron employees, reassuring them that they'll ride out the current crisis. During the ensuing Q&A, he is handed a question from the audience: "I would like to know if you are on crack. If so, that would explain a lot."

This is a brilliant and shocking book, and a vitally important one because if a company like Enron can become so big so quickly, on the basis of so little actual achievement in the way of providing services, then capitalism is a lot more unhealthy than many of us had begun to suspect.

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5.0 out of 5 stars WOW
This book was an eye-opener! If you only read one book about the Enron debacle, make it this. It's a fantastic book and for non-fiction totally unputdownable.

Published 11 days ago by S. Foxcroft

5.0 out of 5 stars people and greed
This a great book, which covers the rise and spectacular fall of Enron and the people who made up the organisation. Read more

Published 1 month ago by markr

5.0 out of 5 stars You thought you knew all about Enron
You probably think you know what happened at Enron, but until you have read this book you do not know the half. Read more

Published 5 months ago by Duncan Gray

4.0 out of 5 stars Authoritative
A well written and well researched account of the fall of Enron. They have interviewed a wide sample of those in involved in the whole sorry mess and also offer their own... Read more

Published 14 months ago by The Emperor

5.0 out of 5 stars Great book
Would recommend this book to anyone who wants to know exactly what happened about Enron despite having been alive at the time. Read more

Published 16 months ago by Alina

5.0 out of 5 stars Very clinical, clear review, with personal details
I have previously read "Enron: The Unshredded Truth", which was a good enough account of a personal journey of Enron's collapse. Read more

Published 18 months ago by jackie_goss

5.0 out of 5 stars Brilliant book - couldn't put it down!
This book is a fabulous read. The story is so well written that it propels you along the upward spiral with such energy and drags you down hard with the shocking end (even though... Read more

Published 18 months ago by Bookworm

4.0 out of 5 stars Cracking Read
Great book. It reads like a really good novel - a breathtaking account of greed. Only possible improvements would be a few new chapters at the end as it finishes before the... Read more

Published 20 months ago by P. Scaplehorn

3.0 out of 5 stars Watch the film!
A quite hefty read and for you non-accountants out there it is a struggle. I found myself getting bored half way through the book. Read more

Published 21 months ago by Jay Kay

5.0 out of 5 stars The Shareholder Is Always The Last To Know!
Enron, once the much favoured and slavered over corporation of the new paradigm economy of the 1990's (remember that? Read more

Published 22 months ago by S Wood

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