The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
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- ISBN13: 9781591840534
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Product Description
Just as Watergate was the defining political tale of its time, so Enron is the largest business tale of our time. And just as All the President’s Men was the one Watergate book that gave readers the full tale, with all the drama and hint, The Smartest Guys in the Room is the one book you have to read to know this incredible business saga.Amazon.com Review
Like its theme, The Smartest Guys in the Room is ambitious, grand in scope, and ruthless in its dealings. Unlike Enron, the Texas-based energy giant that has come to represent the post-millennium collapse of 1990s go-go corporate culture, it’s also ultimately successful. Penned by Chance scribes Bethany McLean and Peter Elkind, the 400-page-plus chronicle of the scandal digs deep inside the numbers while, wisely, maintaining focus on the “smart guys” deep-frying the books. The likes of paternal but disengaged CEO Ken Lay (dubbed “Kenny Boy” by George W. Bush, one of many prominent public facts with whom he rubbed shoulders), cutthroat man-behind-the-curtain Jeff Skilling, and ethically blind numbers whiz Andy Fastow vividly come to life as they make a mockery of conventional accounting practices and grow increasingly arrogant and bind to their collective hubris. They’re not a likable lot, and the writers find it hard to suppress their astonishment and revulsion with the crew who rapidly went from golden boys and girls of the financial world to pariahs when the bill finally came due. The authors’ unrepressed sarcasms are more than regularly unnecessarily agreed the scope of the outrage. Enron’s leading lights were or a time celebrated for their ability to prepare nearly incomprehensible business schemes to hide mounting shortfalls and keeping track on their machinations can be a chore, but, by sticking hard to the tale behind the fall, McLean and Elkind have reported and written the definitive account of the Enron debacle. –Steven Stolder
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Monday morning quarterbacks. I would have been far more impressed if the writers had really done due diligence as the caompany was engaging in such flagrant abuses, and blown the whistle years earlier. What I want to know is: where were all the dedicated business writers (ahem ahem) taking a truly critical look at Enron as the company was destroying it’s employees pension plans and criminally “Laying” waste? Far too small too late. Suggestion to the authors: In the future…why not try investigating corruption before a company collapses and destroys lives? It’s more challanging, noble, and let’s face it, helpful! Not particularly impressed with the storytelling/writing.
Reader’s Rating: 2 / 5
This is a reasonably entertaining account of the Enron saga, and possibly the most up-to-date one (bar anything that has happened during the examination). It provides plenty of information that is simple to follow, even being a dry topic for a reader with small knowledge of or exposure to the topic.
But, like in many so-colled investigative television journalism articles, there are three key flaws:
1. The book heavily criticizes many business decisions, some of which can only be seen as poor after the facts. The kinda 20/20 expertise in hindsight that the authors push is only but unfair, especially when the authors themselves cannot aver to have been in management positions that required guts and business know-how.
2. The book displays a clear left-wing bias when it does not miss any opportunity to bring up issues such as regulation of markets is better than free markets, free markets hurt “small people” and favours “huge business”, the smart and the powerful are “terrible” and the ordinary person is excellent, MBA are young and greedy but the workers are victims.
3. It tries to place the blame on Bush and Republicans for what Enron did on the basis that Enron contributed and lobbied the GOP. But, it does not point out that MOST American corporations (and people as well) make plenty of contributions to every political party, liberal, greeny or whatever. Nothing could be implied just by the fact that Enron supported the GOP.
All in all, the book looks like the predictable drivel of a liberal writer trying to throw cheap potshots. This is like everything that Michael Moore wrote. There is every reason to judge that the film baed on this movie will possibly win an Oscar, simply because the College is infested with left-wingers.
Reader’s Rating: 1 / 5
This book makes a compelling case that the folks who ran Enron were greedy, arrogant, overbearing, obnoxious, and probably criminal. I don’t doubt any of it. A point in their favor though, lost among all the negatives, is that they tried to make stuff take place. They took risks, made deals, place pedal to the metal in their overly ambitious attempts to gain market share and enter new areas. The errors that they made were on the side of action rather than the side of caution.
Contrast this behavior to a company like Exxon. Due to run ups in the world fee of oil the company has generated lots of cash over the last couple of years. Enough cash to go on the stalk for lots of new deals. Erect refineries, renovate new fields, invest in the energy infrastructure, etc. In fleeting they should be doing deals and building stuff take place. As a replacement for what really happens is paralysis by analysis. They just sit on a huge pile of cash as a replacement for of putting it to work.
I’m not excusing Enron for their dubious accounting, lack of ethics, and shell game financial structures. I’d just like to seem some of their aggressive spirit imbued in the lethargic energy giants of today.
Reader’s Rating: 4 / 5
Brilliant television journalism and very well articulated research from McLean and Elkind make this a gripping read for anyone who wants to know the forces that drive corporate greed. Banks, rating agencies, lawyers and accountants are not spared in what is a scathing criticism of profitability over ethics and unadorned common sense. What disapponted me, but, was the authors’ obvious choice to skim over the political fundamentals of the whole scandal. Kenneth Lay was one of the single largest individual contributors to the Bush battle in 2000 and also made available corporate resources, such as company jets, on copious occasions. Dick Cheney had secret meetings with company executives at a time that the wheels were beginning to fall off and it is impossible to judge that this was all innocuous, although in the rare instances that the authors refer to such events, they will have you judge that this was the case. Time will hopefully still reveal more about the murky political dealings of Enron, but it is a crying bring shame on that this otherwise very well written book is not a place where you will learn anything at all about that dimension, despite there being no shortage of facts to be establish elsewhere in the public domain.
Reader’s Rating: 3 / 5
Tim Belden was not the predictable Enron Trader. He had a master from Berkeley and worked as a researcher at the Lawrence Berkeley Laboratory. Some considered him possessing “Pure Thought” about the free markets, a right supply and demand advocate. Did Belden greed cloud his better judgement and wisdom?
Belden was a leader of a group of hyper aggressive West Cost electricity traders. Enron bought Portland All-purpose to gain access to the electricity market. Belden believed in the beauty of the free market and had no problem exploiting the inefficiencies. The exploitations lead to serious officially authorized charges.
In 1999, Deregulation of California’s energy market provided enormous opportunities for energy traders. Lay and Skilling touted deregulation benefits and claimed potential savings of $8.9 billion for California.
Three investor owned utilities – Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison all had long term contracts too buy at high excise. Politicians wanted guarantees that the consumer would get their excise fixed.
This mean the burden of fee increases could not be passed on too the customer. If prices climbed and prices were fixed for the consumer the losses from the fee increases would be carried by the utility company and lead them into forced insolvency. Furthermore, the immature scenery of the new power service markets provided no hedge capability against such uncertainty in the power prices. These companies would drown in debt. In the Summer of 2001, the weight of the privileged fee drown Pacific Gas & Electric as it filed for bankruptcy.
Deregulation forced utility companies to buy power in the spot market every day forbidding long term contracts that could have guaranteed proce. The thought was to make panic and force a rate drop. The drop in excise would return money to the cities. Politically, it made sense
The California Public Utilities Commission predicted a 10 percent drop in excise. At first prices seemed to drop and deregulation was a smash with wholesale cost averaging $33 a megawatt hour. Breaking the long term contracts allowed cities to pool up reserves as lower costs gave them a profitable margin.
In 1998, CPUC was surprise to see set aside power which usually cost a dollar spike to $2,500 per megawatt then to $5,500 and four days later to $9,999 a megawatt hour. Dynegy simply offered to supply standby power at that fee. Nothing was forbidding the companies from bidding to infinity.
California made two quasi-governmental agencies: the California Power Exchange whose job was to set hourly prices for electricity through auctions conducted on the previous day and on the day of manner of language; the second agency called the Independent System Operator whose job was too manage the states transmission lines to ensure reliability.
If deregulation failed in California, it would harm Enron and the economics of supply and demand encouraged internal criticism of the insufficient number of power plants resulting from politics, power being bought out from California and then resold back, and abusive manipulations of the market to make profitable margins. Enron did not reflect CPUC rules made economic sense and on more then one occassion attempted to education by conduct experiment.
If Enron failed in California, it would find it hard to convince additional states to use their power services – electricity and gas brokerage. It would seem Enron best course would be to cooperate and make the system work, as a replacement for Enron decides to go against the system. Enron decides too “game” the system, believing it is their job as Enron traders too make money and not benefit the state.
The results: ISO veteran 17 emergencies combining 1998 and 1998, 55 emergencies in 2000, and 70 in 2001. Prices reached a stagger $750 a megawatt. The ISO response was to cap the fee at $250 a megawatt. In May, Enron’s Belden and his West Coast Trading group booked $200 million. It seemed Enron was manipulating the markets too their own benefit (Stout Boy, Reflect, Death Star, and Get Shorty). Was it a game to the Enron traders?
Why so much maintenance? Companies like Mirant, Dynegy, and Reliant took power plants off line for maintenance. By Nov nearly 25 percent of the state energy capacity was idle for maintenance. From May 2000 to June 2001 major plants only ran at 50 percent capacity. Was there really a scaracity?
Officially authorized problems suddenly surfaced, charges of: fraud, fraud involving markets, and fictitious commodity transactions. FERC lacked subpoena power. FERC concluded there was insufficient data to “support findings of point exercises of market power.” In 2001, FERC initiated fee caps of $92 a megawatt across the western market. The tactic seemed to work and prices dropped to $43 a megawatt. During the crisis California had paid $40 billion for electricity. Abuse was determined to fall on the companies that sold California its power with prices ending up seven times more expensive from a prior year. By 2000, when Belden had clogged his books the West Coast power group had booked $460 million in profits. Overall, Enron’s North American trading desk had made a staggering $2.2 billion for the year. Eventually, the FERC would bring hard evidence against Enron and shut down all their gas and electricity trading privileges.
Reader’s Rating: 5 / 5