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Enron: The Smartest Guys in the Room
THIS BOOK CONTAINS WIKIPEDIA CONTENT ONLY. THERE IS NO ORIGINAL CONTENT IN THIS PUBLICATION.
Enron: The Smartest Guys in the Room is a 2005 documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, a study of one of the largest business scandals in American history. McLean and Elkind are credited as writers of the film alongside the director, Alex Gibney. The film examines the 2001 collapse of the Enron Corporation, which resulted in criminal trials for several of the company's top executives; it also shows the involvement of the Enron traders in the California electricity crisis. The film features interviews with McLean and Elkind, as well as former Enron executives and employees, stock analysts, reporters and the former Governor of California Gray Davis. The film won the Independent Spirit Award for Best Documentary Feature and was nominated for Best Documentary Feature at the 78th Academy Awards in 2006.
Enron: The Smartest Guys in the Room is a 2005 documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, a study of one of the largest business scandals in American history. McLean and Elkind are credited as writers of the film alongside the director, Alex Gibney. The film examines the 2001 collapse of the Enron Corporation, which resulted in criminal trials for several of the company's top executives; it also shows the involvement of the Enron traders in the California electricity crisis. The film features interviews with McLean and Elkind, as well as former Enron executives and employees, stock analysts, reporters and the former Governor of California Gray Davis. The film won the Independent Spirit Award for Best Documentary Feature and was nominated for Best Documentary Feature at the 78th Academy Awards in 2006.
130 pages, Paperback
First published June 12, 2010
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About the author
Frederic P. Miller
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Displaying 1 - 15 of 15 reviews
June 16, 2014
Read this book for a case that’s long mandated now. A fantastic book, except that I found it hard going. One tangible reason Enron fell is right on page 39:
“[M]uch of what happened at Enron can be traced to the decision to use mark-to-market accounting . . . . Suppose you’ve booked an asset and a liability on your balance sheet, for instance, a ten-year contract to supply natural gas to a utility in Duluth. Under conventional accounting, the value on your books continues to reflect your initial assumptions over the life of the deal, even if the underlying economics change. Using the concept of marking-to-market, however, your’e forced to adjust the values on your balance sheet on a regular basis, to reflect fluctuations in the marketplace or anything else that might change the values. That’s the first big difference. Here’s the second. When you use conventional accounting, you book the revenues and profits that flow from the contract as they come through the door. But under the mark-to-market method, you can book the entire estimated value for all ten years on the day you sign the contract. Changes in that value show up as additional income – or losses – in subsequent periods.”
Stunning. The opportunity for manipulation is just breathtaking.
Suggests that Skilling et al really believed that what mattered was the idea, not the execution, not the reality; but the belief that the idea was good.
Suggests that many people were happy to go along with that as long as the stock price was going up. Which sometimes they got by lying; sometimes, they got by screwing California; sometimes they got – briefly – by sheer force of will.
Made me really feel for [some] of their lawyers. For example when they finally confessed to counsel what they were doing off book to mess with California so spectacuarly:
“[Richard] Sanders, however, was horrified. He didn’t understand everything he was hearing – it was very complicated stuff – but those nicknames sent chills up his spine. Fat Boy? Death Star? Ricochet? To Sanders, it scarcely mattered whether the strategies were legal or not. He was a litigator, California was in crisis; people were furious. He knew exactly how those nicknames would sound in court. “Is it too late to change the names?” he asked plaintively. “Can’t you just call them Puppy Dog and Momma’s Cooking?’” (274).
Good book. Tough going at times, peeling back how the drive for short term profits hurt so many people. But still a very good book.
“[M]uch of what happened at Enron can be traced to the decision to use mark-to-market accounting . . . . Suppose you’ve booked an asset and a liability on your balance sheet, for instance, a ten-year contract to supply natural gas to a utility in Duluth. Under conventional accounting, the value on your books continues to reflect your initial assumptions over the life of the deal, even if the underlying economics change. Using the concept of marking-to-market, however, your’e forced to adjust the values on your balance sheet on a regular basis, to reflect fluctuations in the marketplace or anything else that might change the values. That’s the first big difference. Here’s the second. When you use conventional accounting, you book the revenues and profits that flow from the contract as they come through the door. But under the mark-to-market method, you can book the entire estimated value for all ten years on the day you sign the contract. Changes in that value show up as additional income – or losses – in subsequent periods.”
Stunning. The opportunity for manipulation is just breathtaking.
Suggests that Skilling et al really believed that what mattered was the idea, not the execution, not the reality; but the belief that the idea was good.
Suggests that many people were happy to go along with that as long as the stock price was going up. Which sometimes they got by lying; sometimes, they got by screwing California; sometimes they got – briefly – by sheer force of will.
Made me really feel for [some] of their lawyers. For example when they finally confessed to counsel what they were doing off book to mess with California so spectacuarly:
“[Richard] Sanders, however, was horrified. He didn’t understand everything he was hearing – it was very complicated stuff – but those nicknames sent chills up his spine. Fat Boy? Death Star? Ricochet? To Sanders, it scarcely mattered whether the strategies were legal or not. He was a litigator, California was in crisis; people were furious. He knew exactly how those nicknames would sound in court. “Is it too late to change the names?” he asked plaintively. “Can’t you just call them Puppy Dog and Momma’s Cooking?’” (274).
Good book. Tough going at times, peeling back how the drive for short term profits hurt so many people. But still a very good book.
March 29, 2017
I devoured this book. I always wondered exactly what Enron did and how the scandal unfolded, and this book ably tells the story. From the beginning, Enron engaged in aggressive accounting practices and established compensation practices that would ultimately contribute to its demise. It is clear that many Enron executives were brilliant, but they were also arrogant and placed no value on execution. Every action was taken with an eye towards satisfying Wall Street's demands for short term earnings and increasing the stock price (and hence the value of their stock and options).
The account of the business and the actions of it executives is largely clear and compelling. If you find the descriptions of some of the partnerships use to offload debt from the balance sheet hard to follow, as I did, don't feel too badly about it. Apparently the board of directors had the same problem.
This probably a good cautionary tale to read as valuations on the stock market rise to historic levels and the current administration tries to eviscerate Dodd-Frank. The most striking feature of the book for me is the complicity of everyone in Enron's actions -- accountants, lawyers, financial analysts, the rating agencies and investment bankers. They were glad to help themselves to the bounty when times were good and only turned on Enron when they began to smell blood.
The account of the business and the actions of it executives is largely clear and compelling. If you find the descriptions of some of the partnerships use to offload debt from the balance sheet hard to follow, as I did, don't feel too badly about it. Apparently the board of directors had the same problem.
This probably a good cautionary tale to read as valuations on the stock market rise to historic levels and the current administration tries to eviscerate Dodd-Frank. The most striking feature of the book for me is the complicity of everyone in Enron's actions -- accountants, lawyers, financial analysts, the rating agencies and investment bankers. They were glad to help themselves to the bounty when times were good and only turned on Enron when they began to smell blood.
October 25, 2014
This was the best business documentary I have ever seen. There is something extremely interesting about group deception. The story is as good as a fiction novel.
December 27, 2018
Surprising. How could one commit such a big fraud and get away with it? Virtually the whole book is how they did it, but the "what happened next" is only really in the last chapter. I think I would have liked more "consequences". How did it all pan out? Who got jailed? Did one person who left with 350 million dollars get away with it? That sort of thing. Good read.
August 23, 2021
Extremely detailed account of the going ons at Enron. Shocking revelations on mockery of accounting standards. Makes the Satya scam seem like a walk in the park. Somehow mega corporations manage to continue the flawed practices until they begin to appear to be SOPs. Even though you can skim over some details, the account of how much money who made is truly an awesome account.
July 7, 2019
It’s a good read. Essentially another “barbarians at the gate,” but this time from the corporate perspective.
November 23, 2019
Great advise on how not to run a business and how not to be as a leader.
February 28, 2020
Cracking read of the rise and fall of energy giant Enron.
Lessons haven't been learnt as the same failures are happening again in Australia.
Lessons haven't been learnt as the same failures are happening again in Australia.
June 1, 2020
Well written and researched by writers for Fortune magazine. Good insight into Enron's business practices and how it all went wrong (hint: greed).
January 2, 2021
One of the most interesting (and grimly captivating) book I've read recently. A must read for any stock investors.
June 27, 2012
This is the oddest Utilities business that could have existed, and I still have a hard time figuring out what the valuations of the company were being based on. Fiercely tragic to see the losses ordinary, decent people suffered at the hands of Enron.
February 16, 2014
Okay, I didn't read this one, but I did just watch the documentary. It was a clear, interesting movie, but I did object to some gratuitous exotic dancing scenes-- unnecessary and out of place.
May 18, 2016
A lot to learn from this about what not to do in business. Fascinating read, though seems perhaps a bit biased on the "they should have known" side.
June 14, 2014
Quite biased and skims some parts
Displaying 1 - 15 of 15 reviews