3 of 3 people found the following review helpful
5.0 out of 5 stars Who Are These Guys
I chose the above title quote from "Butch Cassidy and the Sundance Kid" to highlight my review. The authors provide a biography of many of the Enron players that lets us know what these guys were all about at their core. For example, Jeff Skilling spent almost all his after-school time working at a television station. Yet, he went to college without a dime...
Published on Jun 12 2004 by C. Moore Value
3.0 out of 5 stars Missed opportunity
Excellent journalism and very well articulated research from McLean and Elkind make this a gripping read for anyone who wants to understand 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 plain common sense. What disapponted me, however, was the authors'...
Published on May 25 2004 by Geoffrey S Kearney
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3 of 3 people found the following review helpful
5.0 out of 5 stars Who Are These Guys,
This review is from: Smartest Guys In The Room (Hardcover)I chose the above title quote from "Butch Cassidy and the Sundance Kid" to highlight my review. The authors provide a biography of many of the Enron players that lets us know what these guys were all about at their core. For example, Jeff Skilling spent almost all his after-school time working at a television station. Yet, he went to college without a dime because he blew all his pay in the stock market-buying stocks on margin. Never mind though because he got an impressive academic scholarship anyway because of his "brilliance." The authors provide other telling stories about the other major players. Ken Lay, the Baptist preacher's boy who preached exemplary corporate values, had an affair with his secretary, and later divorced his first wife to marry her. Yes, this is the same lady who went on television complaining about being broke while her family still owned millions of dollars in real estate. Lay's number two guy-not Skilling-who shacked up with a different Ken Lay secretary at Enron, costing himself annointment as Lay's successor. By the way, this guy now is a billionaire. Having that affair with Lay's secretary, later marrying her, was the smartest thing he ever did because he left Enron to found his own high-flying energy company. Rebecca Mark got a leg up from another Enron mentor by having a tempestous affair with him. The stories like this go on and on.
The authors provide far more detail about company history and the accounting conspiracies that brought it down. As a professional accountant, I am even more convinced now that Arthur Andersen deserved to fail for approving many of the tricks that Enron used to book fictitious profits. The authors point out that near the end, nearly 85% of Enron's total debt wasn't on their books, but "lay" in off balance sheet special purpose entities. The auditors couldn't understand the meaning of the standard sentence in an audit report that states that the financial statements "present fairly the financial condition and operations of Enron in accordance with generally accepted accounting principles." They over emphasized generally accepted accounting principles and ignored the term "present fairly." Good riddance to them.
The authors certainly are not admirers of Skilling, Fastow, or most of the other Enron players. For example they say of Skilling in their Epilogue, "He does not seem to have any remorse about his own actions, any sense that he hired the wrong people, got into the wrong businesses, or emphasized the wrong values. The fault, in his view, lies in a world that did not and will not appreciate the sheer newness of what Enron was trying to do." At the end, Jesse Jackson-yes that Jesse-held prayer meetings in the hall to comfort the afflicted who suddenly realized they needed forgiveness. Skilling didn't attend. I hope Jesse says a few prayers to protect Jeff while he's in prison. He'll need them, as well as a lifetime supply of "soap on a rope."
Certain Enron principals flew to their bankruptcy hearing in their mega-bucks Gulfstream 5 executive jet and stayed at the plush Four Seasons in Manhattan. As one of the offending executives said, "Maybe we should have flown on Southwest and stayed at the Ramada." In short, yes.
5.0 out of 5 stars A must for the non-sceptic,
This review is from: Smartest Guys In The Room (Hardcover)My blood ran cold reading of how long the officers of this firm managed to pull the wool over the investment community's eyes, aided and abetted by the deleriction of duty of those in whom we trust (and pay hansomely) to guard against such crooks. If there was ever a book to convince investors to do their own homework and to think independently, this is it. A well written and an engaging read. Well worth the money.
3.0 out of 5 stars Missed opportunity,
This review is from: Smartest Guys In The Room (Hardcover)Excellent journalism and very well articulated research from McLean and Elkind make this a gripping read for anyone who wants to understand 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 plain common sense. What disapponted me, however, was the authors' obvious decision to skim over the political elements of the whole scandal. Kenneth Lay was one of the single largest individual contributors to the Bush campaign in 2000 and also made available corporate resources, such as company jets, on numerous 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 believe that this was all innocuous, although in the rare instances that the authors refer to such events, they will have you believe that this was the case. Time will hopefully still reveal more about the murky political dealings of Enron, but it is a crying shame 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 found elsewhere in the public domain.
2.0 out of 5 stars Hindsight is 20/20,
By A Customer
This review is from: Smartest Guys In The Room (Hardcover)Monday morning quarterbacks. I would have been far more impressed if the writers had actually 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 little 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.
4.0 out of 5 stars A Fascinating Read With All the Gory Details,
This review is from: Smartest Guys In The Room (Hardcover)Enron was the largest corporate bankruptcy to date. Just a year earlier it was a 70-billion dollar company and the most respected company in the energy field. By the end of 2001 Chuck Watson of Dynegy said he wouldn't take it if it were free. What happened? How could such a large and powerful conglomerate, in which analysts hyped right to the bitter end, fall so fast. Bethany McLean and Peter Elkind take the reader from the beginning of Enron's rise to the colossal fall.
From the beginning Enron was determined to rewrite the "rules" of how the business of energy was done around the world. Ken Lay, the founder of Enron, learned the natural gas business from his early days at Florida Gas and then Transco Energy. In the early 1980's gas prices were largely regulated by the federal government. This led to gas shortages when prices were too low and oversupply when the government hiked prices. Distributors would try to lock into long-term contracts called "take or pay" to protect themselves from future shortages. These contracts were bad from the pipeline owner's point of view because they had to pay the higher rates even if lower rates were available. Lay saw a way out of this dilemma, however. He set up a fledgling spot market for natural gas. The producers who let Transco out of these long-term contracts could sell directly to their customers, paying Transco to move the gas. Lay was a hero and it would propel him toward his vision of a deregulated gas world in which customers would always have the gas they need at the best price.
When Ken Lay created Enron he had a different view of energy than anyone else in the business. When energy was deregulated in the late 19080's prices plunged. Money wasn't being made in oil; it was being made in trading oil. This was Lay's grand vision. In the words of the authors:"Oil trading was about trading, not about oil." The senior executives didn't know much about trading but as long as it made money no one cared. Oil trading was a way of promising to deliver oil in the future while locking in the price today.
From its earliest days Enron struggled to survive. Lay had a vision of the future but he needed someone to show him the way. Enter Jeff Skilling. To Skilling natural gas wasn't about energy; it was about supply and demand. Whenever there was too much supply or too much demand there was money to be made. Instead of long-term contracts between suppliers and customers Skilling envisioned Enron acting as an energy bank. They would purchase gas from producers at one price and sell it to customers at a higher price. Enron would profit from the exchange and the customer would always be able to get gas. All Enron needed to do was to have matching customers for every contract to buy natural gas. He would revolutionize the oil industry. He never cared for the old oil executives; he wanted smart Harvard graduates under him. It didn't matter to Skilling if they never worked in the industry before; they would figure it out.
The problems with Enron can be traced back to these early days. The people involved had great ideas but were poor in their ability to manage and carry them out. Those that could were treated as second class citizens by Enron management. They rewarded the people with the best ideas. It didn't matter if their grandiose plans never made any money. It would become the culture at Enron-a corporation built on vision but near-sighted on detail.
The book is a long and difficult 414 pages. The deals and machinations of Enron's senior management are difficult and complex. The Smartest Guys in the Room is about these deals and not about the people. We know very little about how people truly felt about Enron through its rise and fall but we know a great deal about the gory details. For those with some accounting background it is a fascinating story. For the general reader it probably will be a bit bewildering
4.0 out of 5 stars The most informative Enron book; could be more readable,
This review is from: Smartest Guys In The Room (Hardcover)I've read most of the major Enron books that have been published and, in my opinion, this one is best in terms of delivering clear information about what happened to cause Enron's apparent success and its inevitable failure. The authors show how Enron parlayed some very bad policies and practices:
1. paying huge compensation on the basis of overly optimistic projections for projects that were really bad deals;
into one of the most astounding and tragic business stories in American history.
Having praised the authors for their coverage of the story, I only rate the book as a four star effort because of the writing. The writing is straightforward, efficient reporting as one might expect given the authors' background with Fortune magazine. But, I believe that truly outstanding books are written by wordsmiths who are so good at telling a story that a reader finds the book hard to put down rather than being hard to pick up and slog through. Too often for my taste I found myself working at reading to the end of this book rather than savoring it. To me, that's the difference between a well chronicled story and an exceptional book.
Should you read this book? I'd say definitely yes if you're interested in the Enron story. Just don't expect to be entertained very much while you're being informed.
5.0 out of 5 stars The Best Enron Expose Out There,
This review is from: Smartest Guys In The Room (Hardcover)Whether you're an experienced corporate player, a business school whiz, or just interested in what preceded Enron's 2001 fall, this is the book to read if you only read one Enron expose. Thre's enough detail to satisfy advanced business folks without losing the casual reader completely.
5.0 out of 5 stars Smartest Guys in the Room: The Amazing Rise and Scandalous F,
This review is from: Smartest Guys In The Room (Hardcover)More than any other company, Enron has become synonymous with the outrageous levels of corporate greed and hubris that lie at the root of our economic woes. But the web of accounting procedures, puffed up-revenue, and complex derivatives trading was not a deliberate scheme to defraud investors; it happened through a pattern of activity that resulted from the obsession of keeping the stock price rising at any cost. This is the most thorough examination of Enron to date, based on hundreds of interviews and the examination of thousands of documents over a year and a half by two Fortune magazine reporters. Ultimately, this is a story about the personal shortcomings of the individual players, epitomized by Jeffery Skilling, the man who would rise briefly to CEO and then resign during the chaotic months before Enron's collapse. With a brilliant intelligence matched by an enormous ego, he could never admit, even to himself, that something was terribly wrong with the company he helped create. The Enron death spiral took on a life of its own, with many of the worst sins committed by employees who believed they were simply doing what they were told. Laying extensive groundwork, the authors ably convey the multidimensional nature of this story
5.0 out of 5 stars THERE ARE NOT ENOUGH JAIL CELLS-GOOD READ,
This review is from: Smartest Guys In The Room (Hardcover)"The Smartest Guys in the Room" is very well written, with great biographical backgrounds and telling anecdotes that will give you everything you should know and then some about the major players whose greed and egos led to their demise and Enron's collapse like a classic greek tragedy. McLean and Elkind were able to translate Faustow's complex special purpose entities into laymen's terms. The Enron story also shows the shocking lack of moral character of Arthur Anderson and the investment banks who enabled and profited by Enrons obscene techniques of literally making up its numbers and "earnings". This book was an eye-opener for me. I had never heard of "mark to marketing" accounting which allowed (and perhaps still allows) corporations to book "earnings" now on assumed future income, that it has not received and might never receive. It makes you completely mistrustful of corporate quarterly earnings reports, which Enron and others so easily manipulate. There should be a lot more criminal prosecutions, not just of the Enron people who profited by sham earnings statements, but also JP Morgan Chase, Merrill Lynch, and Citibank executives who enabled and profited by the Enron shenanigans. The wall street analysts who pumped up Enron stock with near complete ignorance of Enron's actual business should also be prosecuted for criminal impersonation-that is pretending to be "analysts". There was certainly enough unanswered questions in Enron's own public filings to raise 100 red flags--
There are a lot more reforms that should be made-particularly on the accounting end, to force corporate disclosure to somehow truly explain a company's actual cash, actual earnings and actual debt and obligations. I will never assume that a company's alleged "earnings" disclosure statements means the company actually has real cash from current revenue,and that its debt/obligation disclosure is remotely truthful.
Unfortunately, the Enron story is all to familiar- Appearances are more important than reality in the world of
corporate governance and finance-- After all, We have a President who brags about Values who should have been prosecuted for inside trading on His Harkness Energy stock sales years ago- and he gets a pass- I'm sure a lot of other big shots at the investment banks who helped Enron scam investors in Enron stock will also get pass
This book will and/or should get you mad--yet i'm not particulary sympathetic to Enron's former employees, many, if not most of whom, had to be aware that this company could not lose so much real money and spend so much real money if it was making real money in an honest way--- and its seems like guys like Pai and most of his associates will probably keep their ill gotten gains
There will be other Enrons as long as Wall Street trades on
"virtual" earnings and undistributed earnings-hopefully "mark
to marketing" accounting and its accounting brethren will be declared illegal, but that would probably be a naive hope
I would highly recommend this book, just to see how dumb and how amoral the smartest guys in the room were and often still are ---- (...) the question may be asked , how could such smart men (and women)be so stupid ......
4.0 out of 5 stars Not For Lay People,
This review is from: Smartest Guys In The Room (Hardcover)There's blame galore to go around for the spectacular downfall of Enron Corp in that sober year of 2001. Accountants, rating agencies, regulators, lawyers, consultants, bankers--and these are just the bad actors outside the corporation. Look inside, where Bethany McLean and Peter Elkind treat their readers to a thorough journalistic scouring, and the smell of the rot almost wafts off the pages.
The authors rightly spend the vast majority of the book examining the personalities and circumstances that allowed the company to become what it was at the end of its life. Mix a potion that's one part hardscrabble Harvard MBAs, one part energy deregulation, and one part hysterical bull market, and you've got a financial molotov cocktail. Sadly, as we all know now, it was largely the little guy who paid the price for all the hubris of the players in this story, a fact that tends to get lost in the authors' painstaking recreation of the most complicated shell game in history.
But the story of Enron's fallout could provide the material for a whole other book. In this one we get the tale of the players, people like Ken Lay, Jeff Skilling, Rebecca Mark and Andy Fastow, all filled with an equal mix of remarkable brilliance and fatal arrogance. All are indicted by these authors as rabid players in a game they made up themselves, deeming themselves beyond the petty world of rules and regulation. But coming in for equal excoriation is the system itself, the web of enablement and intimidation that allowed Andy Fastow to quietly hammer together the company's coffin in the form of a maze of phantom accounting entities designed to prop of the appearance of the corpse inside. The most unnerving theme the book treats indirectly is the effect of mass psychology--the way exceptional personalities distort and transform reality on a systemic scale. And it offers little in the way of how something like this could ever be prevented in the future.
One word of warning for people not acquainted with basic finance: this is a complicated story, about erstwhile geniuses in the arcane use of financial products and regulatory loopholes. Though it's enjoyable even if one can't follow every detour down each accounting scheme, some knowledge of Wall Street and its workings seems necessary to understand the implications of the book overall. Given the fact that most experts didn't understand what went on here, the authors do their best to keep things as simple as possible, often using helpful metaphors and simple summations after a few pages of analysis, but they have no choice but to assume a level of sophistication among their readers.
Which leads to one gripe. In "The Smartest Guys In the Room" not a single institution or individual player involved with Enron escapes the authors' finger-pointing notice, with but one exception. Where were the journalists in all this? Why did short-sellers have to be the ones to ask all the tough questions? Bethany Mclean should take understandable pride in being the first one to pry the door open on Enron's malfeasance, but she was just a little late. One would think that with the mass of financial journalists on CNBC, the Journal, the Times, etc., that just one would have bucked the collective cheering squad and dug deeper into what this supposedly invincible company was up to. But of course, this was the bull market. A time when everyone was exuberant when they should have been scared.
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Smartest Guys In The Room by Bethany Mclean (Hardcover - Oct 3 2003)
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