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

The tale of Enron is a story of human weakness, of hubris and greed and rampant self-delusion; of ambition run amok; of a grand experiment in the deregulated world; of a business model that didn’t work; and of smart people who believed their next gamble would cover their last disaster—and who couldn’t admit they were wrong.

The larger message was that the wealth and power enjoyed by those at the top of the heap in corporate America demand no sense of broader responsibility. To accept those arguments is to embrace the notion that ethical behavior requires nothing more than avoiding the explicitly illegal, that refusing to see the bad things happening in front of you ma

In a way, seen through the lens of the housing bubble, Enron even has some redeeming qualities. It genuinely was an innovative company that was trying to change and create businesses. It may well even have succeeded if its executives hadn’t been so intent on making profits appear in the company’s reported financial statements long before they actua

The 1982 book In Search of Excellence, perhaps the best-selling management tome of all time, was written by two McKinsey partners.

Enron’s board members also insist that they were kept in the dark about the restructuring—it was never included on a list of Enron’s top credit exposures, for instance. Still, since the restructuring was disclosed in Enron’s financial statements, there are only three possibilities. They are lying. They did not bother to read Enron’s financial state

At Enron, it was bookable accounting profits, not dollars coming in the door, that mattered. “People did not know the difference between mark-to-market earnings and cash,” says a former trader. “No one ever talked to me about cash,” says another. “It wasn’t on our annual review or included in our targets. It had nothing to do with how we were measu

The Enron trading desk, Skilling added, always had a matched book—meaning that every short position precisely offset every long position—and made its trading money merely on the commissions, not on speculative risk. Right up until the end, Skilling and his lieutenants stuck to that line, long after it had become demonstrably false.

After the purge of the Pai regime, a veteran trader from wholesale named Don Black was brought in to take over the trading desk. After he’d been there for a while, Black summed up his EES experience this way to a colleague: “It’s like going to work every day with your hair on fire and nothing to put it out with but a hammer.”

after Skilling became Enron’s COO, the company increasingly turned to its tax department to act like just another profit center—and help the company hit earnings targets by taking more and more of the tax savings early. “In effect, we have created a business segment for Enron that generates earnings,” Maxey wrote in an e-mail. Whatever the propriet