Rating: 
Summary: THERE ARE NOT ENOUGH JAIL CELLS-GOOD READ
Review: "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 ......
Rating:
Summary: Packed with Knowledge!
Review: Enron is, of course, old news by now. The company went bankrupt in 2001, and its spectacular collapse was merely the first of a series of notorious corporate scandals. Most of the story Bethany McLean and Peter Elkind tell in their book has already appeared in newspaper and magazine accounts and in other, rush-to-publish books that hit the market during or shortly after the events described. However, these authors have assembled what may be the single most comprehensive, detailed account and written it like an anecdote-rich, lively business-based novel. We do wish they had included a timeline and a list of sources, since they have had the benefit of being able to draw on all of that other work, on indictments and on testimony before courts and Congress, but their account is engrossing and complete. If you read just one book on the Enron scandal, we believe this may be the book to read.
Rating: 
Summary: A Fascinating Read With All the Gory Details
Review: 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
Rating:
Summary: Interesting History Lesson
Review: Even if you do not have exceptional math skills, this is a good read. The book goes through the various accounting manipulations that Enron created. However, the strong points of the book are how it follows the company's main players during its rise during the nineties, and its ultimate fall by 2001. Anyone who works in management, or close to it in the corporate environment will probably recognize some of these same accounting manipulations in there own company. The problem with Enron is that these manipulations became the most prominent source of revenue as the economy changed and bad deals caught up w/them. That anyone actually acts surprised by what Enron did is truly amazing when it was so blatantly out in the open. Enron's enablers, Arthur Anderson, Merill Lynch, the SEC, all assisted Enron w/ making its fall a lot more spectacular than it had to be if simple rules, laws, weren't arrogantly ignored. This book vividly displays these players and has you almost rooting for their fall at the end, if not for their conceit, than for the entertainment provided when an arrogant giant goes down.
Rating:
Summary: good summer read, gripping story, reasonable overview
Review: I found this book gripping (although tedious at times) -- it focusses mostly on Enron's business practices through the early and late nineties culminating in its bankruptcy declaration. It tells the story as viewed from within Enron executives' lives/timelines and provides a high level overview of perhaps most of the significant events that occurred within the corporation. For most Americans, Enron burst into our consciousness post 9/11 -- in a wave of dot-com meltdowns and corporate scandals. Most of us probably still do not understand what energy trading is, and as time passes, will care even less that the principals will go unpunished, or that the enormous loss of shareholder equity and trust will merit nary a whisper of change in Republican controlled business-friendly environments. What a shame!
The book presents a good picture of the executives involved -- Ken Lay -- detached; Jeff Skilling -- missionary but blind to reality; Andy Fastow -- uber self-interested geek/criminal; among a whole cast of characters. Corporate boards would do well to study the personal dynamics and corruption exhibited within these pages to prevent repeats.
Structurally though, it was disappointing to me that the authors spend so many pages discussing the history, but not enough time on certain details or the epilogue. There are a lot of pages enumerating the various deals and shenanigans, but not much detail with respect to what actually they contained or did -- perhaps, as the authors say, the deals were so complicated that not many people understand them even now (including the authors?). It was also disappointing not to read any guidance or at least conventional wisdom in terms of what we need to do structurally to restore the system of balances and trust (i.e. what do we really need to change in the realationships between corporate boards and executives, auditors, analysts/investment banks, the SEC, the DOJ, investment rating agencies etc.). Perhaps we need to wait for a follow on.
Rating:
Summary: Very Entertaining!!!
Review: It is amazing how greed, duplicity and ignorance can come together to destroy an organization. By the end of the book you can only hope that they end up like the poor employees that they destroyed.
Rating:
Summary: turning a dog into a duck...
Review: It is by now a cliché that arrogance and myopia contribute to many a downfall, whether the downfall is personal or corporate. This book proves that point aptly. Hubris and a sincere belief that Enron could do no wrong in the world contributed to an atmosphere of injudicious superiority. Combine that tumultuous atmosphere with ineffective, weak-willed executives and poor business management skills, Enron always was a precarious edifice awaiting its fate.
At least, such is the narrative that the authors offer. They argue that Enron, over the past 15 years, repeatedly found itself in financial trouble, and, rather than come clean to the Street, used financial engineering strategies to make its numbers appear better than they were. This practice arose out of a fanatical devotion to the company's stock price; the company's stock price would not continue to rise if the company missed the Street's earnings expectations for the quarter. Since so much of the executives' wealth was tied up in Enron stock and options, financial shenanigans became a self-fulfilling prophecy. After all, the authors point out, if most of your wealth is tied up in a company's stock, don't you have an incentive to do everything possible to keep its stock at a high level? Certainly, at this point, financial chicanery becomes more attractive than financial fidelity.
Therein lies the fundamental flaw of Enron (as well as numerous other bubble companies): the very compensation scheme created by the company to inculcate a sense of loyalty in its executives created a conflict too gross to manage adequately. The conflict in this instance is, in retrospect, a simple one: executives had all the incentive in the world to keep their company stock at a high level because all of their wealth, and their future wealth, was tied up in the company. Therefore, there was little incentive for them to be straightforward with the Street, or, for that matter, the company's finances. Enron thus became a delusional place where it could do no wrong and its managers were businesspeople par excellence.
All of this is false of course. Enron's managers are human after all, and all humans are susceptible to the foibles and follies of people everywhere; no matter how smart a group of executives, nor the sterling reputations of the schools from which they received their MBAs, absent sound business principles, ignorance becomes bliss and delusion becomes reality.
The authors are at their best when they explain the source of Enron's executives' arrogance, and the consequences for the company of that arrogance. It is important, therefore, to understand the company's hierarchy. The company was run by its founder, Ken Lay. Despite having the title of CEO, he played a role more akin to Chairman of the Board or a statesman: he spent most of his time away from the company, hobnobbing with celebrities and heads of state, and otherwise embodying the rock star CEO mentality. Business is just another form of theater, a la Sean Penn walking down the red carpet at the Oscars. Thus, other executives, from Jeff Skilling, on down, basically ran the show, and their outsized, narcissistic personalities therefore dictated a lot about the Enron culture.
Skilling came from McKinsey, the famous consulting firm full of Harvard and Wharton MBAs. As we all know, people with MBAs from Harvard and Wharton can be very intelligent. But they can also be very arrogant and dismissive of those they consider to be their intellectual inferiors; the authors imply that Skilling demonstrated the worst tendencies of a Harvard MBA, and, absent any checks in his behavior, his arrogance and condescension became the shaky cornerstones of the poorly constructed edifice that became Enron.
The metaphor of a poorly built structure is, at the end, the appropriate one for Enron. Despite the thousands of worker bees carrying out the daily operations of the company, the executives at the top were maniacally focused only on telling the Enron story: manipulating the Street into thinking that Enron was the greatest thing since sliced bread. Their thought was that as long as the stock keeps going up, and the Street believes in the Enron story, then there is no need to make the hard business decisions that are actually quite unpleasant to deal with. Enron had no organization and no comprehension of the risks it faced, either in its daily operations or in its financial engineering. One need not be an architect or engineer to know that structural integrity is important to the sanctity of a building. Such is the lesson we learn from the Enron fiasco: image is nothing when it is created only for the purpose of supplicating the Street and propping up the stock.
Incidentally, the title of this review comes from a reference in the book. The authors quote an accountant who explains that Enron used creative accounting techniques that often hewed to the letter of the law but violated its spirit. Under this logic, if you have a dog, but you paint its fur yellow and paste a beak on it, you technically have a duck, if by "duck" you understand it to mean "an animal with yellow fur (feathers) and a beak." In other words, if a transaction meets the technical requirements for it to be considered, say, revenue, then it need not matter that, in substance, it's not really revenue but debt.
Rating:
Summary: A must for the non-sceptic
Review: 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.
Rating:
Summary: Business 101: Something to learn from
Review: The book is organized in a chronological fashion. But at the same time, certain chapters were focused on key players in Enron:
- The story about Kenneth Lay.
- a story before enron became enron. Mostly, about acquisition.
- Story about Jeff Skilling and how he started off in McKinsey and how he entered Enron and eventually rose to be the top guy on the helm.
- It tells a story about Skilling's other lieutenants like Pai, Baxter, Rice, et.c
- It tells a story about how Fastow rose up the ranks (by the way, he was not originally one of the people in Skilling's inner circle).
- And much more... Some interesting things you will learn in this book are: - How Skilling was able to transform Enron's Busines Model from an "old Economy" Company into a "New Economy" Company similar to Tech-companies like eBay, Cisco, Microsoft, etc. - Understand how Skilling's team transformed the way they handle their accounting. Concepts like Mark-to-Market accounting and Off-balance Sheets. (Something I never knew before I read the book). - Learn about how they manage acquisitions and how they use acquisitions as a means for them to hide the true financial situation of the company. - Learn about how Fastow has maneuvered himself in the inner circle of the Skilling Team and how he had made himself as the Czar of Finance and Accounting from the eyes of Investment and banking institutions like CitiGroup, Chase Manhattan, etc. - Know about the working environment and culture in enron which Skilling has transformed into a "Make Creative Ideas... Nevermind the cost.." and a "Get the deals... we deal with delivering our commitments later." kind of culture. - Learn about the personalities of the key players. What type of social life do they have from Bike Safaris in Mexico to exotic bars. I find this book quite interesting (considering I have never ever had any interest in reading books cover-to-cover. Though most of the books I read are technical and IT-related, I find this book very good to read. The book is well written and proof-read (no grammatical or spelling errors). In terms of reading time and efforts to read this books (here I go again with my technical statistics)... - I find it good to read on flights. It allows you to pause for sometime to actually let you reflect.
- Total Reading time for slow readers like me is around 15 hours. For a long-haul flight from Los Angeles to Manila, you'll probably finish the book by the time you arrive to your destination. Summary, you will like this book. Good Day!
Rating:
Summary: An incredible story of genius and greed
Review: This book is by far one of the most interesting non-fiction books I have ever read. It certainly trumps all other business related books. It's not just the excellent writing of the authors, but the Enron saga itself that plays out like a movie.
The book starts out with a brief history on each of the major players of Enron: Ken Lay, Jeff Skilling, Cliff Baxter, Lou Pai, etc. Each has their own unique story: Jeff Skilling and his brilliant past at Harvard and McKinsey - Lou Pai and his fetish for exotic dancers. But a clear picture emerges how each of them was brilliant in their own way. They each could have done great things, but this motley crew put into motion one of the greatest scandals in American history.
The progression of the company did not always make for good reading. The explanation of Fastow's entities was complicated and mundane. On the other hand, reading about how these characters managed to pull off various stunts can be downright hilarious. For instance: Skilling's hype caused the stock to rise 15 points in one day, Fastow stole from millions from Enron while Skilling unknowingly thought he was doing a good job, Lou Pai inconspicuously cashed out (...) in stock at the peak of Enron, and somehow Ken Lay was completely oblivious to all the above! In the end, each of the executives was being duped or defrauded by one of the other players.
This is a great book that I highly recommend. As a business student, I find this to be a highly analytical, yet entertaining, story of the stock boom - and later bust - of the late 90s of which Enron was a major catalyst.
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