Brian's Reviews > Conspiracy of Fools: A True Story

Conspiracy of Fools by Kurt Eichenwald
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Sep 20, 12

bookshelves: recommended-non-fiction
Read from September 12 to 19, 2012

(4.0) Great recounting of the Enron train wreck, can't believe this all actually happened.

You'll note I'm borrowing a lot of this from a comment I made earlier... ;)

The interesting thing is that these guys weren't the smartest in the room (see: The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron and accompanying movie). Some of them were very creative, but on the whole, Fastow and his cronies were unbelievably stupid, naive, ignorant. It's unbelievable they weren't even aware of things like interest rate risk, currency exchange risk, hey, even discounting future earnings to compute current value. Okay, they were greedy, but then how in the world did the board, Lay, Skilling not see these people were incompetent? (It's interesting that many underlings, auditors, analysts saw their incompetence, saw the writing on the wall, many yelled vocally, most lost their jobs or were reassigned).

Head in the sand is one thing, this is ripping your own eyeballs, ears and nose out to avoid sensing the crimes being committed every month leading up to earnings announcement. I mean, in most cases Wall Street firms at least rip someone else off. These Enron guys were just blatantly running the company into the ground with the financial shenanigans that just shuttled money around, burning fees left and right to fix each quarter's earnings. It's just shocking. Really surprised Lay didn't bail out sooner when they were on top of their game...and just handed it over to Skilling.

I guess from Smartest Guys, I remember more about Enron's retail power group and the California power crisis/es: mostly how Enron helped orchestrate them. Starting to see more of that where I am now in the book. That's more of the behavior I was expecting: dirty, rotten, unethical, somehow legal, ripping everyone else off to benefit Enron (and thus their own bonuses). But obviously, these silly off-balance-sheet shell companies are what brought Enron down, so clearly there was a lot of that going on.

Anyway, this is a fantastic account of how things progressed. Really reminds me of Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis — and Themselves, which was similarly in-the-minute through a crisis (also very long).

That's two good ones from Eichenwald (definitely read The Informant: A True Story if you like reading about incompetent greedy corporate thieves), so I'm becoming a fan. :)
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Comments (showing 1-4 of 4) (4 new)

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message 1: by John E. (new)

John E. Branch Jr. If you don't know much about the collapse of Enron, this book may be a fine way to get informed. I haven't read it, but my experience of Eichenwald's writing suggests that the book will contain previously unreported details without adding much to the overall picture. In case it matters: You can get a quicker grasp of the whole story from a very well-made documentary called The Smartest Guys in the Room, based on a book of the same name.


message 2: by Brian (last edited Sep 17, 2012 08:49PM) (new) - rated it 4 stars

Brian John E. wrote: "If you don't know much about the collapse of Enron, this book may be a fine way to get informed. I haven't read it, but my experience of Eichenwald's writing suggests that the book will contain pre..."

Did see the Smartest Guys a while ago...and came away with the impression that these guys were just really good at structuring deals (a la the creativity more recently in fixed income derivatives contracts, synthetic CDOs etc.) that worked in their favor.

But the interesting thing so far (i'm somewhere in 2000 now) is that these guys weren't the smartest in the room. Some of them were very creative, but on the whole, Fastow and his cronies were unbelievably stupid, naive, ignorant. It's unbelievable they weren't even aware of things like interest rate risk, currency exchange risk, hey, even discounting future earnings to compute current value. Okay, they were greedy, but then how in the world did the board, Lay, Skilling not see these people were incompetent? (It's interesting that many underlings, auditors, analysts saw the writing on the wall, many yelled vocally, most lost their jobs.)

Head in the sand is one thing, this is ripping your own eyeballs, ears and nose out to avoid sensing the crimes being committed every month leading up to earnings announcement. I mean, in most cases Wall Street firms at least rip someone else off. These Enron guys were just blatantly running the company into the ground with the financial shenanigans that just shuttled money around, burning fees left and right to fix each quarter's earnings. It's just shocking. Really surprised Lay didn't bail out sooner when they were on top of their game...and just handed it over to Skilling.

I guess from Smartest Guys, I remember more about Enron's retail power group and the California power crisis/es: mostly how Enron helped orchestrate them. Starting to see more of that where I am now in the book. That's more of the behavior I was expecting: dirty, rotten, unethical, somehow legal, ripping everyone else off to benefit Enron (and thus their own bonuses). But obviously, these silly off-balance-sheet shell companies are what brought Enron down, so clearly there was a lot of that going on.


message 3: by John E. (new)

John E. Branch Jr. Ah--clearly you're getting something out of it.


Brian John E. wrote: "Ah--clearly you're getting something out of it."

Yes, I'd say so. ;)


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