More on this book
Community
Kindle Notes & Highlights
Read between
November 6 - November 14, 2020
Nobel laureate Nelson Mandela came to Houston to receive the Enron Prize.
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.
On one occasion, a secretary sought to arrange a flight for an executive on Enron business only to be told that members of the Lay family had reserved three of the company’s planes.
one class in which the students were discussing a product that might be—but wasn’t definitively—harmful to consumers. The question for the class: what should the CEO do? “I’d keep making and selling the product,” replied Skilling. “My job as a businessman is to be a profit center and to maximize return to the shareholders. It’s the government’s job to step in if a product is dangerous.”
There are two other potential problems with mark-to-market accounting. The first is the mismatch between profits and cash. Just because a company can book twenty years’ worth of revenues and profits in one fell swoop doesn’t mean it actually has the money in hand.
The most dangerous problem of all is the very thing that makes mark-to-market accounting seem so seductive in the first place: growth. When the initial deals are cut and all the potential profits are immediately posted, a company using mark-to-market accounting appears to be growing rapidly. Wall Street analysts applaud, and the stock rockets upward. But how do you keep that growth rate up?
Wing stomped into the Wall Street offices where the 30 lawyers from the two sides filled a conference room. “Let’s play a little game here,” he began. “Let’s all get up and stretch. Now everybody who is trying to get this deal done, go to this end of the room. Everyone who is trying to fuck this thing up, go to that end of the room.”
Skilling had other ideas, too. He used to say that he liked to hire “guys with spikes.” By this, he meant that if an executive had a singular narrow talent—a spike—Skilling was willing to bring him into Enron and lavish him with money, no matter what his other shortcomings. Egomaniacs, social misfits, backstabbers, devotees of strip clubs: Skilling didn’t really care about their foibles so long as they had a skill he needed.
no company can prosper over the long term if every employee is a free agent, motivated solely by greed, no matter how smart he is. No company can function if it only hires brilliant MBAs—and sets them against each other. There is a reason companies value team players, just as there’s a reason that people who get along with others tend to do well in corporate life. The reason is simple: you can’t build a company on brilliance alone. You need people who can come up with ideas, and you also need people who can implement those ideas and are well compensated for doing so.
As Skilling and his defenders saw it, the PRC produced the best of Enron, rewarding brains, innovation, and dedication. But many thought it brought out the worst of Enron: ruthlessness, selfishness, and greed.
The Enron scandal grew out of a steady accumulation of habits and values and actions that began years before and finally spiraled out of control.
“Why,” an employee asked, “has our stock price decreased over the past several weeks, and what is management doing to get it back up?”
Worth magazine described him as “hypersmart” and “hyperconfident”—and named him America’s second-best CEO (just behind Microsoft’s Steve Ballmer) before he’d even been on the job three months.
Several minutes into the question period, Lay was handed a written query, which he read aloud: “I would like to know if you are on crack. If so that would explain a lot. If not, you may want to start because it’s going to be a long time before we trust you again.”
But he was also eager to sound a warning about current corporate practices. “The last reason I’m here,” he continued, “is because, in my opinion, the problem today is ten times worse than when Enron had its implosion. . . . The things that Enron did, and that I did, are being done today, and in many cases they’re being done in such a manner that makes me blush—and I was the CFO of Enron.”
