Tag Archives: Wall Street

Enron: The Smartest Guys in the Room

While many people recognize the name “Enron”, few today probably know exactly what it did to deserve such an unsavory reputation. Enron: The Smartest Guys in the Room describes Enron from its beginnings, and details all the illegal, immoral, and simply insane things it did, all to receive its well-deserved reputation. In some ways, Enron was unique or an aberration as a company, but in other ways it was the prototypical American corporation. It was unique in its sheer willingness to lie, deceive, and recklessly break things, but it was emblematic of American corporations in its lust for profit at any cost, its masculinist competition, and its desire to curry favor with the powerful in order to avoid regulation. Founder Ken Lay was close friends with George H. W. Bush, future American president, and then later with George W. Bush. For those who doubt the closeness of their relationship, Enron: The Smartest Guys in the Room includes a homemade movie the Bushes made for a high-ranking, retiring Enron employee.

It’s telling to witness Enron’s geeky men trying to assert their masculinity, by doing dangerous, long-distance motorbike treks, sometimes injuring themselves in pursuit of proving their manliness. The company enacts a Draconian policy that regularly cuts a certain portion of the workforce, to encourage employees to be super-competitive with each other—consequently, people slit throats and scramble to the top, to avoid being left toward the bottom of the heap and thus fired. Then, Enron deliberately tries to create money out of thin air by using a “mark to marketing” accounting strategy, in which forecasted profits can be counted immediately. Time and again, Enron is intent on trying to believe its own hype, to become successful simply through force of will (independent of tangible resources or assets). In this respect, they are representative of the American financial sector which is premised upon marketing, self-pomotion, deception, and—quite honestly—nothing of actual value being created.

The arrogance that accompanies the accumulation of wealth is shown by the construction of two exclusive staircases ascending to the offices of Ken Lay and Jeff Skillings at the company’s headquarters. This lavish celebration of power and success clearly infects all the Enron employees. When a critical [female] reporter from Forbes magazine asks questions about how Enron makes its money (because no one really knew), Enron’s response is to insult her for not understanding their practices. Of course, Enron’s practices amounted to fraud, but they instead chose to explain their profits as sophisticated and creative. Skillings exemplifies this arrogance when earlier in life he was asked by a college professor at Harvard professor if he thought of himself as smart, to which Skillings responded “I’m fucking smart”.

The house of cards created by Enron collapses in waves, but the company managed to conceal its failings for many years. One guy who leaves the company before its final implosion, manages to walk away with hundreds of millions of dollars, and becomes the second largest landowner in Colorado. Another executive, Andy Fastow, was tasked with covering Enron’s tracks, so he creates countless shell companies (with insider joke names) to conceal Enron’s losses.

The housing and mortgage crisis is a more recent financial scandal today, but the same callousness and indifference was present earlier in the 1990s and 2000s with Enron. The documentary includes audio recordings of Enron traders laughing about screwing over grandmothers and other citizens. The indifference these traders had for the victims of their actions is most pronounced in California. An Enron employee analyzed a new California energy deregulation law (the kind Enron itself lobbied for), to find loopholes, and then created dozens of strategies to play the new system and make money. One of Enron’s favorite tricks was to artificially create demand by deliberately reducing the supply of energy in California. Traders called up managers at California power plants and had them shutdown the plants, sometimes for hours. The ensuing energy shortages led to rolling-blackouts and other chaos. Californians saw their monthly energy bills quadruple in cost.

From the retrospective view of Enron: The Smartest Guys in the Room, Enron was a house of cards that involved too much risk-taking, and too much lying and self-deception. Consequently, they serve as perfect—if not cruel and cutthroat—mascot for Wall Street. Not ironically, much of the same personality characteristics and values helped to guide the crisis of 2007-2008, which brought down the world economy. Enron is a poster-child for anti-social corporate behavior and the wolves of Wall Street.

For class showings, be wary that there a few F-bombs (many of which are funny), as well as a short scene of topless exotic dancers. But, it’s still worth showing in a class, because it is one of the best tutorials of pre-mortgage crisis corporate crime, and a lesson we should not soon forget.

Themes: capitalism, Wall Street, corporations, crime, masculinity