Rough Draft

Enron: The Smartest Guys In The Room

A group of us at work spent our lunch a couple days last week listen-watching Enron: The Smartest Guys In The Room. I had heard nothing but good things about the movie, so I was definitely looking forward to finally seeing it. I had intended to see it in theaters last spring, but never got around to it. This ended up being a fitting time to see it though, since the trial is just getting under way.

I have to admit I wasn't familiar with many of the specific details of the scandal or even all the major players. The two biggest things I didn't realize were 1. how many people outside of the company (the accounting firm, investment bankers, etc) were just as responsible as the top Enron execs and 2. how many people got screwed that weren't really a part of the company (such as the PGE electricians that Enron bought). The PGE people basically had to put some percentage of their 401K savings into Enron stock, and at a a company meeting Skilling and another exec answer a question about whether they should put all their savings into company stock by laughing and saying "yes, of course!".

The film was incredibly depressing and disturbing to watch. The shear number of people that the Enron execs convinced to just blindly believe them was stunning. Sure, lots of them were getting bribes, but you'd think at least someone would realize it couldn't go on forever. I mean seriously, how legitimate really is the weather futures market. And there was the scene where Fastow was pitching his LJM scheme to some investment bankers and one of them asks "isn't this a conflict of interest since you are the CFO of Enron and in charge of this LJM fund?" and Fastow basically says "no" and then later in the same meeting the investment bankers are all like, "well this sounds great". Um, no?

I have to say the one guy that did things "right" was Lou Pai. He got in, made his millions and got out long before the shit hit the fan. It seems he was the smartest of them all.

Another thing I hadn't realized was how responsible Enron was for the rolling blackouts in CA. They were literally calling up power plants and asking, or rather telling, them to shut down the power for certain amounts of time and then make up a reason that the power needed to be turned off. All the while, Ken Lay's friend Bush turns a blind eye. And then Lay starts holding meetings with Arnold Schwarzenegger. His gubernatorial victory seems like so much less of a surprise now.

My one disappointment with the film was with the presentation of some pieces of data. The main thing that comes to mind is a statement regarding mark to market accounting. It was something like, "they could just make up any numbers they wanted". It wasn't really like they could just write down numbers out of thin air. They had o actually come up with all these schemes (like the Blockbuster deal), so they could book revenue in one quarter, even if that revenue was never realized. Another point that came up with my co-workers is that they could have provided some slightly better statistics. For instance instead of saying that Skilling or Lay sold X million dollars worth of stock, it would have been nice to know what percentage of their holdings that number represented.

Overall the movie was incredibly well done and I highly recommend you see it, especially if you aren't all that familiar with the story.