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The Evilest Guys in the Room
There is a new movie coming out this Friday, April 22nd called “Enron: The Smartest Guys in the Room” (trailer: quicktime, wmv). Based on the book of the same name by Bethany McLean and Peter Elkind, this documentary illuminates the motivations of the executives and staff at the Enron Corporation during its tumultuous rise and its dramatic and costly fall. Thanks to a pre-screen copy from the film’s publicists, I had a chance to get a sneak peek.
First, let me dispense with the evaluative necessity—this is a great film. “The Smartest Guys in the Room” takes a complex subject and unravels it into its essential roots: the dangers of the corporate state, the consequences of our capitalist system on fundamental human behavior, and the degree to which so much in this country is controlled by so few.
The film sticks to a fairly traditional documentary style reminiscent of a Frontline or a 60 Minutes documentary. This is not a bad thing. In this age of name-calling and bias accusation (i.e. the SCLM), “Smartest Guys” presents a fully credible portrait built on the words of the Enron executives themselves. There is a great deal of direct footage of the primary players (Chairman Ken Lay and CEO Jeff Skilling), as well as backup narrative from various Enron employees that saw the action firsthand.
However, the most interesting part of this film is not its fact finding, but is instead the complex web it weaves between the facts in an attempt to explain the “why.” Moreover, the Enron executives could hardly fault anyone for asking this question given that their treasured corporate slogan was “Ask Why.”
“Smartest Guys” is a picture of the consequences of our priorities as a society—when the importance of making money becomes the driving mantra behind everything we do. The Enron execs were a bunch of macho, reckless guys with a wild-west gambler mentality. They merged this with a level of confidence that can only come with access to power at the highest levels (i.e. the White House). The result is an arrogance, both internal and projected, that allowed Enron to blind the world with their dreams and schemes.
The consequence I speak of is a corporate state without regard for you or me. The corporation has absolutely no interest or reason to support America and its people. Instead, every single aspect of the corporation is about money for its shareholders and executives. Enron took this idea to its highest highs (and eventually its lowest lows) by instituting procedures designed to weed out anyone with a cautious or empathetic bone in their body.
The Performance Review Committee (PRC), setup by CEO Skilling, was a structure for annual employee performance evaluation. If you weren’t cutthroat enough, weren’t fully committed to the unrelenting goal of making money regardless of human cost, you were let go. Enron dumped 15% of its staff every year based on PRC recommendations. What they were left with after years of this weeding was a staff that would screw us all over, that wouldn’t care about right or wrong, legal or illegal.
In the film’s best sequence, this evil mentality is most evident in Enron’s participation in, and engineering of the California energy “crisis” in 2001. “Smartest Guys” does a great job explaining how Enron sucked power out of California to create a false ‘shortage,’ so that they could then sell it back to them at a huge profit. This sequence is filled with telephone dialogue by Enron traders at the time who happily talk about screwing grandmas out of power and gleefully cheer on wildfires that threaten power distribution (so that their prices would go up even more). Finally, the film does a great job tying this whole debacle into the subsequent recall of CA Governor Gray Davis by Schwarzenegger’s friends Ken Lay and George W. Bush.
The frequent links to governmental power by the Enron executives is a recurring theme in “Smartest Guys.” Ken Lay knew Bush Jr. and Sr. going way back. Lay was an early champion of deregulation, publicly pushing for it as far back as the 1970’s. Despite George W. Bush’s attempts to distance himself from Lay in the aftermath of Enron, “Kenny-Boy” (Bush’s nickname for Lay) and his company were the largest single contributors to Bush’s presidential election campaign in 2000.
One aspect of this movie that particularly pleased me was its unwillingness to give any of the top executives a pass. It lays responsibility right where it belongs—at the top. There are great sequences in the film that include accusations by Sharon Watkins (the inside executive who was appalled at what she found and eventually testified against the company), and ridiculous rebuttals by Skilling in front of Congress. But the film doesn’t stop with Skilling and indicts Lay as well. As Skilling had, Lay claims he didn’t know anything about what these rogue people were doing in his company, and therefore claims no responsibility for what happened. Sure, he and Skilling had dumped millions in stock options just before the company tanked, had hired the people who screwed the world with its Ponzi schemes, and oversaw the downfall of the country’s 7th largest corporation—but its not their fault!
Kurt Eichenwald recently wrote a book on the same subject, titled “Conspiracy of Fools.” I had been particularly interested in reading this book when it first came out, as I was engrossed by his last work, “The Informant,” which lays out the details behind an ADM price-fixing scam in the style of a John Grisham novel. But my reading of reviews of “Fools” revealed that Eichenwald gives Ken Lay a pass and adopts Lay’s defense of ignorance. As unbelievable as his ignorance claims are, their truthfulness is irrelevant in determining guilt or innocence. At the very least Lay engineered and ran the company that screwed 20,000 employees out of a job and lost their billions in pension funds. He managed to get away with hundreds of millions in cash himself, though.
I do wish “Smartest Guys” had done a better job explaining the complex accounting schemes that led to the company’s unreal growth around 2000. Enron created hundreds of “partner” companies, usually consisting of nothing but paper, that they used both to squirrel away debt and to realize projected profits from. These schemes, combined with the confident attitudes and connections to power allowed them to blind the stock analysts who gave them nothing but buy ratings. The film missed an opportunity to unravel this mystery through a simple diagram and explanation.
I also would have liked to have heard more about the aftermath of Enron—the calls for corporate accountability by the citizens and the degree to which our government responded (or failed to respond). How much did Bush play in blocking these reforms? Was enough done to prevent this in the future?
Minor quips aside, “Smartest Guys” is a great film that does a noble service in pointing out that Enron is not an aberration, but is a direct and logical result from the structures we have setup and tolerate as a society. As the film mentions near its end: if it looks too good to be true, than it probably is—a fitting cliché for 21st century America, its corporate dominance, and its superpower politics.
Posted on April 17, 2005 02:08 PM
Comments
Hello,
I wanted to get the author of these articles names because I want to cite them in my paper on enron. So could you please send me your full name! Thanx!!!
Posted by Sirena Bustle on May 2, 2005 10:57 AM
Keep drinking the Kool-Aid. As someone who has more knowledge about the subject than the movie makers, I would suggest you be a little more balanced in your review. You can see my comments on the Smartest Guys In The Room blog.
Steve Avary
Posted by Steve Avary on May 6, 2005 04:40 PM
Steve,
I read your comments on the enron blog (http://www.enronblog.com/2005/04/16/the-smartest-guys-in-the-room/#c14366) as you suggest. I find your comments interesting and insightful in many ways. However, I don't see my review as unbalanced in light of them, nor do I find certain parts of your story believable.
In particular, I am suspect of your assertion that Rebecca Mark was sleeping her way to the top of the company in an attempt to succeed Lay. Cmon, thats about the oldest cliche out there. Can you cite any facts on that or shall I just believe you?
Regardless of that point, I stand by my review and conclusion that the movie is a fitting portrayal of whats wrong with American business and its ties to governmental power in the 21st century.
cv
Posted by cv on May 8, 2005 05:34 PM
I don't disagree with your comments that these guys are poster boys for what's wrong and that there should be some arms length between government and business. But just remember, most legislation is related in some form whether directly or indirectly to economic interests. How's the best way to draft legislation to facilitate growth in an industry? It's probably a good idea to have practitioners in the industry to provide input rather than leaving it solely to career politicians that couldn't identify the market clearing price on a supply and demand model if you spotted them the supply and demand curves and Q*. I do disagree with the movie's assertion that Bush was part of a mass conspiracy to get rid of Gray Davis. I would say his non-intervention has more to do with his economic beliefs in free markets with limited government intervention. History has shown whenever government has intervened, the results typically are less than optimum than if it were left to the market to work through, although it might be long lived and gut wrenching in the process. With California being one of the bluest of the blue states, it's unlikely that the voter recall would've been successful if there was much evidence of a conspiracy. Instead of Gray Davis, California now has Arnold. Many believe that Arnold reached the governorship because of his celebrity, and to a large extent that's probably true. But what the voters of California might not have known either then or now, I didn't know until after the recall election, was that Arnold has an economics degree from the University of Wisconsin. A fine school in itself that also happens to have one of the strongest economics departments in the World. Arnold gets it, and yes coupled with his celebrity, that's why he won.
You find certain parts of my comments difficult to believe? Excluding the individuals mentioned in the movie, do you know any former Enron employees personally? I doubt it. I know some, some of which worked directly with Mark. I heard from them directly as well as others commenting they heard the same thing. Did I say without any reservation that was her modus operandi? No, I said that was the scuttle butt. I don't have a beef with her. I personally don't know her, but
I would say my sources are probably a little stronger than yours.
Posted by Steve Avary on May 12, 2005 07:05 PM
"How much did Bush play in blocking these reforms?"
Uhmm...very little from what I can see. He signed Sarbanes-Oxley and 401k reform acts. Plus, keep in mind, he was President for less than a year when Enron fell apart.
Not to burst your bubble...but if McLean and Elkind would have told you about any clear obstruction of corporate reform by Bush, they would have mentioned it.
Posted by MnZ on May 15, 2005 09:28 AM
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