Customer Reviews
Advanced accounting shenanigans don't create value 
2008-03-12
Very well researched account of the rise and downfall of Enron. It chronicles the start and the ultimate demise of this company, which never really had a great business model - (sorry Jeff Skilling). It is amazing that so many "smart" people did not understand basic business skills and the simple difference between economic and accounting gains. Jeff Skilling, a former McKinsey partner, should have stayed with the consulting firm where theory is safely differentiated from real world. Skillings' first mistake was not understanding his own limitations first and foremost. He breaks out a bottle of champagne to celebrate SEC's acceptance of a change in Enron's accounting system. Accounting does not create value - it does not appear that many Enron executives (especially Skillings who should have known better) understood this.
McLean and Elkind do a nice job presenting some of the schemes and scams that Enron executives used to make themselves look good to investors, analysts, bankers and the general public. There are some scams that I had a hard time following, but the reader will grasp the general idea behind them. In light of recent accounting scandals, this is an important book to read for any investors and the public in general. Unfortunately the book ends around summer of 2002 and we do not find out what happens to some of the key characters. My interest was sparked enough that I researched some of the more recent findings after reading the book. Despite its difficulty to read at times I highly recommend it.
Corporate arrogance gone amok 
2008-01-31
When one reads 'The Smartest Guys In The Room' there is one question that keeps recurring. How did no-one at Enron foresee the company's grizzly demise. The folly of mark to market accounting was reason enoough to expect certain problems, but the endless treadmill that Enron placed itself on concerning the stock price made those problems an inevitability.
Although Elkind and Mclean portray the story well, they really don't have to do much with the material to make a fantastic story of the blistering story with which Enron rose and the calamitous pace at which it fell. The Enron tale is one of brash arrogance in almost every possible facet of a business, allied to a stubborn refusal to accept the economic reality even when it is staring you in the face. The real shame about the whole mess is that these were bright guys and this was potentially a great company. All they had to do was have a little common sense and regular business accumen and they could have been on to a real winner here.
I would ultimately say to everyone that has an interest in business or the financial markets, however slight, that this book is a thumping good read and is worth some money ouot of anyone's pocket.
Fascinating bio of Enron for the layman, though a bit over-dramatized 2008-01-13
This is probably the best corporate bio of Enron you'll find, at least for now. Very readable, the pages turn quick and it never gets boring. Some of the technical accounting details were beyond me, but it wasn't difficult to understand the bottom line: These schemes were illicitly lining a few pockets with massive amounts of cash.
The amount of work that went into this account is mind boggling. I can't imagine the hours of conducting interviews and poring through complex legal and accounting documents to understand what happened over Enron's 15-20 years of existence.
However, as with most journalistic novels like this, you need to be careful to not be influenced by the slant of the prose. I wouldn't say that this account is neutral enough to be good for a "historical" perspective. It was written to sell first, inform second. There are countless statements throughout that could be construed as overly opinionated and even unfair to some of the players.
This is the story of Enron for the layman, not for an MBA student performing a case study on the company. If you're an interested layman like me, do yourself a favor and read it!
intelligence is overrated 2008-01-05
An interesting story of how a corporate belief in hiring intelligent people, or at least people who boast they are intelligent, leads to hubris and eventual ruin.
When everything finally collapses, no one is responsible and no one did anything wrong. A telling tail of how smart people can convince themselves of things better than they can convince the world.
What might Enron have done differently? The authors feel that Enron's use of "mark to market" accounting (booking the entire profits long term deal up front, based on a model of the future; the company is then supposed to adjust their revenues as time passes and the model is tested) was largely responsible for losses that Enron then hid.
The length, at 400 pages, is imposing but goes by quickly. However, the authors took the unusual step of listing all the players with their role, which really helps with getting all the names straight.
An Amazing Guise Indeed 2007-12-12
I still wonder if the title is supposed to be a play on the homonym "Smartest guise in the room."
The authors step meticulously through the company's existence from the promising and fruitful beginnings of its energy operations to it's ultimate demise as America's largest bankruptcy with $10s of billions of debt.
The most enlightening aspects of the Enron saga are the personalities and personal journeys of each of the key players behind Enron's existence. I think it's fair to say, in general, that most successful people in business are either 1) Brilliant, 2)Incredibly charismatic, or 3)Fortunate benefactors of nepotism. The founder (Ken Lay) wasn't very business smart, but had a good idea and was amazingly charismatic and quickly roped in his crack team.
The reader very quickly sees what happens when incredibly intelligent people are put together towards a common goal in an atmosphere of amoral adherence to the "letter of the law". The operation was legitimately making money hand over fist the first year or so...but quickly after that, all "profits" were merely the magic of clever accounting.
This is a story of brilliance turned to hubris and invincibility but yet no accountability. I think the theme of the epilogue "Is anybody to blame?" sums up well the personalities of the key players involved. Everyone felt as though they had done nothing wrong. It's almost impossible to pinpoint when any laws had actually been broken...the regime was one continual exploitation of loopholes and gray areas.
The tale is truly terrifying in a very real sense. It's amazing to think that one of the worst businesses in American history was heralded as stable and as a "good buy" by many Wall Street analysts even up until the day before it imploded and ruined thousands of people's lives as well as the bottom line in some of the world's largest banks. It's amazing that brilliant accountants and relentlessly charismatic leaders can do more to bolster the stock of a company than actual legitimate earnings.
Very well-written and enjoyable 2007-12-03
The definitive volume on Enron's amazing rise and scandalous fall, from an award-winning team of
Fortune investigative reporters.
There were dozens of books about Watergate, but only
All the President's Men gave readers the full story, with all the drama and nuance and exclusive reporting. And thirty years later, if you're going to read only one book on Watergate, that's still the one. Today, Enron is the biggest business story of our time, and Fortune senior writers Bethany McLean and Peter Elkind are the new Woodward and Bernstein.
Remarkably, it was just two years ago that Enron was thought to epitomize a great New Economy company, with its skyrocketing profits and share price. But that was before
Fortune published an article by McLean that asked a seemingly innocent question: How exactly does Enron make money? From that point on, Enron's house of cards began to crumble. Now, McLean and Elkind have investigated much deeper, to offer the definitive book about the Enron scandal and the fascinating people behind it.
Meticulously researched and character driven,
Smartest Guys in the Room takes the reader deep into Enron's past-and behind the closed doors of private meetings. Drawing on a wide range of unique sources, the book follows Enron's rise from obscurity to the top of the business world to its disastrous demise. It reveals as never before major characters such as Ken Lay, Jeff Skilling, and Andy Fastow, as well as lesser known players like Cliff Baxter and Rebecca Mark.
Smartest Guys in the Room is a story of greed, arrogance, and deceit-a microcosm of all that is wrong with American business today. Above all, it's a fascinating human drama that will prove to be the authoritative account of the Enron scandal.
Page-turner, great overview of Enron's rise and fall 2007-11-30
The Smartest Guys in the Room is an intelligently written, comprehensive look at the rise and fall of Enron. Even if you've seen the outstanding documentary of the same title (made after the book came out), I highly recommend reading the book. While the documentary does include information not available when the book was published (such as the truly scary audio recordings of Enron traders blithely manipulating CA's deregulation loopholes by rerouting electrical power or asking power plants to "find a reason to go offline" during CA's rolling-blackout nightmare), the book contains much more detail, as well as players barely mentioned in the documentary.
One of those players is Rebecca Mark, the glam Enron uber-exec in charge of international projects and a short lived venture into water "trading," who was vociferously criticized by Jeff Skilling (big shaper of Enron strategy who became president and COO in 1997), later ousted, and one of the lucky who cashed in millions in stock before Enron's decline. (Ironically, despite some huge debacles, Mark's international projects were among the few assets of value left standing when the dust of Enron settled.) The book also includes much more detail on the shady financial maneuverings of Enron, which arguably were prompted by Skilling's constant promises to Wall Street of increased quarterly earnings (regardless of Enron's actual state of profitability), followed by quarter's-end panic and a just-make-it-happen attitude throughout the company. Profitability was happening, but mainly on paper. Understanding Andy Fastow's off-balance-sheet schemes to hide losses, including the many complex "special purpose entities," can by heady bedtime reading for those of us unschooled in high finance, but it's endlessly fascinating nonetheless.
Though the story of Enron's rise and decline (from a $70-billion company with a stock price of over $80/share to below $10/share and then junk status and bankrupt in a remarkably short time) is fascinating, equally interesting (and related) is Enron's company culture, so vividly illustrated by authors McLean and Elkind. Enron morphed from a straightforward (albeit unsexy) Texas natural-gas supplier into a flashy, MBA-laden, power-trading company with a nearly myopic deal-making culture. Building and maintaining assets was old school; so to it seems were details like carrying through on deals, customer service, anything with a functionary flavor. It was all about trading, starting new businesses, anything visionary (even as Skilling kept selling Enron to Wall Street as a logistics company). One guesses it would have been hell to be a cube worker at Enron, cleaning up the messes created by deal makers upstairs.
For those of us who still think 6 figures is a high salary, it's astonishing to learn about the huge base salaries, multimillion-dollar bonuses, and big severance packages (who knew getting fired or quitting could be so lucrative!). Then there's the hubris of the trading pit. The superior attitude of the traders, other "new" company divisions, and even Skilling himself toward other areas of the company. The complicity of the lawyers and Arthur Andersen's accountants, who were supposed to ensure the company played by the rules (but who enjoyed such high fees and such an incestuous relationship with Enron they sometimes barely tried).
Much of the financial outlay defies common sense, even to those without any business background. Huge bonuses paid to Enron employees immediately for deals signed, based on projected profits (hypothetical and often hugely exaggerated), regardless of whether such deals ever made a dime. The ability to immediately "bank" such profits (yes, all projected profits even on a 30-year project) at quarter's end through the murky glories of mark-to-market accounting. Or Lay and the Board of Directors granting approval to Fastow to set up the special purpose entities (wherein Enron losses were hidden while investment banks were paid high returns for their no-risk (and therefore illegal) participation), and yet never directly asking Fastow specifically how much he was profiting from the funds. Lay and the directors thought Fastow would earn a modest return on his own money invested (Enron also paid him a substantial fee to manage the funds). But within a few years, Fastow and his wife profited a whopping $60 million from the funds, even as he was CFO of Enron and negotiating deals WITH Enron on behalf of the funds. Amazing. (One would think Fastow had nervous knots in his stomach each work day wondering when this sticky subject would come up, but it appears he was confused to the end about any impropriety.)
Kudos to coauthor Bethany McLean, who as a Fortune writer (amid the peak of Wall Street/analyst/investment banking hoopla and adoration over Enron stock) was one of the first to call up Jeff Skilling and say, in effect, "the numbers don't make sense." I'm now onto reading "Power Failure" by Sherron Watkins (the Enron accountant who warned Lay that Enron could implode due to accounting improprieties) and I think TSGITR will provide great background info.
Unbelievable 2007-11-17
I must say that this book is one interesting read. It reads more like an exciting drama novel that a non-fiction book about a real company. A documentary has been released also on this book. I'm waiting for the blockbuster film next.
The book covers the history of Enron from its inception to its ultimate collapse. The book cover sums it up beautifully speaking of it as a "human drama - people drunk on their own success, people so ambitious, so certain of their own brilliance, so fueled by greed and hubris that they believed they could fool the world." And fool the world they did. Professors of prestigious universities created case studies on the company's success, they were Wall Street's darling, Jeff Skilling was ranked at one of the world's top CEO's, Enron was one of the highest rated companies - the best in the world. What masters of deception they turned out to be.
I was really shocked and found it so unbelievable that such a thing could take place. Of course they could not have accomplished this without the complicity of the investment banks, the accountants, the lawyers, the credit-rating agencies and others who themselves benefited from this monstrosity. These machinations came at a heavy price: the lost jobs, the empty 401K's, the screwed shareholders, the prison sentences, and even death in some cases. It was quite a drama.
Blunt, intriguing analysis of Enron 2007-10-05
This book goes through Enron's rise and fall while analyzing each main character. McLean and Elkind have researched well.
This is quite entertaining and a fun read. The only downside is the large number of characters, but the authors have provided a character description list in the beginning of the book. I frequently referred to the characters' descriptions.
Overall, a good book on Enron's choices over the years.
The smartest guys in the room 2007-09-09
A very well-written account of the rise & fall of Enron. I couldn't put it down
