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JimBell Blog

Enron: The Smartest Guys in the Room

Under discussion:

Enron: The Smartest Guys in the Room  (2005)
            Enron: The Smartest Guys in the Room (2005) documents the rise and fall of a natural gas and energy company once ranked most admired company in the United States of America. Executives got approval to implement “mark-to-market” accounting, which means—almost unbelievably—that once they had an idea, they could start claiming profits from it even though they had done nothing. As an example, Enron built a power plant in India where the locals could not afford the power, but Enron claimed huge profits for the great idea while the plant was actually shut down and lost over a billion dollars.             As things get tough, the Chief Financial Officer creates dumby companies which allow Enron to hide its losses. The principal phoney company earns him personally $45 million. As things get even tougher, Enron rank and file traders are heard purposely shutting down California power plants in order to create rolling black outs in the world’s seventh largest economy. This drives the price of electricity through the roof and makes Enron $2 billion, while costing the people of California about $30 billion. In one month in 2001, Enron, a company worth about $70 billion dollars, goes bankrupt. The executives bail out secretly and early—the CEO taking $200 million. The thousands of employees are given 30 minutes to clear out of the Houston headquarters, and receive an average severance of $4,500 while losing pretty much all of their retirement funds.            As shocking as the figures are, the strength of the documentary is probably that it focuses on the characters involved more than the accounting. The co-author of the book The Smartest Guys in the Room, Bethany McLean, is somewhat sympathetic to the CEO. The weakness of the movie is the heavy-handed sound track playing obvious songs such as Billy Holiday’s “God Bless the Child.” Fortunately, in retrospect I remember the movie’s content and not its sound track.           

I watched this documentary in the midst of an on-line discussion of why young men are doing so poorly in post-secondary education. I wondered what teenage guys would think if they saw this film. What proportion of guys would be powerfully motivated to work like dogs to create and/or profit from corrupt companies ripping off and hurting millions of people? What proportion of guys would be disgusted and say they wanted nothing to do with the entire system that supported such crap? What proportion of guys would feel thankful that they live in a wonderful system which could so quickly catch and punish rogues breaking the rules?

Jim Bell

posted on Wednesday, February 28, 2007 3:45 PM by JimBell


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