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Title: Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron by Bethany McLean, Peter Elkind ISBN: 1-59184-008-2 Publisher: Portfolio Pub. Date: 13 October, 2003 Format: Hardcover Volumes: 1 List Price(USD): $26.95 |
Average Customer Rating: 4.5 (34 reviews)
Rating: 5
Summary: Business 101: Something to learn from
Comment: The book is organized in a chronological fashion. But at the same time, certain chapters were focused on key players in Enron:
- The story about Kenneth Lay.
- a story before enron became enron. Mostly, about acquisition.
- Story about Jeff Skilling and how he started off in McKinsey and how he entered Enron and eventually rose to be the top guy on the helm.
- It tells a story about Skilling's other lieutenants like Pai, Baxter, Rice, et.c
- It tells a story about how Fastow rose up the ranks (by the way, he was not originally one of the people in Skilling's inner circle).
- And much more...
Some interesting things you will learn in this book are:
- How Skilling was able to transform Enron's Busines Model from an "old Economy" Company into a "New Economy" Company similar to Tech-companies like eBay, Cisco, Microsoft, etc.
- Understand how Skilling's team transformed the way they handle their accounting. Concepts like Mark-to-Market accounting and Off-balance Sheets. (Something I never knew before I read the book).
- Learn about how they manage acquisitions and how they use acquisitions as a means for them to hide the true financial situation of the company.
- Learn about how Fastow has maneuvered himself in the inner circle of the Skilling Team and how he had made himself as the Czar of Finance and Accounting from the eyes of Investment and banking institutions like CitiGroup, Chase Manhattan, etc.
- Know about the working environment and culture in enron which Skilling has transformed into a "Make Creative Ideas... Nevermind the cost.." and a "Get the deals... we deal with delivering our commitments later." kind of culture.
- Learn about the personalities of the key players. What type of social life do they have from Bike Safaris in Mexico to exotic bars.
I find this book quite interesting (considering I have never ever had any interest in reading books cover-to-cover. Though most of the books I read are technical and IT-related, I find this book very good to read.
The book is well written and proof-read (no grammatical or spelling errors).
In terms of reading time and efforts to read this books (here I go again with my technical statistics)...
- I find it good to read on flights. It allows you to pause for sometime to actually let you reflect.
- Total Reading time for slow readers like me is around 15 hours. For a long-haul flight from Los Angeles to Manila, you'll probably finish the book by the time you arrive to your destination.
Summary, you will like this book.
Good Day!
Rating: 5
Summary: Smartest Book in the Store
Comment: We've all probably had our fill of the sickening sagas of one corporate scandal after another. But The Smartest Guys in the Room is definitely worth the time. It reads like a thriller. The characters seem like they are out of a novel, and the story, when revealed in its putrid detail, reads like a thriller. This a very accessible read. There are a few tough bits where accounting shenanigans are described, but the authors do a good job of explaining everything. A whole new layer of the scandal is revealed here, one that would only be uncovered by a person reading countless news stories over a two year period. Other than the obvious story line of a multi billion dollar company gone bad, there is an undercurrent here--the amazing tale of how long the Enron lies, half truths, manipulation and subterfuge went undetected by the SEC, the big brokerage houses and the banks. Stories of the banks forking over a billion here, a billion there, brazenly encouraging and enabling Enron to feed the beast of its addiction to accounting tricks, corporate jets and hundreds of millions of stock options drained off by shady executive suite characters. Over and above being a great read, this is will also serve as an introduction to the characters who you will read about who will go to jail over the nest couple of years. News stories won't provide the depth of insight into their actions and character--this book will.
Rating: 4
Summary: A Fascinating Read With All the Gory Details
Comment: Enron was the largest corporate bankruptcy to date. Just a year earlier it was a 70-billion dollar company and the most respected company in the energy field. By the end of 2001 Chuck Watson of Dynegy said he wouldn't take it if it were free. What happened? How could such a large and powerful conglomerate, in which analysts hyped right to the bitter end, fall so fast. Bethany McLean and Peter Elkind take the reader from the beginning of Enron's rise to the colossal fall.
From the beginning Enron was determined to rewrite the "rules" of how the business of energy was done around the world. Ken Lay, the founder of Enron, learned the natural gas business from his early days at Florida Gas and then Transco Energy. In the early 1980's gas prices were largely regulated by the federal government. This led to gas shortages when prices were too low and oversupply when the government hiked prices. Distributors would try to lock into long-term contracts called "take or pay" to protect themselves from future shortages. These contracts were bad from the pipeline owner's point of view because they had to pay the higher rates even if lower rates were available. Lay saw a way out of this dilemma, however. He set up a fledgling spot market for natural gas. The producers who let Transco out of these long-term contracts could sell directly to their customers, paying Transco to move the gas. Lay was a hero and it would propel him toward his vision of a deregulated gas world in which customers would always have the gas they need at the best price.
When Ken Lay created Enron he had a different view of energy than anyone else in the business. When energy was deregulated in the late 19080's prices plunged. Money wasn't being made in oil; it was being made in trading oil. This was Lay's grand vision. In the words of the authors:"Oil trading was about trading, not about oil." The senior executives didn't know much about trading but as long as it made money no one cared. Oil trading was a way of promising to deliver oil in the future while locking in the price today.
From its earliest days Enron struggled to survive. Lay had a vision of the future but he needed someone to show him the way. Enter Jeff Skilling. To Skilling natural gas wasn't about energy; it was about supply and demand. Whenever there was too much supply or too much demand there was money to be made. Instead of long-term contracts between suppliers and customers Skilling envisioned Enron acting as an energy bank. They would purchase gas from producers at one price and sell it to customers at a higher price. Enron would profit from the exchange and the customer would always be able to get gas. All Enron needed to do was to have matching customers for every contract to buy natural gas. He would revolutionize the oil industry. He never cared for the old oil executives; he wanted smart Harvard graduates under him. It didn't matter to Skilling if they never worked in the industry before; they would figure it out.
The problems with Enron can be traced back to these early days. The people involved had great ideas but were poor in their ability to manage and carry them out. Those that could were treated as second class citizens by Enron management. They rewarded the people with the best ideas. It didn't matter if their grandiose plans never made any money. It would become the culture at Enron-a corporation built on vision but near-sighted on detail.
The book is a long and difficult 414 pages. The deals and machinations of Enron's senior management are difficult and complex. The Smartest Guys in the Room is about these deals and not about the people. We know very little about how people truly felt about Enron through its rise and fall but we know a great deal about the gory details. For those with some accounting background it is a fascinating story. For the general reader it probably will be a bit bewildering
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