“The tale of Enron is a story of human weakness, of hubris and greed and rampant self-delusion; of ambition run amok; of a grand experiment in the deregulated world; of a business model that didn’t work; and of smart people who believed their next gamble would cover their last disaster—and who couldn’t admit they were wrong.”
If you are someone who loves great crime fiction, you will like Smartest Guys in the Room, about the rise and fall about Enron, a tale which is so real that it is even stranger than fiction.
Bethany McLean and Peter Elkind are journalists who work for some of the best financial papers in the United States. So this book is presented as a lively journalistic report that stretches for hundreds of pages.
The action is relentless and the drama almost Shakespearean in magnitude. The human follies of the characters minutely examined for all to see, in all their grisly detail. The authors build up the book as a classic whodunit. There are powerful CEOs, crooked CFOs and courageous whistle blowers – had someone like John Grisham written this book, it would have been on top of New York Times bestseller list for fiction. Except that this book is not fiction. It is real, as in real life, everything written in this book actually happened – which makes it so much more fascinating.
The main characters are Ken Lay, the CEO of Enron, Jeffrey Skilling, the highly regarded and super qualified President of the company, and Andy Fastow, the CFO and villain-in-chief. There are other interesting characters as well, such as Rebecca Mark, the sexy head of Enron’s international business operations.
Bethany McLean, the writer, is actually involved in the story herself, as her brilliant work as a reporter for Fortune was one of the reasons the shady deals at Enron got exposed for the whole world to see. She describes how she stumbled upon what was easily one of the biggest corporate frauds in history.
McLean’s March 2001 cover story in Fortune, which was titled “Is Enron Overpriced?” was probably one of the things that set off Enron’s fall into disrepute. She essentially set the ball rolling by asking in her article – where is all the money that Enron claims to make coming from?
McLean and Elkind go into the details in this book. They examine how Lay and Skilling built Enron from a small gas company into one of the most admired energy companies in the world. They explain why Lay and Skilling got it all terribly wrong and why trusting Fastow was such a giant mistake.
But were they personally culpable in the fraud that followed? Yes, they were, and the book makes a convincing case against both. They were both brilliant men, but so deeply flawed. One would imagine a lot of the executives who head some of the biggest companies in the world would be like that.
What led to the final collapse was that it was finally revealed that Enron had an incredible $38 billion in debt with zero cash flow. Yes, zero cash flow! The people at Enron had built a House of Cards, and it only took a slight push before the entire edifice came tumbling down.
But were they really “The Smartest Guys in the Room”? They were, until they got caught!