When Jeffery Skilling was asked by a Harvard Professor if he was smart, the alleged response was “I’m fucking smart” (Damn, thats a lot of confidence). This combination of hubris and belief in big ideas was critical to the downfall of Enron, at one time the largest and most powerful energy company in the world. Through a method known as marks to market booking, Skilling was able to record projection FUTURE revenues as current profit. (When I was making the budget for my boss, even when we book a deal for 100k, we have to spread out the money over a year to make sure everything is even).
Skilling also moved Enron into a kind of energy trading company, where gas and later electricity was bought and sold like shares of stocks. (Which is a really cool idea, but what wasn’t cool was what he did with it). This tied in to California’s energy crises earlier this decade. Tapes of phone calls reveal traders asking power plants to shut down in order to artificially raise electricity prices. Enron traders were told that a good trader was a creative trader (although creative really shouldn’t be confused with unethical. It’s easy to be unethical, it’s hard to really do the right thing) who found opportunities for excessive gain. In a workplace were 10% of the low performers were cut each year, and the top performers were rewarded with million dollar bonuses, Enron traders and other employees found loopholes and other ways to make money, or at least look like they were making money.
Of course Skilling wasn’t the only problem. Another Enron executive, Andrew Fastow, had also found ways to make Enron look good, and to make quite a bundle as well. Fastow, as CFO, created dozens of private offshore entities to hide Enron’s 9 figure debt.
Of course, the flashy sports car that was Enron stock smashed into a tree when Enron went bankrupt in November of 2001. 20,000 people lost their jobs and most lost a lifetime of savings.
What are we supposed to learn from all this?
PEOPLE NEED TO THINK FOR THEMSELVES. These execs thought that as long as they could trick the right people, everything was fine, even if they weren’t making anything. But the problem was that so many people followed their unethical and foolish lead like lemmings off a cliff. Except the lead lemmings kind of duck off to one side while all the other lemmings drown.
It reminds of when I wrote about the documentary, Who Killed the Electric Car?. Who was responsible? A lot of people. In the electric car case it was oil companies, car companies, the government. In this case, it was Enron execs, dozens of banks, lawyers, auditors and Enron employees. No one really stopped to say “What the hell are we doing?” Oblivious or ignorant to these ethical questions, these people thought they could make a killing by just bending the rules, and going along with the deception. And look what happened.
Real smart. Real fucking smart.
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