The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
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- Create Date：2022-01-12 09:54:31
- Update Date：2025-09-06
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- Author：Bethany McLean
- ISBN：0141011459
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Summary
What went wrong with American business at the end of the 20th century？
Until the spring of 2001， Enron epitomized the triumph of the New Economy。 Feared by rivals， worshipped by investors， Enron seemingly could do no wrong。 Its profits rose every year; its stock price surged ever upward; its leaders were hailed as visionaries。
Then a young Fortune writer， Bethany McLean， wrote an article posing a simple question - how， exactly， does Enron make its money？
Within a year Enron was facing humiliation and bankruptcy， the largest in US history， which caused Americans to lose faith in a system that rewarded top insiders with millions of dollars， while small investors lost everything。 It was revealed that Enron was a company whose business was an illusion， an illusion that Wall Street was willing to accept even though they knew what the real truth was。 This book - fully updated for the paperback - tells the extraordinary story of Enron's fall。
Until the spring of 2001， Enron epitomized the triumph of the New Economy。 Feared by rivals， worshipped by investors， Enron seemingly could do no wrong。 Its profits rose every year; its stock price surged ever upward; its leaders were hailed as visionaries。
Then a young Fortune writer， Bethany McLean， wrote an article posing a simple question - how， exactly， does Enron make its money？
Within a year Enron was facing humiliation and bankruptcy， the largest in US history， which caused Americans to lose faith in a system that rewarded top insiders with millions of dollars， while small investors lost everything。 It was revealed that Enron was a company whose business was an illusion， an illusion that Wall Street was willing to accept even though they knew what the real truth was。 This book - fully updated for the paperback - tells the extraordinary story of Enron's fall。
Reviews
Urh
，
I think reading this book you feel mostly angry。 Enron is a story of competence and percieved competence。 Something to be observed closely when talking about viruses and vaccines， but it is also a story of stupidity of the willful。 As a story it makes no sense。 Most finance stories of doom get to have some biblical proportions， but this is mostly a story of a cure for baldness on a fair， but with finances of revenue of most flea market in this living world。 Book just doesn't make sense， mostly i I think reading this book you feel mostly angry。 Enron is a story of competence and percieved competence。 Something to be observed closely when talking about viruses and vaccines， but it is also a story of stupidity of the willful。 As a story it makes no sense。 Most finance stories of doom get to have some biblical proportions， but this is mostly a story of a cure for baldness on a fair， but with finances of revenue of most flea market in this living world。 Book just doesn't make sense， mostly it feeds on ambition。 。。。more
Sean
，
Wow。 Well written， if a bit technically dense， and very engagingMassive， unbelievably large yikes。 This book is relevant reading for nearly every industry， and the authors do a surprisingly good job of keeping as adjacent to objective as possible。 I found myself unable to put it down for long periods， rage reading through this unbelievably ridiculous and yet very much real story
Kath ❅
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I don't love true crime， unless it's white-collar crime， then I am all in。 Recently， I listened to the Wall Street Journal's Bad Bets podcast and the first season is about Enron。 Listening to that encouraged me to pick up this book， which I actually added to my TBR six years ago。 This is very well done and I feel like I have a really good understanding of what happened in this case。 I don't love true crime， unless it's white-collar crime， then I am all in。 Recently， I listened to the Wall Street Journal's Bad Bets podcast and the first season is about Enron。 Listening to that encouraged me to pick up this book， which I actually added to my TBR six years ago。 This is very well done and I feel like I have a really good understanding of what happened in this case。 。。。more
John
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Finishing out the year （a very bad one book-wise for me） with THE book about Enron， THE corporate fraud to end all corporate frauds。 Well， unfortunately it's not。 But it is still the most enduring example of how not to run a business， how not to balance your books and do your accounting。 This is a highly readable book， and I greatly enjoyed it。 It really digs into the gory details of how Enron cooked the books， grew into one of America's hippest， most powerful companies， then came crashing down Finishing out the year （a very bad one book-wise for me） with THE book about Enron， THE corporate fraud to end all corporate frauds。 Well， unfortunately it's not。 But it is still the most enduring example of how not to run a business， how not to balance your books and do your accounting。 This is a highly readable book， and I greatly enjoyed it。 It really digs into the gory details of how Enron cooked the books， grew into one of America's hippest， most powerful companies， then came crashing down in a Hollywood-worthy explosion。 Ken Lay， Jeff Skilling， Andy Fastow， et al。 truly come to life。 We see how they were indeed the "smartest guys in the room"- Enron's top dogs undoubtedly possessed powerful， agile intellects。 But they had one other thing in common- huge egos， which ultimately led to accumulating greed and fraud that brought down a once-promising company。If you are not too familiar with financial/accounting lingo （which I am not）， you may have to look a lot of things up while reading （which I did）。 It is also written in a prose styled very much like magazine articles- not a surprise given the authors' day jobs。 But I think that it works very well for this story， making it much more of a zesty and juicy tale。 We can deplore the greed and corruption that Enron represents when we read about it， but we might as well have fun while doing it。I really don't have much to complain about- top-notch writing， research， and presentation。 Bravo！ 。。。more
thethousanderclub
，
At one point in The Smartest Guys in the Room， the authors ponder the question as to exactly when Enron crossed the line from unethical to illegal。 Intriguingly， the answer isn't completely clear。 Even as someone with very little financing and accounting experience and knowledge， I could readily tell certain activities were shockingly unethical; however， the circuitous and byzantine rules of accounting allow for a lot of， as they say in the business， "creative accounting。" The Smartest Guys in t At one point in The Smartest Guys in the Room， the authors ponder the question as to exactly when Enron crossed the line from unethical to illegal。 Intriguingly， the answer isn't completely clear。 Even as someone with very little financing and accounting experience and knowledge， I could readily tell certain activities were shockingly unethical; however， the circuitous and byzantine rules of accounting allow for a lot of， as they say in the business， "creative accounting。" The Smartest Guys in the Room is an exceptionally detailed and mesmerizing story of how unbounded ambition， morally dubious but imposing intelligence， and stunning negligence can blend together into a corporate scandal of truly epic proportions。The Smartest Guys in the Room is a striking testament to the deficiency of education， especially our modern implementation of higher education， to inculcate morality and ethics into students。 It became almost comical how often a new personality would be introduced in the book with the honorific "a Harvard Business School graduate。" A deficiency of intelligence or credentials was not the wellspring of Enron's biggest issues。 As the title of the book （and it's a perfect title） suggests， Enron was bursting with intelligence and talent。 The book is an incredible case study of dysfunctional professionals and the grotesque culture they create for themselves， despite their intelligence。 Failures of leadership and oversight mounted and the well-known outcome is an indelible cautionary lesson。 Indeed， the sordid tale of Enron's rise and fall appears to be the incorporation of Daniel Goleman's illuminating statement: "Academic intelligence has little to do with emotional life。 The brightest among us can founder on the shoals of unbridled passions and unruly impulses; people with high IQs can be stunningly poor pilots of their private lives。"Beyond revealing corporate malfeasance， The Smartest Guys in the Room is a fascinating glimpse into human nature itself， including our power to self-delude and our vainglorious ambitions。 With so much money being handed out to executives throughout the Enron organization， why the voracious drive for more？ How could there be so little self-awareness among so many？ Some， such as Ken Lay， insisted there was never any widespread corruption。 All of the right people signed off on all the right deals。 Those who needed to know， knew。 So， what went wrong？ Many， including the authors to a certain extent， will point toward deregulation as a source of at least some of the issues。 Perhaps this is true in some cases。 However， it ignores the most common issue in all contexts—regulation or not—which is human nature。 As one ecclesiastical leader stated: "There could never be enough rules so finely crafted as to anticipate and cover every situation， and even if there were， enforcement would be impossibly expensive and burdensome" （D。 Todd Christofferson）。 The Smartest Guys in the Room shines a searing light on our frailties as human beings。 Without internal restraints， to say nothing of external ones， we are doomed to make extravagantly poor decisions and more than likely hurt a lot of people。I'm not sure I have read a book as detailed as this one。 It appears to me to have been meticulously researched。 It's really a triumph of storytelling， even if some of it feels opaque。 The soap opera embedded in the story of Enron with its colliding egos and betrayals makes for sumptuous entertainment。 Once again， intelligence says so very little about private conduct and emotional intelligence。 The legacy of Enron isn't only a crippled company but a field of fractured families and friends。 In fact， the book opens with the tragic suicide of J。 Clifford Baxter， Enron's one-time Chief Strategy Officer and one of Jeff Skilling's closest friends。 It's a shocking beginning to the book and a terrible product of scandal and corruption。 The after-effects of the Enron implosion echoed throughout the business world， of course， but it reverberated most violently for a handful of individuals。The Smartest Guys in the Room is essential reading for professionals， especially leaders; having said that， anyone， regardless of their career path or professional experience， can benefit from studying the stunning failures of Enron's executives and the many others who enabled them。 It presents a remarkable case study in not only organizational catastrophe but also of human nature。 You don't have to be a senior executive of a large corporation to feel the seductive grasp of vanity， ambition， and self-delusion。 It's our common lot， and this story reveals how far those deficiencies can carry us into disaster。 https://thethousanderclub。blogspot。com/ 。。。more
Jeff Giddens
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If you wonder "how did it ever get that bad"， it's pretty wild！ If you wonder "how did it ever get that bad"， it's pretty wild！ 。。。more
Rob
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Interesting stuff， but long and repetitive。
Farhan Sadeed
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You might have seen 'American Psycho' starring Christian Bale。 Wait till you read about Jeffrey Skilling and his deeds。 With a Machiavellian philosophy， Andrew and Skilling performed activites against the American population and got away for some time and stormed the nation。 The rapid progress of Enron and its perilous aftermath are well explained。 The book not only gives an exemplification of Enron's crimes but also analyzes it with elucidation。 You might have seen 'American Psycho' starring Christian Bale。 Wait till you read about Jeffrey Skilling and his deeds。 With a Machiavellian philosophy， Andrew and Skilling performed activites against the American population and got away for some time and stormed the nation。 The rapid progress of Enron and its perilous aftermath are well explained。 The book not only gives an exemplification of Enron's crimes but also analyzes it with elucidation。 。。。more
James Stuart
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Excellent， detailed account of the Enron scandalThis outstanding， detailed and methodically researched book gives a blow by blow account of Enron in its glory days and Its eventual downfall。 Highly recommend。
Zain Zaidi
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For me this book has many lessons for a normal individual but the most important is that every rise has a fall！ So one should never rely on the success as at the end we all are numbers。
Harry Harman
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unintelligible answersOn December 2， 2001， the company filed for bankruptcy。chicanerystrifecooking its booksharbingerrollickingjockeyingyeomanincestuousmoccasin slippersHow could America’s seventh-biggest company just blow up？ Where had the billions gone？the sedan was tuned to an interior temperature of precisely 79。a classic run on the bankmulledthe old banker’s motto， for instance， was “36-3”: take money in at 3 percent， lend it out at 6 percent， and be on the golf course by 3 P。Mrapid action— unintelligible answersOn December 2， 2001， the company filed for bankruptcy。chicanerystrifecooking its booksharbingerrollickingjockeyingyeomanincestuousmoccasin slippersHow could America’s seventh-biggest company just blow up？ Where had the billions gone？the sedan was tuned to an interior temperature of precisely 79。a classic run on the bankmulledthe old banker’s motto， for instance， was “36-3”: take money in at 3 percent， lend it out at 6 percent， and be on the golf course by 3 P。Mrapid action— any action—describing Lay’s management style as “Ready， fire， aim。”But he also believed that deregulation would create opportunities to make money—lots of money。 And making money was terribly important to Ken Lay。He had a gift for calming tempers and defusing conflict。Time and again， he would tap his growing network: for a job， for a favor， or to surround himself with those he trusted。 This skill propelled his climb。“It was always inevitable that he would be a man of wealth。” After a lifetime of pinching penniesmanic-depressiveHNG’s modest debt made it a juicy target for corporate raiderswould be the ones calling the shotsbuyer’s remorseEnron’s financial situation had grown so dire that by January 1987 Moody’s had downgraded its credit rating to junk status。 。。。more
Elizabeth Gabhart
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I read the fifty or so pages of this book before I realized -- I'm just not that interested in Enron。 The book is well-written， engaging， and clear。 If you're interested in Enron or economic scandal， I'm sure it would be great for you。 I read the fifty or so pages of this book before I realized -- I'm just not that interested in Enron。 The book is well-written， engaging， and clear。 If you're interested in Enron or economic scandal， I'm sure it would be great for you。 。。。more
Earl Grey Tea
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I've had this book on my to read list for awhile， but it got bumped up to the top after listening to the the first season of the Wall Street Journal's podcast Bad Bets。 These two presentations about the fall of Enron compliment each other with their respective strengths。Bad Bets was easier to follow since it focused more on a high level narrative of what triggered the collapse of Enron。 The majority of this podcast revolved around the off-balance-sheet shenanigans that Andy Fastow was pulling。Th I've had this book on my to read list for awhile， but it got bumped up to the top after listening to the the first season of the Wall Street Journal's podcast Bad Bets。 These two presentations about the fall of Enron compliment each other with their respective strengths。Bad Bets was easier to follow since it focused more on a high level narrative of what triggered the collapse of Enron。 The majority of this podcast revolved around the off-balance-sheet shenanigans that Andy Fastow was pulling。The Smartest Guys in the Room goes into much more depths about the history of Enron， the unsustainable businesses it created in new markets， its abuse of mark-to-market accounting to create a façade of success， the hiding of debts on off-balance-sheets， and the company's ultimate downfall。 This book shows that Andy's fraud helped cover up and perpetuate the company's failing business model and his work alone was not the reason for the collapse of Enron。The material presented is great for deeply understanding the complicated Enron scandal。 However， the organization of this information felt disjointed as the authors switched between complex explanations of finances and the personal side of the people involved。 Perhaps this topic is so convoluted that there is no perfect way to arrange all of the details。Despite my degree in Finance， I was still unable to understand how Andy Fastow's off-balance-sheet special purpose entities worked。 The author gave all of the details but the explanation is still murky。 The 2008 subprime is also an extremely complicated topic， but there are vidoes out there that make it comprehensible to the average person。 An oversimplified explanation of these financial vehicles to help the reader understand the big ideas would have been helpful before diving into the minutia to flesh out the full picture。I now have a much better understanding of the Enron scandal compared to what I have learned in other podcasts and videos。 However， this book is dense in information and not written in a way to be accessible to the largest audience possible。 I would not recommend this book to the majority of people that I know， only to my erudite friends that have the time and desire to dive deep into this topic。 。。。more
Nick Killian
，
Long winded book but probably needed due to the complexity of the scandal
Jonathan
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7/10Basically， Enron was great at booking revenue， but terrible at realizing it。 The incredible thing is how difficult it is to point at any one thing that Enron did that was against the law。 “When exactly did Enron cross the line？ The scandal grew out of a steady accumulation of habits and values and actions that began years earlier and finally spiraled out of control。 When Enron expanded the use of mark-market accounting to all sorts of transactions—when they set up their first off-balance she 7/10Basically， Enron was great at booking revenue， but terrible at realizing it。 The incredible thing is how difficult it is to point at any one thing that Enron did that was against the law。 “When exactly did Enron cross the line？ The scandal grew out of a steady accumulation of habits and values and actions that began years earlier and finally spiraled out of control。 When Enron expanded the use of mark-market accounting to all sorts of transactions—when they set up their first off-balance sheet partnerships， Cactus and JEDI， with reputable investors like GE and CalPERS？ Or when it categorized certain unusual gains as recurring？ Or perhaps when it created EPP， that “Independent” company to which Enron sold stakes in its international assets and posted the resulting gains to its bottom line？” The only clear thing is that at some point they chose to knowingly mislead investors in order to gain a higher valuation。 Exactly what that point was is a little hazy， however。 All of this was made possible by the use of Mark to Market accounting， which essentially allowed them to book the revenue of the life of a deal all at one time， meaning in a single month they could book the revenue another company might book over a decade。 This was within their rights to do， and to some extant， investors should have seen it as a larger issue。 “Where people at Enron were smart about bending the rules， they were not smart about where all that bending was taking them。”“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。” 。。。more
Tanya Faberson
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I loved this book！ I've had a good run of these finance scandal books lately and this has been one of my faves。 I loved this book！ I've had a good run of these finance scandal books lately and this has been one of my faves。 。。。more
Rian
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Stunningly researched account that gains a real edge-of-your-seat feeling as it hurtles you towards the inevitable， but no less thrilling， conclusion。
Phil Cunningham
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Must read for Corporate True Crime Junkies， like me！I liked the way the authors kept the story simple enough so just about anyone could understand what was going on。 The story moved at a decent pace， stuck to the facts， and didn't bog you down with unnecessarily complex details。 Must read for Corporate True Crime Junkies， like me！I liked the way the authors kept the story simple enough so just about anyone could understand what was going on。 The story moved at a decent pace， stuck to the facts， and didn't bog you down with unnecessarily complex details。 。。。more
Rob Tesselaar
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An interesting read despite the time that has passed since the Enron debacle and the writing of the book。 Lots of lessons to be learned on the impact of culture and values in the workplace。 Makes me wonder about some of our societal values and how polarization today might have been influenced by this incident。
Isabella
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1st timeWow what a saga。 At times extremely financially dense but overall an excellent blow by blow about a company that could never seem to do the right thing。
Sipho
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This book is about one of the most infamous corporate collapses of the 21st century。 That of Enron。Enron was started as an energy company and grew to become one of America's biggest corporations。Somewhere along the line， because of greed， poor revenue management and simple hubris， Enron - led by Jeff Skilling - decided to start trading energy as a commodity。 The same way you'd trade stocks。This wasn't such a great idea。It also didn't help that Enron began using an accounting method known as "mar This book is about one of the most infamous corporate collapses of the 21st century。 That of Enron。Enron was started as an energy company and grew to become one of America's biggest corporations。Somewhere along the line， because of greed， poor revenue management and simple hubris， Enron - led by Jeff Skilling - decided to start trading energy as a commodity。 The same way you'd trade stocks。This wasn't such a great idea。It also didn't help that Enron began using an accounting method known as "mark to market" in an effort to inflate their profits， with the bigger goal being to push up their stock price。Essentially， they would start a project （eg building infrastructure） and then mark the expected profits as actually being received。The house of cards came crashing down spectacularly in 2001， when Enron went broke。 Overspending， terrible investments and the reckoning from their accounting chicanery finally came back to haunt the once vaulted corporation。This narrative is witty and edgy。 Definitely a page turner。Lessons to be learned about how being the smartest person in the room can often work out to your disadvantage。 。。。more
Cornelia Miedler
，
A story of greed and power。 It also shows once more that people at the top aren’t always the smartest but simply create the illusion that they are。 The book is very detailed and I personally could have used a chart every once in a while to help me understand the ever changing structure of Enron。
Aura Erickson
，
An incredible story of how smart men can be blinded by greed。 They committed fraud on a large scale by coming up with complex accounting schemes to hide their deceit。
Joseph
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A good reminder that rarely do people start out wanting to defraud or be dishonest， it can happen by degrees and bending the rules little by little until we believe the lies we tell。 We are capable of great rationalizations。 My biggest complaint is the book is not in chronological order and so it felt confusing to understand the timeline at times and made it feel repetitive。
David
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Good book， found it extremely interesting。 It's a wonderful tale， and such a shame it isn't fiction。 The story itself is told in incredible detail， for the authors to get the correct information and their head around what on earth was going on， and then put it in a readable fashion， is pretty impressive。 Good book， found it extremely interesting。 It's a wonderful tale， and such a shame it isn't fiction。 The story itself is told in incredible detail， for the authors to get the correct information and their head around what on earth was going on， and then put it in a readable fashion， is pretty impressive。 。。。more
Cheng Jun
，
I really like this book。 Made me interested in accounting！
Greg
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Wow。 Have you ever wondered what would happen if you just started borrowing money， then borrowing money to pay off that borrowed money， ad infinitum？ Surely lenders would get the idea and stop lending you money before long。But wait！ What if the lenders somehow got the idea that you were paying the loans back with money that you were earning， not just money that you were borrowing？ What if you were to say to your bank "I earn lots of money that I use to pay off my debts！ Why， here's a guy who gav Wow。 Have you ever wondered what would happen if you just started borrowing money， then borrowing money to pay off that borrowed money， ad infinitum？ Surely lenders would get the idea and stop lending you money before long。But wait！ What if the lenders somehow got the idea that you were paying the loans back with money that you were earning， not just money that you were borrowing？ What if you were to say to your bank "I earn lots of money that I use to pay off my debts！ Why， here's a guy who gave me a bag of money earlier this week！" Then you show them a picture of yourself， but you're wearing a trench coat and sunglasses。 And you-in-a-trench-coat happened to get that money by borrowing it from someone else。Enron tried this experiment and reached its logical conclusion。 What's confusing and maddening is the idea that these people all thought they were smart。 Not getting-away-with-it smart， just big-brains smart， smart like "business is a walk in the park for us！" smart。 But all of their correspondence is ridden with misspellings。 But I guess that lacking self-awareness is a sine qua non for believing that you're one of the most clever people in the world。 。。。more
Miha Rekar
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#books #enron #energy #capitalism Very long and detailed read about one of the greatest business collapse stories at the end of the 20th century。 It shows exactly what can happen when the only thing that matters is stock price and you have incredibly smart people who are willing and capable to do anything to play the market。 Sad， but real。Also interesting contrast with the Rockafeller’s biography that I recently read。 The incentives were there and they played hard against the competition， but at #books #enron #energy #capitalism Very long and detailed read about one of the greatest business collapse stories at the end of the 20th century。 It shows exactly what can happen when the only thing that matters is stock price and you have incredibly smart people who are willing and capable to do anything to play the market。 Sad， but real。Also interesting contrast with the Rockafeller’s biography that I recently read。 The incentives were there and they played hard against the competition， but at least they had the decency to be honest and play by the market rules which were transparent。 。。。more
Pensioner
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The scandal that was Enron！ It's a well written book on the scandal that shook corporate America and showcases what greed and hubris can do to men when they get drunk with hoax of what looks like success。 The scandal that was Enron！ It's a well written book on the scandal that shook corporate America and showcases what greed and hubris can do to men when they get drunk with hoax of what looks like success。 。。。more
Adam Clark
，