Thursday, April 28, 2005

The new Enron documentary

Enron, by now, has become a buzzword for the failures of corporate America. But do we really know what happened? In gory detail? Arranged so nicely for us in dramatic fashion?

That's where this new documentary, subtitled The Smartest Guys in the Room, comes in. In the same vein as that other real-life corporate-horror movie, The Corporation, it takes its cue from one of the recent handful of new books to be published about the rise and fall of the energy trading company. (Conspiracy of Fools by the NYT's Kurt Eichenwald is another one.)

As one of the co-writers of the book (both Fortune reporters) says, it's a classic story of hubris a la the Greeks translated through latter-day capitalism: a bunch of guys (Ken Lay and Jeff Skilling in particular) thinking they could navigate the business world better than anyone else knew how, exploiting shady but technically legal accounting methods and externalizing fluctuations in the energy grid as much as possible along the way, to make gobs of money and give the appearance that a lot more money was left to be made.

This is a great movie to see, because it brings home the idea that business is really about people -- their hopes and dreams, their faults and foibles. Sure, numbers come into it, but you don't have to be a math whiz to see how those running the company basically schemed the press, the government, and most of all perhaps, the company's employees and shareholders.

One of the most amazing things I learned was this idea of banking expected future profits in the current reporting period. This concept that once you have the
Next Brilliant Idea to make money (and often externalize costs) you can subjectively say how much it's going to be worth someday without knowing for sure or -- I assume -- going back to correct your inaccurate estimations. That brand of accounting is in part how the stock rose so quickly only to plummet within weeks, once the bottom fell out.

Also gripping are the audio tapes of Enron energy traders, talking and cursing like they're the kings of commerce, as they -- among other things -- manipulate the California energy "crisis." (There's a bit of a black humor in hearing Phantom Planet's "California" play as the narration recounts the fallout from that period.)

This is a great documentary to see now, because it might whet your appetite for the trials of Lay and Skilling, which the film said are coming in January '06.

Currently playing in two N.Y. theaters and one in Houston, Enron opens (slightly) wider tomorrow, reaching the D.C. metro area, Boston, Chicago, Atlanta, St. Louis, Denver and other major cities.

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