Enron - The Smartest Guys in the Room
There are innumerable ‘I-can’t-believe-they-did-that-and-got-away-with-it’ moments in this documentary film. Enron: Smartest Guys in the Room captures the chronological story of the fall of Enron. It is a meticulous account of corruption and deceit. It is also an excellent profile in personality psychoses with enough material for a grad-level psych course. From ego-maniacal Kenneth Lay, overachieving and megalomaniacal Jeff Skilling, and hedonistic financial guru Lou Pai, to the nameless, faceless traders who quickly outgrew humanity as they watched their salaries quadruple. This documentary, based on the book by financial journalists Bethany McLean and Peter Elkind, is easily one of the most important biopics ever to be told.
After leading a company to gigantic, yet illusory, success, executives cashed in billions of stock options and rowed to safety on their executive lifeboats leaving loyal employees floundering on the quickly sinking Enron. The stench of immorality is form-fitted for Hollywood, and yet—to its credit—the film is not seduced into additional sensationalism: it is the basic story without unnecessary embellishment. The film asks and seeks to answer how Enron happened. While there is a little Marxist-like finger pointing at the perils of systematically unchecked capitalism, the blame is mostly directed at the hubris of the personalities at the helm. Chairman and CEO Kenneth Lay, hailing from a barebones background, was fashioned from a young age to pounce on new ideas and manipulate them to greatness. Jeff Skilling, the archetypal geek-cum-prom king, was driven by desperation to forge a system that would bring him the fame and approbation for which he yearned. Skilling was the Dr. Frankenstein of mark-to-market accounting, valuing a commodity at the unset future sale value, before the goods are acquired or the price is locked down. Lu Pai was the brilliant economist and accountant who obsessed about strippers and cleaned out early with $250M, and Andrew Fastow, the perilous scapegoat who had personally hidden the company’s debt in an intricate web of puppet firms, taking a little for him self with each transaction. The film even touches on the individual morality of traders and accountants being quashed by dominating leadership sweetened by reward. All of these men had big ideas, large scope, and completely ignored their own professional immortality.
Through interviews with executives, journalists, accountants, and traders, the film develops the personality profiles of the leaders and just how they built Enron to a highly profitable entity. Their Faustian-like contract builds their success and confidence through trading on commodities and futures, to adding in profits that didn’t exist and hiding debt that did. The unbound Prometheus reached the apex with the same California energy crisis that brought down a Governor and political party in the world’s 5th largest economy. Enron was artificially raising the cost of gas so that generators slowed production, consumers were not able to purchase and blackouts ensued. In a rare moment of hyped drama (but it played well) the film plays transcripts of sardonic traders gleefully shutting down generators like puppeteers while the public suffers.
In March 2001, Bethany McLean wrote a little shock piece in Fortune magazine called “Is Enron Overpriced?” Enron was returning shares at 89% and had over $100B in revenue, McLean argued it shouldn’t be. This only brought to the outside world what Lay and Skilling already knew, the writing was one the wall. Jeff Skilling, COO and mastermind, left Enron in August 2001. In December 2001, the lies unraveled, stock had tanked and faithful employees lost all their savings. During Congressional oversight hearings, Sen. Barbara Boxer said to Jeff Skilling, “You knew the firm was going down, you were pulling your own money out, and yet you urged the employers to invest all of their 401Ks in Enron stock.” He gave no answer worth repeating, and did it without a trace of contrition.
The film answers the question, what went wrong, with the argument that immoral and greedy individuals were allowed to game the system. Unfortunately, in its blame apportionment, Smartest Guys did not spend much time discussing the accounting, investment and general capitalist system that was also to blame. Yet this is what the American public latched on to as the solution: politicians overhauling the regulatory accounting (Senators Sarbanes and Oxley), attorney generals chasing prestige through public exposures (Eliot Spitzer), workers decrying corporate bonuses, legitimate or not. Enron led to collapse of one of the richest companies in the world, loss of billions that secured the futures of thousands; it is the fault of a few individuals and the world in which they operate. Fortunately this film is not, nor should be the definitive work on the fall of Enron; it is an incredibly important chapter in the anthology of what is wrong with corporate America. And a crucial part of a story that needs to be told. Again, and again.
Feature Commentary with Writer/Director Alex Gibney
We Should All Ask Why?: Making the Enron Film
Where Are They Now?
A Conversation with Bethany McLean
A Conversation with Peter Elkind