I’ve read several books detailing the fall of Enron including The Smartest Guys in the Room, Conspiracy of Fools, and Power Failure. I’m fascinated by the personalities involved in the collapse of what used to be a universally admired company. A good friend of mine worked for Enron right out of business school and I recall how he described going into work one morning only to find the company he worked for no longer existed. A few personal items stuffed in a box were all he took home.
I was thrilled to find this article in the New Yorker from one of my favorite authors, Malcolm Gladwell, where he questions the theory that more information could have helped us see the trouble at Enron before it was too late.
“There have been scandals in corporate history where people are really making stuff up, but this wasn’t a criminal enterprise of that kind,” Macey says. “Enron was vanishingly close, in my view, to having complied with the accounting rules. They were going over the edge, just a little bit. And this kind of financial fraud—where people are simply stretching the truth—falls into the area that analysts and short-sellers are supposed to ferret out. The truth wasn’t hidden. But you’d have to look at their financial statements, and you would have to say to yourself, What’s that about? It’s almost as if they were saying, ‘We’re doing some really sleazy stuff in footnote 42, and if you want to know more about it ask us.’ And that’s the thing. Nobody did.”
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