I don’t know what the take-up at the video-stores has been but if you’re looking for a provocative and articulate documentary on corporate america then “Enron – The Smartest Guys in the Room” should find it’s way into the DVD player or even red furry stocking. So why is this movie so noteworthy? It succinctly exposes a chilling cynicism and general misanthropy at the heart of Enron itself and tangibly explains the complicity of many of the world’s largest financial institutions in perpetuating lies about the organisation’s success. Many could claim they were duped but these are people who consider themselves very shrewd. Also it’s fair to say that the CFO’s proposals regarding using a network of companies to reposition debt stank. There should reasonably have been some suspicions. Yet the documentary tells us that a dissenter at Merril Lynch was fired for failing to appreciate what Enron were doing. What were they doing? Falsifying revenues and profits as quickly as they could to push and bolster the share price.
The end result of all this was staggering losses for ordinary workers whose pension funds were obliterated when Enron collapsed & the explicit manipulation of energy prices on the west coast of the United States for fun and profit. There are a few scenes in this movie which take your breath away. Rather than the often-snide commentary style of Michael Moore the filmmakers opt to show you real footage and let you judge for yourself. There’s plenty of footage to choose from with Skilling et al. turning in some pithy lines like:
“What’s the difference between California and the Titanic? (cue sniggers ) At least when the Titanic went down, the lights were on” (cue uproarious laughter)
So that’s pretty much every member of senior and middle management having a laugh about the rolling-blackouts in the state of California. Blackouts that Enron helped precipitate through resource and price manipulation. Director Alex Gibney also incorporates the behavioral studies of famous US psychologist Stanley Milgram by referring to his infamous Milgram Experiment which concludes that the majority of people will do what their told, to the point of killing someone, if the order comes from an authority figure. It’s all too easy to believe. Over 40 years later people are still trying to discredit Milgram’s findings as the suggested truth is too uncomfortable for societies that believe themselves to be both moral and just. Just to summarise the Enron story:
- The company falsified revenues and profits over a prolonged period of time
- The business model was apparently so difficult to explain that the CEO couldn’t explain it and the company was a “black box” which had to be “taken on faith”
- Many financial analysts who SHOULD have known better took it entirely on faith! A young and inexperienced journalist pointed out that the emperor wasn’t wearing any clothes by asking the simple question “how does Enron make it’s money?”
- Executives cashed in millions of dollars worth of share options when they knew they could no longer sustain the lie & while urging ordinary workers to use their pension allowances to buy Enron shares.
- The various checks and balances that should have stopped this happening failed because auditors, bankers etc. were willing to overlook obvious inconsistencies in financial reports in return for massive payments and the promise of more in the future
Makes you wanna hide your money under the mattress! Occam’s razor would suggest that they weren’t the exception and there are other Enron’s out there. So the next time you’re offered a financial product or investment opportunity that seems too good to be true, it probably is.