For a while I've wanted to know more about the factors that led Enron's businesses to become so big and so hollow that the company fell apart as suddenly and disastrously as it did in the early 2000s. Another book (the otherwise booster-ish history of Houston called Prophetic City) thankfully referenced this title as providing that context, so I devoured it within days. The corporate culture of Enron gave many people, including the author for a time, pause at questioning the continuous hiding of losses and re-restating balance sheets but no one actually stopped the practices until much too late. It was interesting to learn how many of the executives involved had history as first-generation college grads, kids from rural farm backgrounds, and others with modest upbringings that used intelligence and tenacity to climb a corporate ladder. Houston's culture promoted that, as well, and there was an intriguing window into that tendency in the book. ( )

See also 16 boxes of documents in SH Archive.

If you lived through the late 1990's and early 2000's you may be aware of the basic, headline grabbing story of Enron. A small energy company who's core business was in pipelines and natural gas grew over the late 80's and 90's into the world's largest energy company who invented the idea of the energy trading market. Through questionable accounting, poor (criminal) decisions, and a culture that pushed everybody to make as much money as they could, however they could, the company eventually imploded, crashing so far that the company never recovered. Today Enron, if people know it at all, or even hear the name, see the company's story as a cautionary tale (at best), or as a laughing stock, suitable only as the butt of jokes.

Mimi Swartz (along with Sherron Watkins - an Enron employee and the one held up in the press as the whistle blower who helped shed light on the company and presaged it's fall from power) tells the story of Enron from before it's founding, through it's rise and dominance, and then the eventual fall. Mimi shows us who Ken Lay, Jeff Skilling, Andy Fastow and the other leaders of Enron were, and what drove them. (Usually greed.) Effort is taken to show how driven the company was to make money at all costs, how this culture spread throughout the company, and the many times that questionable decisions were taken. The story is interesting because of how willing so many people were to overlook questionable practices (in time these became illegal practices) because of greed and a feeling that Enron didn't have to abide by the rules because they made them. Even people who didn't get rich went along with decisions (or were bullied into them) and as long as people were getting rich they were willing to look the other way. In that sense Power Failure is an interesting look at the kind of thinking that can easily dominate a company, allowing small problems to snowball into the kind of issues that can take a company down. It is important to learn this lesson because many times it is the ordinary worker who suffers the most while those at the top manage to avoid any responsibility for their actions. In the case of Enron - and not covered in the book because the cases were still pending at the time of publication - Lay, Skilling, Fastow, and others were all indited and convicted on charges of fraud, conspiracy, and insider trading. For this reason alone it is important to remember the Enron story to make sure that business leaders are held accountable.

Mimi makes a mostly balanced look at the company, trying to show it dispassionately. Some might feel that including Sherron Watkins in the narrative gives a decidedly negative, or one-sided view of the company. However, I found that Sherron's story and inside knowledge of the company helped to make the company and the people there (especially upper management) relateable. Without that perspective it would be hard for somebody who wasn't an employee to really understand (let alone comprehend) what went on at Enron.

I would recommend Power Failure for anybody who is in management or business as a cautionary tale. While the events may seem like ancient history - and Power Failure itself was written nearly 18 years ago - the story of Enron is an important one for readers of US history as the demise of the company has had far-reaching repercussions in accounting and finance. (The Sarbanes–Oxley Act of 2002 was a direct result of Enron's fiasco.) ( )

Update: My wife and I just finished watching Enron: [b:The Smartest Guys in the Room|113576|The Smartest Guys in the Room The Amazing Rise and Scandalous Fall of Enron|Bethany McLean|http://photo.goodreads.com/books/1171679587s/113576.jpg|1604], an excellent documentary made in 2005. I recommend it highly, especially as many of the seeds of the current economic crisis were apparent in the machinations of the Enron boys. The parallels are uncanny.

Ken Lay was the product of a very religious background in a small Midwestern town. During work on his PhD in economics, he became enamored of the world of stocks. He parlayed InterNorth, a small energy company into Enron. He was a rich man, having made $4 million in stock value increases from the merger of Houston Gas into InterNorth, later renamed Enron. He was also the highest paid CEO in the United States. The company's strengths were also its weakness: the constant risk-taking; the high debt load to ward off potential takeovers; "impassioned embrace of deregulation;" constant reorganization; and instant adoption of the hottest new business ideas. They were soon struggling for cash.

In the meantime, Lay had created a new culture at Enron. It was his belief that all one had to do was hire the best and the brightest, provide a free environment, and things would take care of themselves. He also had trouble saying no to anyone. He hired an old friend to be the "bad guy," but it soon became apparent to all that if you made money for the company you could get whatever you wanted.

Watkins was hailed in 2001, following the collapse of Enron, as a heroine for her "whistle-blowing." Whether her actions actually constitute that appellation is open to question. Certainly she was an insider, and her account reveals a great deal more of the financial shenanigans in greater detail than the previous book I reviewed, Anatomy of Greed. She interacted constantly with Lay, Skilling and Fastow, and if she got really nervous about what she was seeing, perhaps whistle-blowing was just a way of protecting her posterior.

What started out as a new paradigm, a different way of delivering energy, soon became a case of the blind leading the blind, or a corporate version of Dumb and Dumber, as the board and Enron employees began creating numerous new ways of hiding losses, even making losses look like revenue. It was a huge, ever-increasing house of cards.

Watkins is an accountant and naturally had a strong sense of the financial improprieties the company had embarked upon, but the impending doom she warned of in her now-famous memo to Lay should have been obvious to everyone. Enron's own head of research said presciently, "Every era gets the clowns it deserves."

If they ever make a movie of this book, it will have to be a comedy. It is astonishing how stupid many of the "best and brightest" graduates of American business schools were, as they bellied up to the trough of corporate greed. Sherron made an attempt to meet with Ken Lay, but first she had to convince his personal secretary to arrange a meeting. The secretary informed Watkins that "Ken gravitates toward good news. . . ." It did not bode well for the meeting. Another insider told her to make the presentation as simple as possible and eliminate any accounting jargon. She obliged and reworked her presentation so that her two-year-old daughter could understand it. The meeting was a flop, and it was clear to her that Lay could not understand - or perhaps did not want to understand - a thing she was talking about.

Ironically, Osama Bin Laden's exploits barely dented the US economy. Lay's machinations and the subsequent stock free fall provided a vicious slambang. ( )

Watkins, Sherron (Author); Enron (Subject)