Enron Ascending

Preface

Enron is well on its way to becoming the most intensively dissected company in the history of American business.” So wrote Bethany McLean and Peter Elkind in their 2003 account, The Smartest Guys in the Room. Today, Enron stands as the most-analyzed corporate scandal in modern history, with countless books, journal articles, and reports about an iconic company gone rogue.

Imprudent investments coupled with financial and accounting legerdemain constitute the well-documented why of Enron’s artificial boom and decisive bust. But the why behind the why—the attitudes and strategies that produced risky and deceptive practices—has been less chronicled and little understood.

Simplistic criticisms have abounded. “Fish rot at the head” declared one popular Enron book. “Shocking incompetence, unjustified arrogance, compromised ethics, and an utter contempt for the market’s judgment” found another. “Thoughtless and incompetent leadership” and “careless and lazy management” concluded the most professorial study of Enron to date.

Hubris, amorality, and greed were certainly present at Ken Lay’s company. But accusations of incompetence, lethargy, and thoughtlessness fall short. Enron brimmed with smart, dedicated, focused decision makers who tirelessly sought to create a new kind of company. How and why did so much talent and effort go astray? Why was “innovation corrupted,” as a Harvard Business School professor asked.

Was it capitalism run amok? A species of market failure? Or was ...