Business book: Smarta**es

Instructive book about venal business leaders

Given my focus on authoring corporate thrillers, I enjoy reading both fiction and non-fiction business books.

On the latter, I’ve recently read several books about characters whose moral turpitude led to the collapse of the once-iconic firms they led. Of note is Bethany McClean and Peter Elkind’s The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron.

I recall, in the fall of 2001, while among a cohort of fellow newly enrolled finance post-graduate students, touring Enron's London office, starry-eyed. At the time, our professors wanted us to be exposed to an innovative financial engineering company. Shockingly, a few weeks later, the edifice crumbled, and Enron filed for bankruptcy. Fingers were pointed at the company's deceptive accounting practices. Shortly after, Enron's auditor, Arthur Andersen, one of the Big Five accountancy firms, collapsed, deemed culpable for Enron's accounting shenanigans.

Back then, confounded and eager to unpack the full extent of Enron's reporting chicanery, I was drawn to the topic of creative accounting. It contributed to my pursuit of a career related to the development of accounting standards.

With the tons of articles and papers I’d read on Enron, I thought I had a reasonably good grasp on pretty much what there was to discover in this sector. Yet, I found McClean and Elkind’s book hard to put down. It's a cautionary tale and reminder of the perils of “smart-ass-ery.” It shows that hubris is inevitable when those who should serve as watchdogs abandon their obligation to exercise skepticism and instead allow wiz kids to razzle-dazzle and run rings around them.

The book also added layers to my understanding of the highly regulated, yet inefficient and ineffective energy sector that incentivized the emergence and initial flourishing of Enron and its chair, Ken Lay, who was found guilty of securities fraud, and CEO, Jeffrey Skilling, who was convicted of fraud and insider trading. I must admit, though, unlike for the uber-arrogant, pugnacious Skilling, I felt a tinge of sympathy for Ken Lay, holder of an energy economics doctorate, who’d earned his stripes during his ascent to the apex of the sector and as an adviser to top US administrations, only to squander it spectacularly.

Overall, a takeaway from the book is that brilliance bereft of a moral fiber and inner humility is akin to a brakeless Ferrari speeding on a highway—it's an accident waiting to happen.