Tag Archives: Discussing Documentaries

The Fine Line Between Smart and Heinous: “Enron: the Smartest Guys in the Room”

Hello, internet. Welcome to the first post of my second topic: documentaries. I’m planning on doing both movies and miniseries; I’ve been planning out posts for “Making a Murderer” and Leah Remini’s Scientology series (though, the latter might be difficult, as it is getting at least one more season). But today I wanted to start out with the first documentary I remember actively liking (despite it having 0.5 stars on Netflix). I was made to watch Enron: the Smartest Guys in the Room, a movie based on a book of a similar name, in some class back in what must have been high school based on its release date. I was weirdly into it, even though I didn’t really understand much of the business dealings behind it. Having never taken an econ class past the one required in high school, I can’t say that I entirely understand them now, but I feel like I got more from it than I did ten years ago. I’ll do my best to give an overview before getting into what was good and bad about this documentary.

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The Sordid Details

As on suspects from the title, this is a movie about Enron, the energy company from the 90’s. I realize that some people reading this may be too young to remember the company. Even I only remember its existence as a thing grown ups sometimes mentioned when i was a child. From my Wikipedia research, I found out that Enron derived from a parent company InterNorth, which began in the early days of the Great Depression, in 1930. This natural gas company would acquire another, called Houston Natural gas, a slightly older company. These two would merge and their new entity HNC/InterNorth Inc. before it was renamed “Enteron.” This name would later be shortened to Enron. “The Smartest Guys in the Room” doesn’t discuss this past and begins after Enron officially becomes in entity in 1985. More accurately, this documentary begins with a slightly narmy scene of the Enron buildings interspersed with various people in suits telling what they thought Enron’s fatal flaws were, with another voice whispering things like “he’s hiding something from the rest of us” and “what is he building in there?” This scene is followed by the suicide of a man named John “Cliff” Baxter, an Enron executive, before cutting to a scene of Jeff Skilling’s trial.

The narrative, however, begins with Enron’s first scandal in 1987. This incident, called the “Valhalla Scandal,” involved two traders in the oil sector of the company essentially gambling beyond their means in the oil trade and diverting some of the money to personal accounts. They destroyed records and kept two sets of books, one real and the other that showed what they wanted it to, in order to increase Enron’s profits. I’m slightly unclear as to how precisely this worked in this situation, but much of the oil market is based on speculation about oil prices and much of the market is a gamble (for those interested Planet Money has a short series on the oil market. They begin by buying oil). When this was discovered by the company, Kennith Lay, the then-CEO of Enron, did nothing to discourage this behavior. In fact, he encouraged the division to “please keep making [Enron] millions.” Eventually, this was shut down by one of Enron’s executives, who managed to get the real books and was able to keep the company afloat.

This sets the stage of the hiring of Jeff Skilling, who climb the ranks at Enron before becoming the COO in 1997 and moving to the position of CEO in early 2001. Skilling’s plan to grow the company hinged on the use of mark-to-market accounting. This form of accounting matches the value of a commodity to its real value in the market, rather than to its price on the books, which is meant to allow investors to have a better idea of how much a product is worth in real-time. In Enron’s case, this meant being able to declare the value of their own product, as Enron was creating the very markets it was meant to be marking to.  Under Skilling, the work environment at Enron turned particularly brutal. He instituted a ranking system by which employees were ranked on a scale of 1 (best) to 5 (worst), with each category containing roughly the same number of employees. Employees in the bottom 20% of the company were let go. That fact has very little bearing on the main scandals, but it’s a fact that upsets me, so you all have to know. There are a number of other executives that the documentary discusses, but I’m going to skip over them in the interest of not making this post too incredibly long and based on the fact that they don’t directly deal with the shadiest of Enron’s practices. Suffice it to say that, during the 90’s, Enron had a number of ventures, like the selling of broadband, that did not pan out, yet the company’s stock prices still increased each year and the head of one failed department walked away with millions. Andrew Fastow, the CFO, created a number of corporations for the sole purpose of trading with Enron in order to hide the fact that the company was in debt. Many of the biggest banks invested in these, essentially helping Enron to hide their losses.

Yet the worst of Enron’s dealings, and the most likely to have caught the attention of readers old enough to be aware of current events in pre-9/11 2001, were its policies in California.

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There was a great cartoon with a screw labelled “Enron” going through California, but I couldn’t find it.

I suspect that most Americans born before about 1993 have some vague recollection of the rolling blackouts that California suffered in 2000 and 2001. At the time, I assumed that the blackouts were caused by natural disasters. (I was ten. Blackouts happen in big storms. I made the obvious connection.) However, as is illustrated in great detail in this documentary and as adults at the time were probably aware, they were caused by the shifty dealings of energy companies. California had just deregulated energy. This enabled those who sold power to do a number of unethical things that were not technically illegal. Chief among these was the practice of creating artificial power shortages in order to drive up the price and profits for themselves. This documentary illustrates this point very vividly by playing tapes of Enron traders negotiating to get certain power grids turned off because they’d like the price to go up a little bit and cheering as wildfires destroy power lines and grids.

Eventually, it would become clear that Enron’s practices were unsustainable. On ex-vice president interview in this documentary depicts Skilling as an almost tragic figure, a CEO whose company is being taken over by the traders. Skilling would resign on August 14, 2001. This was at a time that Enron stock was falling and Lay, who had been chairman before returning to the position of CEO, attempted to assure everyone that the company would pull through.

The day after Skilling stepped down, Sherron Watkins, a vice president at Enron, attempted to become something of a whistle-blower by informing Lay of the issues with the company’s accounting. The documentary is a bit unclear about the exact order of events or if Watkins’ actions had much of an impact, as Lay used Enron’s own lawyers to declare their accounting fine, but the Securities and Exchange Commission would begin an investigation into Enron by late October 2001. This would lead to the collapse of the company and the trials of both Skilling and Lay. The documentary ends with employees describing how they were told at 9:00 one morning that Enron declared bankruptcy and that they had 20 minutes to get their things and leave the building before turning back to a couple former employees they’d had commenting sporadically throughout the movie saying that they didn’t question the company and its practices enough at the time. Before the credits go up, white writing on a black screen details how much the employees of Enron lost compared to what was made by their bosses. As the credits roll, they have what is possibly the creepiest song in the background. It reminds me a bit of “This is Halloween” from The Nightmare Before Christmas. It’s entitled “God’s Away on Business.”

The Good and the Utterly Confusing

They say that cultural decades don’t split at the beginning of chronological decades. For example, what we see as the culture of the 1950’s is really something that happened between 1955 and 1965, with “the 60’s” being 1965-1975 and so on. I believe this movie is proof of that. Despite coming out in 2005, it’s so 90’s. Not the early 90’s big hair and grunge that belongs to the 1985-1995 cultural epoch, but the other 90’s. The getting really excited about the internet 90’s. The 90’s in which I had a box of semi-translucent floppy discs in six or seven different colors. This was definitely part of why I liked it. Even it’s opening creepy whispers narm was great. It also allowed me to start piecing together what was happening around me at that time. I remember hearing about Enron when I was in elementary school and then mentions of them just disappeared. I never really gave them a thought until whatever teacher it was that made us watch this movie said we were watching a documentary about how it collapsed. I think the figuring out what happened when I was too young to be paying attention was part of what appealed to me about this documentary.

On a less personal note, I think there are things that this documentary does right. It doesn’t drag at all and it does a decent job at mixing somewhat pulpy content with the deeply disturbing realities of how the powerful could play with the system. In this film at least, much of what appears to have brought Enron crumbling down was a group geeks-turned-dudebros doing whatever they wanted, screwing over people and, in one guy’s case, bringing strippers up into his office (yes, there are shots of a strip club in this documentary about white collar crime). The documentary itself is also broken into segments, with what looks like a title card appearing at various times. The titles of the segments often correspond to songs, which makes me think it was something for the movie, but they would make sense as chapters of the original book.

While this documentary seems quite sleek, it’s pretty hard to follow. Perhaps I was just not giving it my full attention when I watched it for this post, but I didn’t really get a sense of the timescale of these activities. Most of the dates in my summary came from Wikipedia. I think it would be really good if you already understood a lot of the background of Enron, but it isn’t the best introductory overview. You’d get a sense of a big company making a lot of dodgy choices in a short amount of time, but it doesn’t spend a lot of time explaining any background information. It also has a pretty large cast of characters. Like many documentaries, they intersperse talking-head type interviews with their footage. In these, they interview the woman who co-wrote the book (a journalist by the name of Bethany McLean), Watkins, a number of former employees, and, I believe, a number of accountants and lawyers not associated with Enron. It was difficult to keep each person straight, especially since they didn’t subtitle who they were each time they appeared.

This documentary is also a bit confusing, as it doesn’t have much of a narrative. I realize that part of that is due to real life not having an actual narrative, but I feel that documentaries have to impose some sort of order to make things clear to the viewer. A lot of people come in and out at random times. Most noticeably, there is John “Cliff” Baxter, whose suicide begins the movie, but who only features in a list of higher-ups of Enron. In this review, he was one of the boring execs who I glossed over. His story does show the high stakes of what happened, but I didn’t know who he was by the end of the movie and had to go back to figure out what was up with him. Similarly, Lou Pai, who was the head of a failed department who walked away with 100 million and who had strippers in his office, appears to be there just to show the level of corruption and disregard for anything resembling ethics or tact was at Enron, but doesn’t play much of a role in the downfall of Enron. His story is once again interesting, but I feel like it just sits as an anecdote, rather than functioning to move any sort of narrative forward.

Ultimately, I still really enjoyed this documentary. Even though some parts of it were quite confusing, it kind of has everything. It’s the story of a company infected with a hyper-masculine swagger that decides it can do what it wants and loses all sense of right and wrong, which ultimately results in it digging its own grave. It gives you the bizarre opportunity to live vicariously through corrupt executives and depraved traders and still stand in righteous indignation over their actions. This may be a sort of Harry Potter situation where the movie only really makes sense if you’ve read the book. Or at least the Wikipedia page.

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