This weekend I had a chance to see HDNet Film’s movie/documentary, Enron: The Smartest Guys in the Room. Great movie. Helps puts some perspective on the role of vision, morals, big business, and government. Now I want to read the book.
A few things that kind of surprised me about the movie:
- I expected to see something about McKinsey per this story by Gladwell.
- It was interesting to see the breadth and depth of connections of Enron to the power troubles in California.
- The movie seemed to portray the accounting related to "mark-to-market" as evil – clearly the Enron interpretation of the technique was way too aggressive, but it strikes me (on first blush) as incorrect to call the techniques used at Enron as mark-to-market. For Enron, it seemed more like something like "mark-Enron-assets-to-future-market-in-my-dreams".
- The movie portrays the financial analysts on Wall Street as a bunch of idiots that cannot see through the tradeoffs of accounting techniques. But this is odd to me because, at many b-schools, one is trained to adjust for things like LIFO/FIFO inventory liquidations, restructuring/"big bath" one-time accounting charges, off-balance sheet items, etc. Investment bankers are trained to walk on water to be able to see through accounting stuff and boil things down to true economic impact. Now outright deception (by the company doing the financial reporting) is something that one can’t always control for, but it seems that there must have been something externally visible …
At least for some of these points, I reconcile it all in my mind that greed can drive people to be blind. The reference in the movie to the Milgram experiment is also very noteworthy, but I tend to prefer the temptation explanation over the more pessimistic "we just do as we’re told"-Milgram explanation.