THOSE OF a timorous disposition may want to avoid Enron: The Smartest Guys in the Room . Most Hollywood horror is ultimately comforting, since you can tell yourself it never happened. Not so the events recounted in this blood-curdling, neatly constructed documentary on the rise and fall of the notorious Houston energy giant, culminating in the world's biggest bankruptcy.
As the film progressively reveals, principally through the mouths of the protagonists, they really were as bad as they seemed. We see the hubris (one of the shell companies set up to shelter the firm's mounting losses was called M. Yass - OK, move the full stop to the right), the self-serving and the rampaging greed. In retrospect, though, what should send shivers up every spine is that if Enron and Arthur Andersen were business's Twin Towers (40,000 jobs and $100bn of capital were lost between them), the fundamentalism that brought them crashing down was not some external malevolence: the enemy was, and is, within.
At one level, Enron was a microcosm of the dotcom extravaganza, a one-company bubble of its own. All the ingredients were present: within the firm, leaders who believed they could outsmart anyone or anything, and products that became increasingly disembodied from reality (from energy to futures and markets: at one stage it planned to sell weather) outside the firm, political support and willing believers - 'useful idiots' in both academic and financial worlds who took at face value everything the firm told them and eagerly talked it up.
Once the bandwagon started to roll, Enron became a model of self-sustaining momentum. Everyone was dazzled by the honeypot. Investors scrambled over each other to pile in. The top US investment banks, Wall Street's creme de la creme, enthusiastically subscribed to the loss-hiding schemes, no questions asked. Laxer accounting rules? Regulators, perhaps mindful of chairman 'Kenny Boy' Lay's political connections, were happy to oblige. Lawyers and auditors - the latter well enough aware of what was happening to shred the offending documents in panic when the balloon burst - were far too dependent on the gravy train to even attempt to apply the brakes.
Enron was a bubble in another sense. Disconnected from reality by both its conviction of invincibility and its fantasy accounting, and unchecked by guidance from the top, Enron employees behaved as if they were in a world of their own. Just how perverse this world had become is shown in one of the film's most disquieting sequences where Enron traders are overheard laughing and boasting about their efforts to disrupt California's energy supplies in 2000. The famous blackouts that year were not caused by shortage of capacity or poor regulation - they were caused by Enron, which drove prices (and profits) up by as much as nine times by shutting down power stations and creating artificial shortages. Caught on tape, one trader exults at the forest fires sweeping over the state, crowing 'Burn, baby, burn!'
It may be significant that it took two women to make the first small punctures in this testosterone-inflated balloon - Fortune reporter Bethany McLean (one up for journalism here), who mildly asked if the company's stock was overpriced, and Sherron Watkins, the Enron employee who undertook the dangerous job of informing the company emperors that they weren't wearing any clothes.
Although Enron bosses used considerable ingenuity in their attempts to disguise the true state of the figures, in retrospect the most striking thing about their drive to auto-destruction is its utter pumped-up, fanatical single-mindedness: business as extreme sport.
Enron was the most extreme corporate monument to shareholder value ever erected. The entire system was geared to keeping the share price up. On the carrot side, the incentives for doing so were vast: even in the last months executives were collecting bonuses of tens of millions and cashing options for hundreds, even as they exhorted lowlier employees to invest their retirement savings in company stock (which was later pillaged in a desperate attempt to buy time). On the stick side, the system was 'rank and yank': every year all employees were graded one to five, and all the fives were fired. Fifteen per cent had to be fives.
In a culture formed by the sack on one side and a pot of gold on the other, it's scarcely surprising that employees stopped at nothing, including shutting down California (which is now suing for $6bn compensation), to keep the quarterly numbers moving up. After all, their own greed could be, and was, justified because it was all for the shareholders.
But we should know that. In systems where incentives are sharp enough and the moral compass deliberately disabled - what's good for shareholders is good for the company is good for me - that's what happens. In that sense, to get where Enron ended up didn't require management to be deliberately evil; it just required it to take what most MBAs learn at business school and pursue it to its logical conclusion.
The Observer, 7 Ma7 2006