Trading Numbers

Another book! To quote Seinfeld: It was good; I almost read the whole thing!

The whole thing was The Smartest Guys In The Room: The Amazing Rise and Scandalous Fall of Enron by Bethany McLean and Peter Elkind.  Why this book?  Well, I’ve long been plagued by this fear that I’m a moron.  Things happen in the world and I don't know why or how and it bugs me.  The financial crisis of the past couple of years falls into that category, though lately I’ve been feeling like I understand how the subprime mortgage crisis happened and the ripple effect it had.  Sometimes I sort of understand what a credit default swap is.  A few months ago I happened to catch an interview with Bethany McLean and Joe Nocera, who wrote All of the Devils Are Here: The Hidden Story of the Financial Crisis.  It was a really interesting interview and I was all set to march right out and buy the book (full price, hardcover) when I actually managed to stop myself.  Honestly people, I’m really really trying to get a grip on the impulsive spending.  I told myself to see if it was at the local public library yet.  It wasn’t, but The Smartest Guys In The Room was, so here we are.

Let me first say that there is something intensely gratifying about reading about people who irresponsibly, greedily, and stupidly lost billions of dollars in a book you checked out for free.

My criticism of the book is this: Bethany McLean is former investment banker, and I think this may be the reason the book felt a little out of step with what needed to be explained and what didn’t.  At one point, the narrative stops to explain to the reader what a “stock” is.  I’m a moron, but I know what a share of stock is.  But then they would toss around acronyms and banking/finance terms that would bounce right over my head.  And since my most reliable reading time is right before bed, it wasn’t like I was going to hop out of the covers, fire up the computer and start Googling. So there were some things I didn’t understand. (And sometimes the book was better than a half-tab of Ambien, but this is also because I’m a moron and have no attention span.)

As I expected, it was not a zippy read.  I renewed it from the library twice, then finally returned it last week.  I was about 100 pages from the end on the day it was due (it’s 464 pages), so I just read the last 50 before returning it.  Yeah, I skipped 50 pages.  I am awash in self-loathing.

The most interesting aspect was how Enron ceased to really be much of an energy company well before it went down in flames.  It had morphed into more of a financial / brokerage behemoth.  Dozens and dozens of people making deals all over the world for tens or hundreds of millions of dollars that was collateralized with penny whistles and moon pies.  Millions being made, more millions being lost, and all anybody cared about was the stock price. The authors suggest that the people making and signing off on the deals really didn't understand what they were doing either. Enron recklessly manipulated accounting rules to get as far as they did, which was also interesting and horrifying.  And a lot of the oversight that should have stopped it never happened because everyone seemed to be getting rich.

A lot has been said about how the only way to become really wealthy (what some would call “fuck you” wealthy) is to invent or create something that is or becomes in demand.  Only suckers, like me, work for someone else for a salary and a hope that what I’ve saved for retirement isn’t pissed away by another Enron.  If you can’t invent a flying car or a magic pill that makes you look and feel 20 years younger, then sometimes the way you make money is by dancing very very close to the line between legal and illegal.  You have to take risks.  Or at least these clowns thought they had to take risks.  Big, stupid, short-sighted risks.  

Two of the most interesting players in the book are Jeff Skilling (Enron’s CEO for six months after Ken Lay left) and Andrew Fastow (Enron’s CFO during the crash and burn).  Jeff Skilling was interesting for being, apparently, very smart in certain areas and yet completely blind to the brick wall the company was racing toward, with all of his best people at the controls.  Andrew Fastow was introduced as an unbelievable ass in the book, and he ended up taking huge (illegal) risks after he was already making millions of dollars.  I don't get people like this: You cross  into deception and illegality after you’ve already made millions for yourself?

I suppose that if you’re doing deals for millions (or even billions) of dollars, a few million dollars in personal wealth starts to feel unsatisfying.  I mean, I would imagine.  I’m just a sucker who works for a paycheck though, so what do I know?