enron the smartest guys in the room transcript pdf

Surely all these other people can’t be wrong! In reality, no one has done their diligence. When you have multiple reputable people on board, everyone thinks everyone else has done their diligence.

Looking to others believing they had done their due diligence Lesson: Correct for your own incentive bias when you analyze a situation.

Short sellers were a useful counterforce, since they had a large incentive to expose wrongdoing.

Buy-side analysts at banks who were supposed to be independent were strongly pressured to give buy ratings, since companies would only work with positive banks.

Bankers who ran bigger deals got promotions.

Investment bankers earned large fees from Enron’s complicated deals, even when they knew they were skirting the intent of the law.

Furthermore, Enron gave many Andersen accountants cushy jobs.

Enron’s accountants (Arthur Andersen) couldn’t lose Enron as a client (Enron kept accountants waiting in the wings), so they tolerated their practices despite internal skepticism.

Shareholders (employees and the public in general) didn’t look very hard, as long as the stock price rose and employees got bonuses.Further, the more Enron became a success (like in terms of stock price or deal flow), the more beholden the stakeholders were to Enron. People who could have stepped in and intervened didn’t, often because they had a large personal stake in Enron’s success. Stakeholders/watchdogs overlooking bad behavior as long as they were profiting

Enron the smartest guys in the room transcript pdf