Conspiracy of Fools

Posted on January 19, 2006

I’ve just recently finished reading Kurt Eichenwald’s book on the collapse of Enron, Conspiracy of Fools.

As journalistic history goes, it’s very good. You get a clear picture of the forces that turned one of the biggest companies in America into a bankrupt shell. Of course, it suffers from the flaws of the journalistic history form, too.

Probably the most compelling thing about the book is that it is less of a business case study and more of a character study. The three primary players each emerge as distinct personalities: Enron Chairman Kenneth Lay as a well-meaning executive who spent more time glad-handing politicians and fellow executives than watching the daily operations of his enterprise, CEO Jeffrey Skilling as a hyper-driven leader whose manic search for The Next Big Thing instilled a culture of corner-cutting at the company, and CFO Andrew Fastow as an amoral schemer who concocted financial schemes that simultaneously masked Enron’s structural problems and poured millions of dollars of company money into his own pocket.

Of the three, the undoubted villain of the piece is Fastow. He is presented in an unremittingly negative light, as someone so obsessed with amassing enough wealth to enter the top tier of Houston society that he is willing to do anything to make it happen. In this telling, Skilling has a role in the company’s failure, too, but it’s not a leading role; his primary sin was fostering a culture at Enron so mercenary, so focused on chasing grandiose visions and pumping up the next quarter’s reported earnings, that double-dealings such as Fastow’s could take root and flourish. Lay is depicted as being responsible more by what he did not do — his instincts are generally laudable ones, reining in some of the uglier aspects of the Skilling culture, but he was so disengaged from the workings of his business that he never knew of Fastow’s financial manipulations or the degree to which Enron’s facade depended on them until the facade collapsed.

When I say that Conspiracy of Fools shares the failings of journalistic history, I’m thinking primarily of its portrait of Fastow. I don’t know the man, so I can’t speak to his character one way or the other. But one thing I’ve learned from reading other books by journalists (see, for example, anything Bob Woodward has written in the last 20 years) is that the story they tell is driven in large part by the people they get to agree to an interview. Those who agree get an opportunity to share their side of the story; those who don’t do not — and moreover, those who agree will often dump blame on the shoulders of the silent ones, seizing the opportunity to pass the buck. The result is usually that the people who don’t talk come across as very bad indeed — sometimes much worse than they actually are.

The book’s depiction of Fastow is so unremittingly negative that I wonder if Eichenwald didn’t fall into this trap. Eichenwald’s Fastow is relentlessly avaricious, constantly grabbing for the quick buck and taking any opportunity to screw over his colleagues. This is in stark contrast to the way the book treats Jeffrey Skilling, which is surprisingly sympathetic. We see Skilling as CEO working so hard that he ruins his home life and health, leading him to walk away; then, when Fastow’s bombshells start going off, he desperately tries to come back to the company to perform damage control. The image of Skilling we get is multifaceted and complicated, like a real person; Fastow is remarkably two-dimensional by comparison.

Now, maybe that’s just how these two guys are, so I don’t want to come down too hard on the book (and I certainly don’t want this to be taken for a defense of Fastow, whose business dealings are repulsive no matter if he had redeeming qualities or not). It’s a good read, easy to follow and lucidly written. The secondary characters tend to blur into the background somewhat, but the main personalities stand out, and you do get some sense of the motivations that led these men to make their Faustian bargain.

It’s not a bad book; it’s just good enough that I wish it was better. (I’m going to have to check out the other big book on Enron, The Smartest Guys in the Room — which was recently adapted into a movie — and see how it stacks up by comparison.)