Summary of Bethany McLean & Peter Elkind's The Smartest Guys in the Room

By IRB Media

Get the Summary of Bethany McLean & Peter Elkind's The Smartest Guys in the Room in 20 minutes. Please note: This is a summary & not the original book. Original book introduction: There were dozens of books about Watergate, but only All the President's Men gave readers the full story, with all the drama and nuance and exclusive reporting. And thirty years later, if you're going to read only one book on Watergate, that's still the one. Today, Enron is the biggest business story of our time, and Fortune senior writers Bethany McLean and Peter Elkind are the new Woodward and Bernstein.

Remarkably, it was just two years ago that Enron was thought to epitomize a great New Economy company, with its skyrocketing profits and share price. But that was before Fortune published an article by McLean that asked a seemingly innocent question: How exactly does Enron make money? From that point on, Enron's house of cards began to crumble. Now, McLean and Elkind have investigated much deeper, to offer the definitive book about the Enron scandal and the fascinating people behind it.

• Language: English
• Publisher: IRB Media
• Release date: Dec 10, 2021
• ISBN: 9781669343714

IRB Media

With IRB books, you can get the key takeaways and analysis of a book in 15 minutes. We read every chapter, identify the key takeaways and analyze them for your convenience.

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Insights on Bethany McLean and Peter Elkind's The Smartest Guys in the Room

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 3

Insights from Chapter 4

Insights from Chapter 5

Insights from Chapter 6

Insights from Chapter 7

Insights from Chapter 8

Insights from Chapter 9

Insights from Chapter 10

Insights from Chapter 11

Insights from Chapter 12

Insights from Chapter 13

Insights from Chapter 14

Insights from Chapter 15

Insights from Chapter 16

Insights from Chapter 17

Insights from Chapter 18

Insights from Chapter 19

Insights from Chapter 20

Insights from Chapter 21

Insights from Chapter 22

Insights from Chapter 23

Insights from Chapter 24

Insights from Chapter 25

Insights from Chapter 1

#1

The city of Houston, Texas, was the center of the country’s oil and gas industries, and it reflected those industries’ cultures perfectly. Natural gas, which was used in the production of plastics, was never going to be as important as oil, but it gradually became useful and even important.

#2

The author interviewed a former Enron executive who described the company as ready, fire, aim. The company’s founder, Kenneth Lay, believed strongly in deregulation. He saw himself as one of the winners, and he wanted to lead a company that would become the world’s biggest gas pipeline company.

#3

Enron’s founder, Ken Lay, was a very popular man who was known as a generous philanthropist. He was also known to be extremely egotistical and narcissistic.

#4

Kenneth Lee Lay was born in 1942 in Missouri. His parents struggled to raise three children on their own, and Lay worked hard throughout his youth to help support the family. He was a top student who enjoyed politics and economics.

#5

The first key relationship for Lay was with Pinkney Walker, who was drawn to Lay’s ambition and brains. Walker became his mentor.

#6

In 1973, the country was hit with an energy crisis. The crisis proved to be a test for the young Ken Lay, who was now the vice president of corporate planning for a pipeline company called Florida Gas.

#7

The author's great-grandfather was a key figure in the Teapot Dome scandal, in which he received millions of dollars in bribes from a government contractor.

#8

The author says that the crisis was created by the government, which in 1978 increased the price that gas producers would be paid for some of their gas, and at the same time decreased the price that gas consumers would be charged.

#9

Ken Lay, the future chairman and CEO of Enron, was hired by HNG in 1984.

#10

In 1985, HNG was approached by Segnar, the CEO of InterNorth, a large Omaha pipeline company, about a possible merger. However, it became clear that Segnar was too eager for his own good and that the deal was a bad fit.

#11

The deal between HNG and InterNorth was set up so that HNG would acquire InterNorth, which had 37,500 miles of pipeline. However, the InterNorth directors came down with a case of buyer’s remorse, and began to distrust the Texans.

#12

The board of directors of InterNorth, a Hanesbrands company, voted to move the company’s headquarters to Houston in 1985. Omaha residents were furious about this decision, and it would cause a deep rift between the two cities for years to come.

#13

The year after the HNG-InterNorth merger, Enron’s financial situation had worsened to the point that they were forced to sell assets to pay off debt.

Insights from Chapter 2

#1

The oil-trading division of InterNorth became Enron Oil, and was tucked away in a division that was a hodgepodge of different businesses. It made money and was a source of pride for Enron’s top brass, who didn’t really understand how it worked.

#2

The man who created Enron Oil was named Louis Borget. Within Enron, he was a shadowy figure who divulged as little as possible about the details of his operation and kept a wary distance from Houston. He created the first oil futures contract and set up the Enron Oil trading division.

#3

The author met with a group of Enron traders in the late 2000s, who all shared similar stories about the company’s culture of excess.

#4

In 1987, Enron’s internal auditing department discovered that the company had been receiving funds from Apple Bank in the Channel Islands, which couldn’t be located on the books. This was, according to the auditors, evidence of profit shifting.

#5

The author showed how Enron used the deferment of expenses to make its numbers look better, which was a form of earnings manipulation.

#6

The internal auditors were summoned to Houston and presented with the transactions in person. They were told to hand the investigation over to Enron’s accountants, Arthur Andersen.

#7

Arthur Andersen was Enron’s auditor for years, and they were in charge of the investigation. They were not able to verify the ownership of the trading partners, and the profit shifting had no material effect on Enron’s financial statements.

#8

Eventually, the board would decide that the transactions were legitimate, but