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Wednesday 13 January 2010

Book Review: The Smartest Guys In The Room, Bethany McClean, et al

Although the fall of Enron now seems old news, the book and movie are as relevant today as in 2003.

It is an insider expose of the macho, ego-driven ride to disaster. It also, as today, charts a tragedy. Many decent hardworking folk working for firms acquired by Enron lost their 401ks and a lot besides.

Unchecked risk, leaders without scruple, out-right lying about the real value of stocks - it's all here. On the movie you can here the Enron traders cynically manipulating California's energy prices to max-out on profits.

It also shows how Enron innovated the very credit instruments that formed the heart of the 2008-09 sub-prime crisis. In my view, we have lived through one continuous crisis, starting in 2003, the alleviation of which caused the bubble of 2008.

The book neatly integrates the sequence of events and links to a psychological interpretation, referencing the infamous Milligram experiments, showing just how far people will go to follow the orders of authoritarian leaders.

The book also works as a story of how one female journalist and one female whistle-blower brought down the stack of cards.

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