[[Fraud]], [[Investing]], [[Markets]], [[Short Selling]], [[Jim Chanos]] # The Smartest Guys in the Room Author: [[Bethany Mclean]] The book provides a brief background of the origins of Enron's founder Ken Lay and his core belief in "deregulation". The idea that deregulation is an important force in competitive economies is a key theme throughout the book. The authors detail the various lines of business and cast of characters which has the downside of being a bit much to follow. Its difficult to distinguish the relative magnitude contributed by each illegal action or mistake without looking at the filings in more detail. The three key people in the story are Lay (Founder and Chairman), Skilling (CEO) and Fastow (CFO). From my reading of the book, Ken Lay was quite aloof and had essentially no idea what was going on the whole time as chairman. He had a very cursory understanding of what was happening inside the company. Skilling came up with the idea of the tradeable gas market and seemed to be responsible for turning Enron into a trading powerhouse. This business was a legitimately profitable operation but they suffered from the cut-throat and reckless culture common throughout Enron. They took too much risk and contributed to Enron's downfall in their own, more subtle, ways. Skilling, like Lay, believed in deregulation and free markets above all else. Skilling really thought he could turn anything into a market which resulted in the failed retail energy business, failed broadband business, failed water business, failed metals business (at least it was unprofitable), etc. Skilling's role was the visionary who just wanted things done, whatever it takes. He never seemed to ask people to do illegal things, he just wanted it done without taking no for an answer. This is what took Enron to the edge of legality (and way passed ethical boundaries) and provided fertile ground for bad actors to deliver whatever Skilling wanted. Fastow was through and through a cheater and manipulator. He was taking advantage of his role to make himself rich through investment vehicles, negotiating against his subordinates for repurchase agreements (so that Enron could manipulate its earnings and meet targets). He then lied about how much time and money he was spending on it. He is truly the wildest character in the book. Lay provided no oversight, Skilling created an environment destined for bad behaviour and Fastow ultimately pulled the trigger with the most aggregious actions.