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Clips from Enron: The Smartest Guys in the Room (2005)

So that was the one good idea.

"So that was the one good idea."

Enron: The Smartest Guys in the Room (2005)

In 1992 using that good idea,

"In 1992 using that good idea,"

Enron: The Smartest Guys in the Room (2005)

we became the largest buyer and seller of natural gas

"we became the largest buyer and seller of natural gas"

Enron: The Smartest Guys in the Room (2005)

in North America.

"in North America."

Enron: The Smartest Guys in the Room (2005)

Jeff was like the prophet.

"Jeff was like the prophet."

Enron: The Smartest Guys in the Room (2005)

He came in and said There's a whole new world out there.

"He came in and said There's a whole new world out there."

Enron: The Smartest Guys in the Room (2005)

Forget about this pipeline stuff,

"Forget about this pipeline stuff,"

Enron: The Smartest Guys in the Room (2005)

you know the staid pipeline in the ground and...

"you know the staid pipeline in the ground and..."

Enron: The Smartest Guys in the Room (2005)

gas in and gas out.

"gas in and gas out."

Enron: The Smartest Guys in the Room (2005)

We can recreate this entire industry.

"We can recreate this entire industry."

Enron: The Smartest Guys in the Room (2005)

An attorney from Vinson & Elkins,

"An attorney from Vinson & Elkins,"

Enron: The Smartest Guys in the Room (2005)

Amanda Martin was one of the first executives hired

"Amanda Martin was one of the first executives hired"

Enron: The Smartest Guys in the Room (2005)

by Jeff Skilling and became part of his inner circle.

"by Jeff Skilling and became part of his inner circle."

Enron: The Smartest Guys in the Room (2005)

The excitement was palpable.

"The excitement was palpable."

Enron: The Smartest Guys in the Room (2005)

You cannot imagine how proud we all were to be there.

"You cannot imagine how proud we all were to be there."

Enron: The Smartest Guys in the Room (2005)

And then, of course, we had a leader who imbued us

"And then, of course, we had a leader who imbued us"

Enron: The Smartest Guys in the Room (2005)

with a sense of confidence that if we were smart,

"with a sense of confidence that if we were smart,"

Enron: The Smartest Guys in the Room (2005)

anything could be accomplished And then the bottom line

"anything could be accomplished And then the bottom line"

Enron: The Smartest Guys in the Room (2005)

we began to make money.

"we began to make money."

Enron: The Smartest Guys in the Room (2005)

And that in and of itself,

"And that in and of itself,"

Enron: The Smartest Guys in the Room (2005)

was a re-affirmation that this could be big.

"was a re-affirmation that this could be big."

Enron: The Smartest Guys in the Room (2005)

Skilling saw the opportunity to build an industry new

"Skilling saw the opportunity to build an industry new"

Enron: The Smartest Guys in the Room (2005)

and to start a business from scratch.

"and to start a business from scratch."

Enron: The Smartest Guys in the Room (2005)

But he had one specific condition

"But he had one specific condition"

Enron: The Smartest Guys in the Room (2005)

that had to be met before he'd join Enron,

"that had to be met before he'd join Enron,"

Enron: The Smartest Guys in the Room (2005)

and it was that he be allowed to use

"and it was that he be allowed to use"

Enron: The Smartest Guys in the Room (2005)

a certain kind of accounting known as mark-to-market.

"a certain kind of accounting known as mark-to-market."

Enron: The Smartest Guys in the Room (2005)

Arthur Andersen signed off, and the SEC approved it.

"Arthur Andersen signed off, and the SEC approved it."

Enron: The Smartest Guys in the Room (2005)

I remember walking in and going 'What's going on? '

"I remember walking in and going 'What's going on? '"

Enron: The Smartest Guys in the Room (2005)

And Causey and everybody,

"And Causey and everybody,"

Enron: The Smartest Guys in the Room (2005)

I mean every one was so excited and then came the champagne

"I mean every one was so excited and then came the champagne"

Enron: The Smartest Guys in the Room (2005)

and We had got Mark-to-market accounting treatment.

"and We had got Mark-to-market accounting treatment."

Enron: The Smartest Guys in the Room (2005)

And I often think about how clear my memory was about that event.

"And I often think about how clear my memory was about that event."

Enron: The Smartest Guys in the Room (2005)

And that was the beginning of a major cog

"And that was the beginning of a major cog"

Enron: The Smartest Guys in the Room (2005)

of the downfall ultimately of Enron.

"of the downfall ultimately of Enron."

Enron: The Smartest Guys in the Room (2005)

Mark-to-market accounting allowed Enron

"Mark-to-market accounting allowed Enron"

Enron: The Smartest Guys in the Room (2005)

to book potential future profits

"to book potential future profits"

Enron: The Smartest Guys in the Room (2005)

on the very day a deal was signed.

"on the very day a deal was signed."

Enron: The Smartest Guys in the Room (2005)

No matter how little cash actually came in the door,

"No matter how little cash actually came in the door,"

Enron: The Smartest Guys in the Room (2005)

to the outside world, Enron's profits could be...

"to the outside world, Enron's profits could be..."

Enron: The Smartest Guys in the Room (2005)

whatever Enron said they were.

"whatever Enron said they were."

Enron: The Smartest Guys in the Room (2005)

Very subjective.

"Very subjective."

Enron: The Smartest Guys in the Room (2005)

And very... it left it open to manipulation.

"And very... it left it open to manipulation."

Enron: The Smartest Guys in the Room (2005)

And they were saying that we're going to sell

"And they were saying that we're going to sell"

Enron: The Smartest Guys in the Room (2005)

power out of this power plant in ten years

"power out of this power plant in ten years"

Enron: The Smartest Guys in the Room (2005)

for X dollars per kilowatt.

"for X dollars per kilowatt."

Enron: The Smartest Guys in the Room (2005)

And there was no way anybody could prove that

"And there was no way anybody could prove that"

Enron: The Smartest Guys in the Room (2005)

they could do it.

"they could do it."

Enron: The Smartest Guys in the Room (2005)

Well... Hey Reg.

"Well... Hey Reg."

Enron: The Smartest Guys in the Room (2005)

Good morning. How are you?

"Good morning. How are you?"

Enron: The Smartest Guys in the Room (2005)

Finally. Great. Good to see you.

"Finally. Great. Good to see you."

Enron: The Smartest Guys in the Room (2005)

Jeff. Good to see you. Todd, sit down.

"Jeff. Good to see you. Todd, sit down."

Enron: The Smartest Guys in the Room (2005)

We've been working hard on this

"We've been working hard on this"

Enron: The Smartest Guys in the Room (2005)

and we've really pulled out all the stops.

"and we've really pulled out all the stops."

Enron: The Smartest Guys in the Room (2005)

Look what we got. Origination...

"Look what we got. Origination..."

Enron: The Smartest Guys in the Room (2005)

We did 20 million last year,

"We did 20 million last year,"

Enron: The Smartest Guys in the Room (2005)

I think we can do 120 million dollars this year.

"I think we can do 120 million dollars this year."

Enron: The Smartest Guys in the Room (2005)

Trading we did 10 million last year

"Trading we did 10 million last year"

Enron: The Smartest Guys in the Room (2005)

we think we can do 64 this year.

"we think we can do 64 this year."

Enron: The Smartest Guys in the Room (2005)

This is the key.

"This is the key."

Enron: The Smartest Guys in the Room (2005)

We're going to move from

"We're going to move from"

Enron: The Smartest Guys in the Room (2005)

mark-to-market accounting to something

"mark-to-market accounting to something"

Enron: The Smartest Guys in the Room (2005)

I call H, F, V

"I call H, F, V"

Enron: The Smartest Guys in the Room (2005)

Hypothetical Future Value accounting.

"Hypothetical Future Value accounting."

Enron: The Smartest Guys in the Room (2005)

If we do that we can add a kazillion dollars

"If we do that we can add a kazillion dollars"

Enron: The Smartest Guys in the Room (2005)

to the bottom line.

"to the bottom line."

Enron: The Smartest Guys in the Room (2005)

Whoa. Jeff... alright. That sounds fantastic.

"Whoa. Jeff... alright. That sounds fantastic."

Enron: The Smartest Guys in the Room (2005)

Oh Jeff, thank you. That's just supurb performance.

"Oh Jeff, thank you. That's just supurb performance."

Enron: The Smartest Guys in the Room (2005)

And you're going to go far, my boy.

"And you're going to go far, my boy."

Enron: The Smartest Guys in the Room (2005)

Probably President of the company one day.

"Probably President of the company one day."

Enron: The Smartest Guys in the Room (2005)

You think so? I think.

"You think so? I think."

Enron: The Smartest Guys in the Room (2005)

He really believed that the idea was everything.

"He really believed that the idea was everything."

Enron: The Smartest Guys in the Room (2005)

And that when you came up with an idea,

"And that when you came up with an idea,"

Enron: The Smartest Guys in the Room (2005)

you should be able to book the profits from that idea,

"you should be able to book the profits from that idea,"

Enron: The Smartest Guys in the Room (2005)

right away.

"right away."

Enron: The Smartest Guys in the Room (2005)

Because otherwise some lesser man was taking the profits

"Because otherwise some lesser man was taking the profits"

Enron: The Smartest Guys in the Room (2005)

from the idea that some greater man

"from the idea that some greater man"

Enron: The Smartest Guys in the Room (2005)

had come up with in the past.

"had come up with in the past."

Enron: The Smartest Guys in the Room (2005)

When Jeff Skilling applied to Harvard Business School,

"When Jeff Skilling applied to Harvard Business School,"

Enron: The Smartest Guys in the Room (2005)

the professor asked him if he was smart.

"the professor asked him if he was smart."

Enron: The Smartest Guys in the Room (2005)

He replied, 'I'm fucking smart.'

"He replied, 'I'm fucking smart.'"

Enron: The Smartest Guys in the Room (2005)

One of his favorite books was The Selfish Gene,

"One of his favorite books was The Selfish Gene,"

Enron: The Smartest Guys in the Room (2005)

about the ways human nature is steered by greed

"about the ways human nature is steered by greed"

Enron: The Smartest Guys in the Room (2005)

and competition in the service of passing on our genes.

"and competition in the service of passing on our genes."

Enron: The Smartest Guys in the Room (2005)

At Enron.

"At Enron."

Enron: The Smartest Guys in the Room (2005)

Skilling wanted to set free the basic instincts

"Skilling wanted to set free the basic instincts"

Enron: The Smartest Guys in the Room (2005)

of survival of the fittest.

"of survival of the fittest."

Enron: The Smartest Guys in the Room (2005)

Jeff had a very Darwinian view of how the world worked.

"Jeff had a very Darwinian view of how the world worked."

Enron: The Smartest Guys in the Room (2005)

He was famous for saying once in Enron's early years,

"He was famous for saying once in Enron's early years,"

Enron: The Smartest Guys in the Room (2005)

that money was the only thing that motivated people.

"that money was the only thing that motivated people."

Enron: The Smartest Guys in the Room (2005)

Skilling's notion of how the world should work

"Skilling's notion of how the world should work"

Enron: The Smartest Guys in the Room (2005)

really trickled down,

"really trickled down,"

Enron: The Smartest Guys in the Room (2005)

and affected everything about how Enron did business.

"and affected everything about how Enron did business."

Enron: The Smartest Guys in the Room (2005)

He instituted the system know as the PRC,

"He instituted the system know as the PRC,"

Enron: The Smartest Guys in the Room (2005)

or Perfomance Review Committee.

"or Perfomance Review Committee."

Enron: The Smartest Guys in the Room (2005)

It required that people be graded from a one to a five.

"It required that people be graded from a one to a five."

Enron: The Smartest Guys in the Room (2005)

And roughly ten percent of people had to be a five.

"And roughly ten percent of people had to be a five."

Enron: The Smartest Guys in the Room (2005)

And those people were supposed to be fired.

"And those people were supposed to be fired."

Enron: The Smartest Guys in the Room (2005)

Hence, this came to be know as 'Rank and Yank.'

"Hence, this came to be know as 'Rank and Yank.'"

Enron: The Smartest Guys in the Room (2005)

I, personally, am convinced

"I, personally, am convinced"

Enron: The Smartest Guys in the Room (2005)

that the PRC process is the most important process

"that the PRC process is the most important process"

Enron: The Smartest Guys in the Room (2005)

that we conduct as a company.

"that we conduct as a company."

Enron: The Smartest Guys in the Room (2005)

I've never heard of a company yet

"I've never heard of a company yet"

Enron: The Smartest Guys in the Room (2005)

that would be successful terminating 15 percent

"that would be successful terminating 15 percent"

Enron: The Smartest Guys in the Room (2005)

of their people every year...

"of their people every year..."

Enron: The Smartest Guys in the Room (2005)

just to satisfy the fact that the other employees

"just to satisfy the fact that the other employees"

Enron: The Smartest Guys in the Room (2005)

had to vote on them.

"had to vote on them."

Enron: The Smartest Guys in the Room (2005)

And so when you're being evaluated by that group,

"And so when you're being evaluated by that group,"

Enron: The Smartest Guys in the Room (2005)

you are getting direct communication from Ken and me

"you are getting direct communication from Ken and me"

Enron: The Smartest Guys in the Room (2005)

about what the objectives of the company are

"about what the objectives of the company are"

Enron: The Smartest Guys in the Room (2005)

and how you fit with those objectives.

"and how you fit with those objectives."

Enron: The Smartest Guys in the Room (2005)

It was a brutal process.

"It was a brutal process."

Enron: The Smartest Guys in the Room (2005)

The ability for a 25 year old to go in

"The ability for a 25 year old to go in"

Enron: The Smartest Guys in the Room (2005)

and to be reviewed and to be superior...

"and to be reviewed and to be superior..."

Enron: The Smartest Guys in the Room (2005)

and as a consequence get a five million dollar bonus.

"and as a consequence get a five million dollar bonus."

Enron: The Smartest Guys in the Room (2005)

I don't think that's repeated in many places

"I don't think that's repeated in many places"

Enron: The Smartest Guys in the Room (2005)

in corporate America.

"in corporate America."

Enron: The Smartest Guys in the Room (2005)

Our culture is a tough culture.

"Our culture is a tough culture."

Enron: The Smartest Guys in the Room (2005)

It is a very aggressive culture.

"It is a very aggressive culture."

Enron: The Smartest Guys in the Room (2005)

At Enron,

"At Enron,"

Enron: The Smartest Guys in the Room (2005)

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