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Book Review: Conspiracy of Fools by Kurt Eichenwald

It started as a free book from the Random House event, became something to keep me busy while waiting at the airport, and ended up being an incredibly thrilling page-turner I could hardly put down. Conspiracy of Fools covers everything from the beginning – the very beginning – with the formation of Enron and the personal and professional history of Ken Lay and Jeff Skilling. (There’s even mention of Skilling’s HBS interview.)

If you didn’t know the outcome already, you might find yourself identifying with the characters, at least in the beginning. However, even though the book reads like fiction, these “characters” are real people and the events discussed are all true. If you don’t believe the author could possibly have gathered all this information, just check out the 40 pages of meticulous references.

While Enron has become synonymous with corporate scandal, the glut of media coverage sometimes makes it overwhelming to decipher what really happened. This year’s RC class was assigned a new case covering some of the issues: “Innovation Corrupted: The Rise and Fall of Enron.” However, with 675 pages, the book can afford to go into much more detail.

Kurt Eichenwald’s book describes how Jeff Skilling came to consult for Enron; how he conceived the energy-trading business; and even how he recruited and hired Andy Fastow. It also details the off-balance-sheet partnerships that played an important role in the Enron debacle.

And if you want the skinny on the $85 million oil-trading scandal briefly mentioned in the case, the book touches on it as well. Although that scandal occurred in 1988, it’s an important point. The way the event was handled internally was very telling about the context and culture that set the stage for the firm. The Performance Review Committee (PRC) meetings and process recur throughout the story. The California Energy Crisis is woven into the account, and even Larry Summers makes an appearance in the book (only in his role as Treasury Secretary).

You can also learn about another HBS grad, Rebecca Mark, twice-named one of Fortune’s most powerful women in business and rumored to have a long-standing rivalry with Jeff Skilling. Mark’s depiction in Conspiracy of Fools is not quite as soft as the one provided in the HBS case. At times, her leadership in the $2.9 billion Enron investment in India for the Dabhol power plant and her role as CEO of Azurix (Enron’s water business spin-off) portray her as someone who didn’t fully understand basic business concepts. Of course, as with anything else, the book is just one account of the complex chain of events that unraveled at Enron.

Having read the book, I feel a better sense of overall understanding of the situation and can weigh it against other media reports. It also gave me a sense of how things can go wrong and the types of situations to be aware of in the business world.

It’s hard to believe all this occurred so recently. As I read it, I had to remind myself that these events took place within the last five to 10 years and this was the way business was being done at a major multi-national corporation. Controls I thought would have worked broke down, and I learned just how far-reaching these events really were. While it’s hard for any of us at HBS to find time for extra reading, I would highly recommend this book.

March 13, 2006
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