Sunday, May 22, 2005

Ask Why, Mini-Monkeyclown

So, we must bring you news of an earth-shattering rupture in the cultural force that took place this weekend. It kicked us in the face as we were sat on the sofa sipping our coffee. We had called up our Sitemeter stats because we do so love spying on strangers, and noticed that there were far too many links from dubious media outfits and not enough from the titans of corporate finance. Which is odd, because we're much better at discussing the movement of capital in and out of big-ticket boondoggles than attempting to decipher impenetrable hipster in-jokes.

We were perusing the movie listings that day, and noticed that the Enron documentary, The Smartest Guys In the Room had been playing in the city for a few weeks now. We could excuse our lateness by stressing that we had read the book of the film, which suffers only from giving the financial journalists a bit too much of a pass on their earlier love of Enron, and then over-stressing their role in its unravelling. Or we could try and pretend that Cutesome wanted to watch the House of Wax but that would be LIES.

The collapse of Enron is usually described as a tension between the dreams of visionaries and the more base instincts of the guys they hired to put them into place. Or more specifically, did Ken Lay know what was going on? These are delightful questions for prosecutors, but somewhat beside the point, since Enron was, at heart, a classic and cautionary tale of leverage.

We're not sure why the word leverage has gained such wide currency as a financial term - we write about it a lot, and much of the time it's really a way to say "borrowing lots of money", or avoiding saying "very in debt", neither of which are considered very nice ways to describe top companies. That said, few companies frown upon borrowing vast sums of money, and most of them get by just fine. Those companies, though, have good cashflow.

Enron, ultimately, was a rotten company that borrowed too much money. Some of the money it borrowed was legit, some was hidden from shareholders, but all of it was necessary because none of Enron's assets performed that well. We'd have liked to have seen more on those rotten assets (there was a fair amount in the book), and probably less on the national politics. There was a fascinating teaser that there's a link between Enron, Arnold, and the campaign to unseat Gray Davis. And the fact that Arnie has done squat to fix the state's electricity market is a fairly good sign that the devious plan worked - only that Enron isn't around to benefit from it.

We still think there's an epic book to be written about deregulation, the way how Enron, and its peers in several industries, exploited the (real) hope of smaller government budgets, lower taxes, and (less credibly) lower prices, to take over huge parts of what was once the public sphere. But this was really a gloriously voyeuristic stroll through a single company, with strippers and swearing a-go-go.

The fleeing of the Minutemen with now take place in Rock City, which makes no sense at all.


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