By Vicky Davis
Last April, Robert Bradley, a former Enron employee presented to the Houston Forum his analysis of the culture at Enron that led to the criminal behavior and the eventual Enron bankruptcy. The title of the presentation was Enron: An Insider’s View. And nobody was closer to the inside than Bradley because Bradley was Ken Lay’s speechwriter.
It was a fascinating peek into the mindset that was driving the company’s ambitions. It can be summed up in two words: Gold Fever. Gold Fever is the all-consuming madness that grabs hold of greedy men and drives them. All rational thought is abandoned. They have tunnel vision with the pot of gold at the end of the tunnel. Getting that gold becomes the single most important thing in life. No cost is too great. No sacrifice is too small. It’s all out - no holds barred - run for the gold.
Quotes from Bradley’s presentation that lead me to that conclusion are as follows:
- Ken Lay had a business model. That model was perpetual first mover advantage - a model of revolutionary change or revolution always over incremental improvement. It’s baseball season now so the analogy would be to swing for the fences and don’t use the strategy of the small ball: the walk, the steal, the sacrifice, scoring runs that way - go for the fences.
- …the guru of Ken Lay and Enron’s business model - Gary Hamil. Hamil was a Drucker disciple who brought the discontinuity revolution to new heights in his book, “Competing for the Future and Leading the Revolution”. …Don’t transform your organization. Transform your industry. Don’t be a rule taker, be a rule maker - no more, be a rule breaker. How many of us at Enron remember all the presentations: ‘rule taker, rule maker, rule breaker. “We’re the rule breaker”. “We’re revolutionaries”.
- Speaking of revolutionaries, there is an Enron mouse pad: “What are you going to do to change the world today”. And there are interviews with Andy Fastow during this period: “I’m a revolutionary”.
- There was a conference in New York City by Gary Hamil on revolution, “Revolt, Revolt” and Ken Lay was scheduled to appear and this was less than a month before Enron’s bankruptcy
- Ken Lay’s business model put in practice is something like this - there are great pools of potential profits just awaiting entrepreneurial discovery and action - opportunities that the stodgy competition has not or cannot see. By employing and empowering the best and brightest, potential profits can be turned into actual profits.
It’s important to understand the mindset of the Enron crew because that mindset didn’t stop at the doors of Enron, it extends into the highest reaches of government - all the way up to the White House. It infected everybody associated with Enron - or more accurately, the Reagan Administration.
It may be an oversimplification (although I don’t really think so), but I think the Reagan Revolution can be summed up by applying the philosophy, “the world is a market, government is an impediment and must be crippled or preferably Grover Norquist’s solution: “reduce the federal government to a size so small "that it could be drowned in a bathtub”.
With the ‘world is a market’ as the premise coupled with the concept for a universal trading system for all commodities as described by Robert Bradley, it begins to build the picture of the pot of gold that Enron and the connected saw:
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Skilling through the platform of Enron online sought to universalize a trading model for all commodities and it was Skillings model Lay thought that could take Enron from being the world’s leading energy company to being the world’s leading company period.
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Here’s a slide we used to use that talks about Skilling’s model that on the internet with the internet online, the integrated companies no longer needed to be integrated. They no longer needed to do everything in-house. They should do what they are the very best at and then turn to the Internet to repackage - to reintegrate, as they needed.
In other words, they were attempting to build the Mother of all Procurement Systems. The concept was a global internet-based purchasing system that would provide all commodities - with commodity being defined as entity which means EVERYTHING and anything a person or corporation might want to buy. That would include oil, gas, water, people (labor), products, timber, animals, movie tickets - absolutely everything)- anything a person or corporation would want to order.
It might be easier to think of it as one store in the world accessible only through the Internet. Whatever you want, you order through their system and it is delivered to your door. Their initial focus was on electric services, gas and oil, but they had the fever and thought they could corner the world market in procurement.
At this point, you need to think through the ramifications of a global system like this - if they had been successful. What would be the impact? All middlemen would be cut out - put out of business. The only businesses that would remain in business would be the owners of the source material or product - and the transportation systems that would deliver the material or product to the customer. And therein lies the explanation for the ‘gold rush fever’ to buy up the world’s natural resources and the heretofore inexplicable focus on major transportation systems.
