Empty Cookie Jar
Donald MacKenzie
- Pipe Dreams: Greed, Ego and the Death of Enron by Robert Bryce
PublicAffairs, 394 pp, £9.99, November 2002, ISBN 1 903985 54 4
- Enron: The Rise and Fall by Loren Fox
Wiley, 384 pp, £18.50, October 2002, ISBN 0 471 23760 4
The Four Seasons hotel, Houston, 20 January 2000. The investment managers and analysts packed into the ballroom are paying only partial attention to the presentation by the Enron Corporation. On the New York Stock Exchange, Enron’s shares have been rising all day, by as much as $2 an hour. It is now mid-afternoon, New York is about to close, and the members of the audience know that the moment to profit will have passed if they wait for the dramatic announcement they all suspect is coming. Out come the mobile telephones. ‘They weren’t even leaving their chairs, they were calling their traders and saying, "Buy it, I don’t care what the price is, buy it,”’ one attendee told Robert Bryce. As New York closes, the announcement comes. Enron, which began by owning pipelines carrying natural gas, is going to organise the trading of ‘bandwidth’ (capacity) in pipelines that carry information, the fibre-optic cables of the Internet. At the end of a tumultuous day, Enron’s stock price has risen by 26 per cent.
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Letters
Vol. 25 No. 11 · 5 June 2003
From Michael Prior
Donald MacKenzie (LRB, 22 May) misses an essential factor in his analysis of the downfall of Enron: the culpable ignorance of the financial services industry which hyped the company. MacKenzie notes, admiringly, that EnronOnline traded $100 billion worth of natural gas between November 1999 and June 2000. Since $100 buys roughly 1000 cubic metres of gas in the wholesale market, it follows that EnronOnline was claiming to have hosted trades in about 1000 billion cubic metres of gas. The total annual market for gas in the EU was about 450 billion cubic metres, mostly supplied in the form of long-term take-or-pay contracts which never went near a trading floor let alone the Internet. EnronOnline was thus claiming to be trading about four times the annual European market from its start-up. How did they do it? So far as one can see, by churning trades between fictitious agents, selling gas between themselves and, probably, by lying. They also used the cute device of adding the value of trades hosted to their revenue account. Most people in the energy business took Enron's hype with a bucket of salt. Unfortunately, bankers and investment analysts took it seriously – unable, it seems, to do simple sums.
Michael Prior
Hebden Bridge, Yorkshire
Vol. 25 No. 12 · 19 June 2003
From Michael Dibdin
Donald MacKenzie (LRB, 22 May) writes of the hypothetical ethnoaccountant working for an American corporation that 'she would find a myriad of special purpose entities' and 'she would also find that the different ways in which rules can be applied can have major financial consequences'. Male accountants have to put up with enough laddish ridicule as it is without the LRB implying that only a female accountant would be capable of applying the conclusions of Wittgenstein's Philosophical Investigations to the US Financial Accounting Standards Board rulebook. Correct discourse in the US now demands that the gender of non-specific personal pronouns should alternate. This can get a little confusing, but that's the price we pay for progress.
Michael Dibdin
Seattle
Vol. 25 No. 13 · 10 July 2003
From Laura Spira
Michael Dibdin (Letters, 19 June) should be aware that female accountants have often had to contend with a good deal more than 'laddish ridicule' in their struggle for equal footing with their male counterparts. This female accountant applauds Donald Mackenzie's choice of gender for his hypothetical ethnoaccountant (LRB, 22 May). He is also right to call for more research into the processes that give rise to the all-important numbers that accountancy generates, and into the social consequences of the decisions based on those numbers. This type of research is, however, difficult for accounting academics to undertake and get published, especially in the US.
Laura Spira
Oxford Brookes University
Vol. 25 No. 14 · 24 July 2003
From Paul Simon
Donald MacKenzie (LRB, 22 May) says that Enron was 'sailing close to the wind, but that's the way to sail fast'. That may be so in the business world. On the water, however, sailing close-hauled may feel faster, primarily because the boat is heeling over, but you move more quickly in the upright position, running before the wind.
Paul Simon
Norbury, Shropshire
Vol. 25 No. 16 · 21 August 2003
From Russell Seitz
Paul Simon (Letters, 24 July) corrects Donald MacKenzie for writing that 'sailing close to the wind' is 'the way to sail fast'. But Simon is equally mistaken in asserting that 'you move more quickly … running before the wind.' It's when the breeze comes from the side, and slightly abaft of abeam, that a vessel can achieve its fastest point of sail. Only then can the vector sum of boat-speed and wind-speed combine to amplify a vessel's velocity, allowing the wind-speed to be equalled or exceeded.
Russell Seitz
Nantucket, Massachusetts
