Malt Shop Logic

This whole situation had to get stabilized, [Jeff] Skilling said. "What's this shit with Andy [Fastow], anyway?"

[Greg] Whalley pulled a face. "We're firing him."

Skilling was bowled over. "You've gotta be kidding," he said. "That's the dumbest thing. I mean, your CFO, you need to raise money, and you're firing him?"

"Hey, I don't know if he did anything wrong," Whalley said. "But that's beside the point."

Why? Skilling wanted to know.

"Jeff," Whalley said, "Andy was a really shitty CFO."

-Conspiracy of Fools: A True Story

Smartest Guys in the Room is one of my favorite documentaries in how it chronicles the illegal activity that helped bring Enron down. But Conspiracy of Fools is the authoritative book on the collapse and the story goes much deeper than the documentary. Turns out, not only was the CFO enriching himself at the expense of Enron, all these structures that he set up thinking they were enriching him and helping the company were so incompetently structured that they - not the illegal activity - really brought down the company.

Both the documentary and book are well worth your time. But my broader point is about what's really screwed the economy the last 10 years or so - it's that people are dumb. Or at least not as smart as they think they are.

Enron is a great example. The mortgage backed security debacle is another. Read The Big Short - there probably was some unethical marketing of the MBS bonds, but the bigger problem is that they were structured so incompetently that they were bound to fail. And most everyone assumed that the people putting them together were so smart that there couldn't be a problem. Of course, the folks who didn't take that on faith did just fine.

I've seen it in my own jobs - leaders are seen as "brilliant"/the smartest guy in the room and therefore never questioned, even if their ideas are basically stupid. Maybe they're not brilliant, just really smart and people (like the Board) should question harder what they're doing. Then again, maybe that's the problem - no one wants to ask the question that exposes themselves as not understanding the issue (and therefore not brilliant), even if that question will expose a bad idea.