Malcolm Gladwell

  • 10 Jan 2007 at 2:38 PM
  • Enron

Questioning The Enron Case, Day 8

freejeffskilling.jpgIt’s been eight days (or so) since Malcolm Gladwell’s article in the New Yorker got people talking about Enron again. Consider the Enron case officially re-opened. And by “officially” we mean “under debate on the interwebs.” So it’s not legally re-opened but there is at least a chance that the public understanding of Enron might begin to change from one dominated by The Most Evil Guys In the Room image to something a bit more reality based.
Tom Kirkendall takes on Enron prosecutor John Hueston’s recent contentions to task today. It’s a long post that deserves to be read all the way through. But since you’re busy, here’s Kirkendall on the claim that Jeff Skilling manipulated Enron’s earnings.

Moving on to Hueston’s other allegation against Skilling, the evidence that Skilling engaged in earnings manipulation is so sketchy (see more extensive discussion in the earlier comprehensive post) that Hueston resorts to attempting to tie Skilling to the alleged Global Galactic agreement between Fastow and Causey. Revealingly, only the non-believable Fastow testified during the trial that Skilling knew about Global Galactic and, even after Causey copped a courthouse steps plea deal to hedge the risk of the effective life sentence that Skilling received, the Task Force chose not to call Causey as a witness. More than likely, the reason that the Task Force did not call Causey is that Causey wouldn’t have corroborated Fastow at all, which raises a quite reasonable question — why did the Task Force prosecutors used Fastow’s testimony to convict Skilling when they knew that there was reasonable doubt about Fastow’s veracity? Indeed, what does Hueston have to say about the Task Force’s duplicity with regard to Fastow’s testimony during the Lay-Skilling trial? And again, what does Hueston have to say about the numerous witnesses who the Task Force effectively prevented from testifying who would have provided exculpatory testimony for Skilling and refuted Fastow’s testimony?

Your move Hueston.
Reacting to Gladwell’s Enron article [Houston’s Clear Thinkers]

More Heat For Gladwell’s Enron Essay

malcolmgladwell2.jpgWow. It wasn’t long-ago that Malcolm Gladwell was a media darling. Critical remarks on his writing came from only a few sources, including federal judge Richard Posner and writer Steve Sailer’s blog. But now he’s gone and challenged one of the central myths of our times–the Myth of Enron Evil–and all bets are off. The Times‘ Joe Nocera published a long, critical piece on Saturday (which we missed because, well, who reads the Times on Saturdays?).
(By the way, when we refer to the Myth of Enron Evil we don’t mean to imply that the folks running Enron did nothing wrong. By calling it a “myth” we simply mean to indicate how important it has become to the way people think. It has reached iconic, legendary almost religious status. Even though much of what people are angry at Enron for has little to do with the wrong-doing at the company.)
Anyway, here’s an excerpt of Nocera’s critique of Gladwell:

Mr. Gladwell makes much of Enron’s use of so-called special-purpose entities — those supposed “independent” partnerships that were run by the company’s chief financial officer, Andrew S. Fastow. Those entities, Mr. Gladwell argues, are incredibly complicated, and Enron’s were more complex than most. Mr. Gladwell calls them examples of Enron’s “recklessness and incompetence,” but not an example of inadequate disclosure. Even if Enron had publicly disclosed every page of every special-purpose entity, he says, it would have made no difference; they were just too convoluted.
This, however, is where he runs off the rails. Yes, the fact that the entities were run by “a senior Enron executive” is something that the company disclosed (usually in some buried footnote). And it should have raised a huge red flag. Shame on Wall Street for not picking up on it.
But Enron’s S.P.E.’s were not always used for some legitimate purpose. Mostly, they were used to hide poorly performing assets and to launder loans as income. Not all of them were structured illegally, but many of them were — a fact that Mr. Gladwell glosses over, and which Enron never disclosed publicly. Mr. Skilling, according to prosecutors, secretly guaranteed that Mr. Fastow’s partnerships would never lose money in Enron assets, violating the law. It is also a reason Mr. Skilling is in prison now.
The point is not the sheer volume of disclosure; it’s whether disclosure illuminates or obfuscates. Enron usually did the latter. In effect, Mr. Gladwell has conflated fraud with overvaluation. James Chanos, the short seller who first raised questions about Enron’s numbers, told me that until the summer of 2001, when Mr. Skilling abruptly and inexplicably resigned, “even I only thought it was a case of overstated earnings; that is all you could tell from their documents.” He thought he would ride the stock down for a while, and then, eventually, cover his position once the market corrected for the overstatement. You could find plenty of evidence of overstated earnings in Enron’s financial documents — but you’d never know that the company was a Potemkin village. The kind of information that would have led to such a conclusion was precisely the information Enron hid from investors.

But Gladwell’s over-arching point–that there may be something wrong with the disclosure model of corporate governance and that solutions demanding ever more disclosure might not help the situation–stands. (As does the point that Jeff Skilling’s 24-year sentence is groteque.)
Tipping Over a Defense of Enron [New York Times via the ledger.com]

  • 04 Jan 2007 at 11:16 AM
  • Companies

Gladwell’s Definitions Mysterious and Puzzling

malcolmgladwell2.jpgThat Malcolm Gladwell article we pointed to the other day has been taking some hits lately. Brad DeLong totally harshes on the the Free Jeff Skilling buzz here. But more interesting, Steve Sailer points out that Malcolm gets the distinction between a puzzle and a mystery exactly backwards.

Gladwell writes: “Osama bin Laden’s whereabouts are a puzzle. We can’t find him because we don’t have enough information…”
No, that’s a mystery, as the term is normally used. For example, in Raymond Chandler’s famous murder mystery The Big Sleep, detective Philip Marlowe is hired to find former bootlegger Rusty Regan. Marlowe doesn’t have enough information to find him so he goes around searching for clues. Only at the very end does he know enough to figure out where Regan is. Similarly, according to Gladwell, we need more clues to find Osama, so his whereabouts are a mystery, not a puzzle.
Gladwell goes on:
“The problem of what would happen in Iraq after the toppling of Saddam Hussein was, by contrast, a mystery… Mysteries require judgments and the assessment of uncertainty, and the hard part is not that we have too little information but that we have too much.”
No, that would be better labeled a “puzzle.” Rubik’s Cube is a classic puzzle: everything you need to solve the puzzle is right in front of your eyes, but it’s still very hard to figure out.

Brad DeLong: “Gladwell seems more than a bit thick here.” [iSteve.com]

The “Free Jeff Skilling” Movement Grows

freejeffskilling.jpgWell. Okay. That headline may be a bit strong. But Malcolm Gladwell’s New Yorker piece on Enron certainly has definitely brought the issue of Jeff Skilling’s conviction and incredibly harsh sentence back into public discussion. At least if “people writing on the internet” counts as “public discussion.”
Some recent responses:
• Larry Ribstein asks: “So how about this angle — although we still don’t know exactly what Skilling did wrong (if anything), he’ll be rotting in jail for a generation…I’ve already pointed out a zillion times that the criminal laws were wildly inappropriate to deal with this case. Just maybe Gladwell’s found a way to say it that people will finally listen to, even if they don’t really understand it.”
• Houston attorney Tom Kirkendell is even more blunt: “Reading Gladwell’s account along side this earlier post on the case against Jeff Skilling, is there really any meaningful doubt that an enormous injustice has occurred in regard to the conviction and sentencing of Skilling to 24 years in prison?”
• Michael Statsny says there probably isn’t some legislative solution to the problem of a Gladwellian mystery: “Inevitably, disclosure requirements just increase the amount of bureaucratic information produced. What you want is only the pertinent information revealed, but you can’t legislate that, so you get lots of verbiage instead.”
• And there’s more from Point of Law and Conglomerate.

“I’m Malcolm Gladwell, Bitch!”

malcolmgladwell2.jpgBusiness journalism feuds are so much fun because there is so little at stake. There’s even less at stake in most business journalism than, say, foodie writing. While a restaurant review might effect where you take a date or a client to dinner, when was the last time someone traded based on, say, what Gretchen Morgenson writes about executive pay (does she write about anything else?), much less what Larry Ribstein writes about what Morgenson wrote.
One of our favorite feuds is between Malcolm Gladwell and Steve Sailer. At first glance it looks rather one-sided—Steve Sailer penning these devastating critiques of Gladwell’s books and articles in the New Yorker and Malcolm Gladwell getting rich off of writing books and articles in the New Yorker. You could be excused for suspecting that Gladwell has no idea who this Steve guy is. But you’d be wrong.
Not too long ago we ran into Gladwell in a lower east side dive bar called Lolita. He was having a drink with a nice young woman, and we were having quite a few drinks with some journalist types even more dissolute than we are. In the course of our conversation, we asked Malcolm what he thinks of Sailer, half expecting him to say “Steve who?” But Malcolm knew exactly who Sailer was, and proceeded to describe him as “a nut” who was obsessed with him. So, you know, the battle has indeed been joined.
It was pretty clear that Malcolm didn’t like Steve. But what we didn’t know until today is that Steve likes Malcolm. He just wishes Malcolm’s journalism would be, uhm, more like Malcolm is when he talks about Steve. That is, less friendly and enthusiastic and more “I’m effin Malcolm Gladwell. Who the hell do you think you are?”
Here’s Steve writing about Malcolm’s latest New Yorker article on movie economics:

The average business writer can’t afford to make a cool-sounding start-up company wait four months to prove their bona fides in a test designed by the writer. Instead, Joe Average Journalist has to read the press release, make a few phone calls, and churn out some copy. Gladwell, in contrast, can afford to subject his subjects to whatever torture tests he devises. He can say, “I’m Malcolm Gladwell, bitch! Prove it!”
But he doesn’t. Unfortunately, Gladwell isn’t enough of a jerk to insist that his subjects prove their worth. His problem is that he’s not egotistical enough. He’s always getting wowed by the overwhelming genius of somebody with a complicated-sounding line of patter. He doesn’t do simple reality checks on theories that smart-seeming people tell him because he’s just not cynical enough. He really, truly admires all these people he writes about and believes they are all brilliant, even though their theories often contradict each other. (That’s why Blink makes no sense whatsoever.)

Malcolm Gladwell on how to write hit movies [isteve.com]

The Formula
[The New Yorker]

  • 29 Aug 2006 at 5:01 PM
  • Economics

Gladwell versus Galt, Round Two

gladwell.jpeg Uhm. Wow. It seems that Malcolm Gladwell really, really didn’t like the response to his latest New Yorker article from Jane Galt (who, in the interest of full disclosure, we’ll now take the time to admit having met socially on more than one occasion; and further, we’ll admit we found her rather fetching each time—although she has graciously pretended not to notice our attentions). He’s penned blogged a (over)heated response to her.
[More on Galt versus Gladwell after the jump]

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