Jailbirds I Have Known (1)

So – Elon Musk slips past the slammer.  Not so lucky was Jeff Skilling, also done for misleading shareholders (and a couple of other things).  The SEC was in a more vengeful mood after the Enron meltdown – at the time, the biggest corporate crash there’d been – resulting in a $45 million fine, and 24 years inside.  He thus became the third chap to enter my short list of personal acquaintances who’ve partaken of the porridge.

Skilling was an amazing chap: not only a visionary, but someone who could execute on what he envisioned and implement it – a rare combination indeed.   He was the kind of leader who commands by sheer force of knowing exactly what to do, in circumstances where everyone else is scratching their heads over the sheer impossibility of the task they’ve been given.  He’s often described as arrogant, but that was no part of his demeanour – he’s a small chap, and as personable and approachable as could be imagined for someone perpetually under enormous pressure and with huge responsibilities.  He wore his intellect lightly, and while he probably had no time for fools, well, he didn’t have time for very much at all, which was far more to the point.

The pressures, responsibilities and impossible tasks were all of his own making.  He had a vision of the gas and electricity markets that was as radical as Bill Gates’ dream of putting a computer on every desk.  He was going to take those two commodities – previously the preserve of monopolies the world over – and make them into traded commodities in open, liquid, competitive markets.   Enron was to be his vehicle.   Nowadays, what he envisioned might almost seem commonplace; but consider two gigantic reasons why this was highly visionary and utterly revolutionary. 

Firstly, there was a body of economic doctrine holding that natural gas was a “paradigm example” of a commodity that could not be traded – for specific, real and enduring phsyical reasons.  No-one was even contemplating the idea that electricity, too, could be traded; those same physical aspects were present in even more extreme form.  These things were impossible!

Secondly, the status quo was dominated by statutory monopolies with considerable political clout and absolutely no interest in seeing things changed.  Indeed, they didn’t even believe change was possible – a weakness in their position, because they didn’t exert themselves against Enron quite as fully as they might.

That isn’t to say the acquiesced.  Far from it: they lobbied and stalled and blocked and abused their monopolies royally to fend off the coming of open markets.  Albeit clumsily, every man’s hand was turned against Enron – hardly what Gates faced when promoting his own ambitious vision.

But Skilling was a true Field Marshal, understanding the multi-front theatre spread before him and judging exactly how to conduct operations across so many battlefields.  He chose his subordinates well, commanded their complete confidence, turned them loose with compelling orders and strategies – and won engagement after engagement, battle after battle against his powerful but sluggish and uncomprehending foes, until the whole world of gas and electricity rolled up before him. 

There’s a load of rubbish written about Skilling, and Enron in general.  It’s fair to say, not a single true insider has written a book yet (Sharon Watkis wasn’t remotely ‘inside’).  Yes, manifestly, the whole Enron thing devoured itself in the end: the reasons are for another day.  Yet Skilling gave a pedestrian medium-sized company – a gas pipeline company! – an extraordinary 14-year run of non-stop growth.  By the end, it was the largest commodities trading empire and market-maker the world has ever seen.  Trading gas and electricity, as Skilling had foreseen, was not impossible, even though it was very difficult.  And then coal … and paper-and-pulp … and base metals … and financial derivatives on everything …   A mere 18 months after inception, Enron Online was the world’s largest B2B site, transacting some $2.5 billion a day, click-and-trade, across more different contracts than you could shake a stick at (approx 2,000).  In every large energy company you visited, you’d find at least of third of their trading books were with EOL: in the smaller ones, often more. 

By the end, everyone was an Enron wannabe.  David had taken on a score of global Goliaths, one after another, and felled them all.  Now, even China plans to open up its electricity markets – and Enron hasn’t been on the scene for 17 years. Skilling’s legacy is everywhere you look, and very tangible indeed.

Incidentally, he was “released to a halfway house” in August this year.  That’s 12 years inside, albeit mostly in low-security.  Few people enjoy being locked up:  but as a rule, middle class people really don’t enjoy it.

ND