Lured In by Enron's Illusion of Financial Health

  • Playlist
  • Download
  • Embed
    Embed <iframe src="" width="100%" height="290" frameborder="0" scrolling="no">
  • Transcript

The trial of Enron executives Kenneth Lay and Jeffrey Skilling has prompted some observers to ask, once again, how so many experts were deceived about the financial health of the company. Mike Pesca profiles one Enron investor almost taken in by the illusion of success — University of Houston business historian Joseph Pratt. He spent many months poring over Enron's records between 1999 and 2001, and far from becoming a skeptic, he wound up almost investing all his money in the company.


Joseph Pratt is watching this Enron trial from a unique vantage point. From the mid 90s up until Enron's collapse, he was the Enron corporate historian invited inside to look over everything. As NPR's Mike Pesca reports even someone like Joseph Pratt who'd place the stock, its history and its lessons became an Enron convert during the heyday.

MIKE PESCA reporting:

For about a decade being a professor of history and business at the University of Houston meant that Joseph Pratt studied pipelines, fossil fuels and that he knew his way around both an oil derrick and a corporate library. But by the mid-90s to be a business historian in Houston was to run into Enron at every turn. Soon Pratt accepted an offer to compile a history of Enron. And once a week he'd go over to corporate headquarters, interview top executives, look through files and sometimes visit Enron's facilities.

Pratt encountered the rah-rah attitude of the trading floor and the brash confidence of the boardroom. The qualities that would come to be regarded as "the pride before the fall." Pratt didn't try to predict that. Instead he thought back to John D. Rockefeller over 100 years ago.

Professor JOSEPH PRATT (University of Houston History/Business): In the early history of Standard Oil, the 1890s or so. The competitors to Exxon, Standard Oil New Jersey were referred to as Rockefeller's crew as the Standard Oil gang. I don't know jealously or whatever but it was clear that the Standard Oil gang was making more money and having more fun and doing things as unified whole better than anybody else in the industry. So you know I look back, I don't see it much different. I see the Enron in the mid 90s as a corporate culture that reflected the energy of the company; the idea that it was a place you were supposed to go to, to move fast and to do big things.

MIKE PESCA: Pratt became in short time an Enron believer.

Mr. PRATT: I shared the energy of going into the building. It was an amazing place to be for a while. It was seductive to me as well as the people who moved from all over the country to go to work for Enron. To think I'm going to be a part of something that actually changes history.

PESCA: Maybe the problem was that the one part of Enron's business that really was an area of Pratt's expertise was natural gas pipelines and there was no question that Enron had done something revolutionary in that field. So when Enron said we're going to do for water in India or broadband access on the Internet what we did for natural gas, Pratt actually thought, well maybe. Did you invest in Enron?

Mr. PRATT: That was a good story. I, I caught the Enron enthusiasm about part of the way through the year 2000. I'm not a rich man, I have a little savings after a long lifetime of academic life, and I was going to invest them in Enron, most all of them. And I have a good friend who knows a lot more about natural gas than I do. I told her what I was thinking and she said simply, take my word for it, don't do it. There's too many questions about that company right now for it to be a good investment. I trusted my friend and I didn't invest or I would have lost whatever I had invested.

PESCA: Then came another turning point for Pratt. Provided by employees of the company that Enron used to call a dinosaur.

Mr. PRATT: The time I was in Enron I was also teaching once a year in an executive program at Exxon and I would try to make the Exxon people compare themselves to Enron and we would have very good debates about the old versus the new and I finally, one of those discussions, the friend of mine who had organized the seminar from within Exxon stopped the discussion at the end and said well one thing Joe you have to remember in Exxon we know where our money is. I had to sit and listen to that. I went home that night and thought, started thinking a little more about what I was seeing in Enron. I mean if you call Exxon a dinosaur, it's the most successful dinosaur in the, in the history of the United States economy.

PESCA: Before Pratt could fully tease out all his thoughts on what was now the seventh largest company in America, it collapsed and all that was left was the sight of employees lugging out whatever portions of their careers fit into cardboard boxes. Pratt thought to himself, I'm someone who should have known better. I missed this. Maybe I was a bad historian. So like the successful companies he studied, he took stock and came up with a plan. He decided that in the future he would concentrate on chronicling the businesses he knew best. If it had a pipeline Pratt knew what it meant. But Pratt also decided not to overcorrect. For him to say I'll no longer believe it when a business claims it will change the world would have been easy, but he decided it would have been unwise. Look at Ford, look at Standard Oil, look at Microsoft, they all said they were smarter, that their innovations were going to change everything and they were right. A historian needs to be open to that possibility.

Mr. PRATT: Every time there's major innovation, most of us are skeptical because it means we're doing something in a way that it hadn't been before. And in my profession we always reach back to the word creative destruction by Joseph Schumpeter describing a destructive process that creates a more efficient economy by wiping out the old economy and pulling forth a new.

PESCA: Maybe Google has an in-house historian, and maybe whoever writes the definitive book on the iPod, though it may be a PodCast, will find the right balance. To be open to all the fantastic possibilities, while at the same time not to be sucked in by the fantastical. Mike Pesca, NPR News, New York.

Copyright © 2006 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.