I'm baaaaaaack.

Hoarding All the Glitter Since 2001.

29 July 2012

Minutiae Sometimes Have Value.

Like most teachers, I am a walking Jeopardy game.  Children ask lots of interesting questions.  I think it is good educational practice to tell children you don't know something or to help them find the answer themselves, but I do generally try to find answers to their questions.  And whenever I am planning a new unit of study I try to learn more about the topic than I plan to teach.

Some develop this skill/habit/eccentricity through teaching; others collect strange facts and obsessions like magpies.  I am one of the latter.  One of my minor sideline interests is risk analysis, and through this I am perhaps overburdened with all kinds of information about Enron.

Strangely enough, this comes in rather handy when discussing education reform.  One of the wealthy deformers attempting to manipulate education like it's demand for electricity in a badly-deregulated market is John Arnold, ex-Enron trader and all in all not someone whose life experience leads me to think he has any place in education policy.

Apparently I'm not the only Enronista who's teaching, because a recent comment thread at the Answer Sheet (now closed) brought it up:

"educationlover54" begins:
Enron used to practice a strategy with their traders they called "Rank and Yank." Each year they would rank their traders by the amount of money they made the company, and then fire the lowest 10-15 percent. Since it was because of the traders that Enron went bankrupt, we can see that "Rank and Yank" wasn't all that good in the long term for the company.  

What RTTT is doing seems equivalent to Enron's "Rank and Yank" policy.



"educator53" chimes in:
Rank and Yank ensured that the most brutal Enron traders would continue their tricks. It pressured the traders to do things that were unethical in order to create false earnings for the company, such as the rolling blackouts that occurred in California.


And then "ramrants" gets irritated:
Enron didn't go bankrupt because of the traders. It went bankrupt because of the deriviative accounting practices they implemented. This is the reason why all the finance and accounting executives are currently in prison and not their traders. 
 
The interent [sic] is a wonderful thing. Where else can you spread your ignorance to the masses?



I'd like to respond to "ramrants": Yes!  You certainly spread your ignorance on the internet today!


Because ramrants?  Is WRONG.  Among the many reasons Enron went bankrupt were its traders:
  1. Enron's energy manipulation shenanigans opened them to huge liabilities, and they had to first hold cash and then give it away to settle regulatory issues at a time they could not afford it.
  2. Traders went to jail and accepted plea bargains to avoid prison because of their illegal manipulation of energy markets.  In fact, the first Enron plea deals originated in Portland - among electricity traders - prior to the bankruptcy.  (Besides, now that Andy Fastow's out of the halfway house, I am quite certain Jeff Skilling is the only Enrat still in prison.)
  3. Traders at Enron rose to positions of power, taking their dubiously legal and morally bankrupt strategies to the company as a whole.  Enron's last President?  A trader.  The person who perhaps  lost the most of Enron's cash while making off the best?  Also a trader.
  4. Enron's traders demanded massive "retention" bonuses as the company bled cash, even though the "retention" they were offering was a few months at best.  This made it difficult for Enron to raise cash because its burn rate was worsened.
  5. Enron's trading book was essentially valueless; despite the traders' claims, they weren't sitting on any cash to save the company.  Nor did their unit survive after its purchase - UBS laid off the traders and then closed the book.
  6. And most critically, Enron's traders burnt through the cash Dynegy gave Enron as part of their merger agreement.  When Dynegy realized the cash was gone, the Hail Mary merger failed, and Enron had no choice but to declare bankruptcy.  That's right: in the end, the traders bankrupted Enron.
I don't know if ramrants is simply misinformed or one of John Arnold's commenting identities.  Regardless, Enron as a whole - traders, Rank and Yank, mark to market, you name it - all of it was built  around the value of being number one no matter the cost.  That's why the elevators showed the stock price.  That's why the traders ran the asylum.  That's why ludicrous deals with great but fake numbers got approved just before annual bonuses.

Enron was built around the idea of absolute, cutthroat competition.  It was a brutal and hostile workplace.  In that environment, moral lapses and cheating became commonplace, even honored.  Honesty got you lousy bonuses and recommendations to find work elsewhere; coming up with ways to bankrupt Californians and giving them catchy names like "Death Star" got you big bucks.  And we can all see how that played out.  John Arnold may have a lucrative career and plenty of cash on hand to bring Enron's values to education, but most of Enron's rank and file employees lost everything.

So in the end, Enron does matter.  Its values are those we see in education reform.  That those values are bankrupt and destructive goes unmentioned or ignored.  I don't think we can allow that: we need to fight the kind of ideology upon which Enronesque deformers rely.

And that's why being an Enronista does still come in handy.

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