The Enron (Ken Lay and Jeff Skilling) Trial: An Account
Kenneth lay, the former chairman of Enron, has been formally indicted for Mr Lay, however, did take direct charge of Enron after Mr Skilling. That book was called “Give and Take: Why Helping Others Drives Our Own . Grant finds that people are way more likely to be giving in personal relationships. “Ken Lay was charming when mingling with powerful people in. Kenneth Lay, former chairman and chief executive officer (CEO) of Enron Corp., Here we take the time to talk with one another and to listen. . Such transactions were basically smoke and mirrors, reflecting a relationship between LJM2.
Salk, of course, viewed the rest of the world as jealous. I get how Meyer is an admirable person whose qualities we should emulate. People generally want to think of themselves as fair and good. Rather, it can be due to a lack of effective empathy, which distorts their view of the world.
Imagine you and your partner are asked about how much you each contribute to the relationship, from 0 to percent. This is the responsibility bias: This happens partly because of ego we want to glorify ourselves but also because of information discrepancy: There is an antidote to responsibility bias: The Perspective Gap The chasm of empathy causing responsibility bias is called the perspective gap.
Doctors consistently think their patients are feeling less pain than the patients themselves rate. And there is a fast decay effect — someone who is exposed to cold water and then 10 minutes of warmth rate cold pain as though they had never experienced the cold water. Takers rarely cross the perspective gap. Narcissistically, they focus on their own viewpoints and rarely see how others are reacting to their ideas. Takers project their own feelings on other people, and behave in accordance to how the takers would like to be treated.
For example, gift givers routinely overestimate how much recipients enjoy off-registry gifts. Stuck in their own frames of reference, gift givers give what they would prefer themselves, rather than accurately appreciating what the recipient would enjoy. If you love Dutch ovens, you think others would love them too; but if they loved them that much, the recipient would have put Dutch ovens on the registry.
When empathizing with another person, a taker believes she is imagining how the other party is feeling. But in reality the taker is imagining how the taker would feel in that situation. This is a false, self-centered empathy. Thus narcissists tend to see themselves as righteous and doing nothing wrong, and when others react poorly, narcissists may dismiss the insulted parties as unlikeable rather than assigning blame to the self. Toddlers are given two bowls, one with crackers and another with broccoli.
They overwhelmingly personally prefer crackers. They then watch a researcher express disgust while eating crackers and happiness while eating broccoli. The researcher then asks for food. Over age, some people may naturally incline toward this empathy more than others.
Givers tend to actively empathize with the other party. Before giving feedback, comedic writer George Meyer reflects on his past feelings of feeling eviscerated when being rewritten. As discussed above, matchers and takers have a disadvantage in creating valuable networks — they seek out only people who can benefit them today. This ignores undervalued people who blossom into great success, whom givers help without expectation of return. The Pygmalion Effect — Self-fulfilling Prophecies of Potential Confounding the potential problem is the Pygmalion effect — a self-fulfilling prophecy where having higher expectations about a person leads to performance increases in that person.
This effect has been experimented with in a wide range of professional and educational settings. In grade school students, bloomers gained ten IQ points more than their peers over 2 years. In the military, high potential trainees do better on expertise tests and weapons evaluations.
In the workplace, new employees whose managers are told of their high promise receive higher performance ratings. The effect is stronger when there are initially low expectations like in problem studentswhen subjects are men, and in the military. To someone of high promise, a teacher sets higher expectations, communicates more warmly, calls to answer more often, gives more advice and feedback, and attributes failure to the task rather than the person.
The student responds to positivity, setting into place a positive feedback loop that leads to a sustained self-fulfilling prophecy. In contrast, to someone of low promise, a teacher does the inverse: Similarly, this leads to a vicious cycle where the student feels less motivated, and each progressive failure is more evidence of low promise. How do takers, matchers, and givers perform differently in this framework?
Takers assume that most people are takers and thus place little trust in other people. When they see someone with high performance, they see this person as a threat, which prevents them from whole-heartedly supporting the person. Furthermore, takers tend to dismiss low performers as not possibly being able to help the taker.
This creates vicious cycles where takers fail to provide encouraging support. Matchers value reciprocity, so when they see someone of high potential, they do provide support in hopes of returned favors later.
By default, givers tend to be optimistic and see everyone as bloomers.Give and Take - How it Works
All people are diamonds in the rough until proven otherwise. Givers provide encouraging support broadly. Talent Is Overrated — Grit is Important One reason takers and matchers tend to undervalue potential is that they overemphasize current performance and talent. After all, they want to extract value now. Instead, research has shown that orthogonal character traits like interest and grit make a big difference. Interest drives people to develop skill in the first place.
And grit keeps them pushing through setbacks and difficulties. Both character traits can be nurtured by early teachers who are caring and patient. Teachers who can spark the interest and provide positive experiences set the foundation for developing skill. Then teachers who set high expectations and push them past limits inculcate grit.
Givers tend to be these supportive teachers. If takers know this, will they simply select on grit rather than current performance? Possibly, but they may be at a disadvantage by not creating the environment that nurtures talent growth. So with limited time, how can givers focus on people with true promise?
And how do they avoid the escalation of commitment to investment in a person? Escalation of commitment is a powerful force that pushes people to throw good money after bad. There are four factors here: Ego threat — the biggest factor. Sunk cost fallacy — you weigh your past losses in your decisionmaking, rather than re-initiating a decision. Project completion — a desire to follow through and finish In many cases, escalation of commitment to a bad decision is worse for the group, but better in the short-term for the individual in terms of disguising mistakes and massaging ego.
Takers are more vulnerable to ego threat than givers are. Cutting off a bad investment makes them look foolish and can incur big personal costs like a loss of a promotion.
Thus continuing the bad investment allows the taker to continue hiding the prospect of failure. In contrast, givers are more concerned about achieving the goals of the group than about ego. Thus, givers are more willing to admit personal mistakes and de-escalate commitment.
Givers do this naturally. Furthermore, takers tend to discount constructive feedback that harms their ego. In an experiment, subjects were identified as givers or takers, then made decisions on how to solve problems.
All participants received a random score indicating they were below or above average, then given a suggestion to delegate more. By avoiding constructive feedback, takers continuously entrench into their former decisions, as doing otherwise would deflate their ego in being correct.
Takers want to be the smartest people in the room. In contrast, givers care about the performance of the group and focus more on the organizational consequences of their decisions. Thus, they take in as much data and disconfirming evidence as they can to make better decisions, even at the short term expense of their ego and reputation. Stu Inman was a basketball scout for the Portland Trail Blazers and is seen as key to building the team that won the championship in As a college coach, he cared about talent development and made room for gritty players even if they lacked talent.
As an NBA scout, he fought common wisdom and used psychological analyses to find gritty players, rather than focusing on upfront performance. This led to picks like Bill Walton and Clyde Drexler. They had their share of mistaken picks. But Inman was receptive to negative feedback and to admitting his mistakes. After making bad picks, other NBA teams tended to play their picks more than they should have, in an effort to prove their ego correct and out of ego-protecting denial that they had made a mistake.
In contrast, the Blazers played their bad picks less than average, thus de-escalating their commitment. In contrast, Michael Jordan, despite being the best known basketball player of all time, was a classic taker on and off the court. While playing, he was known as being egotistical and selfish.
He bristled under constructive feedback and was criticized at his Hall of Fame speech for thanking few people and excoriating his doubters. As an executive for the Washington Wizards, Jordan made a bad first pick in Kwame Brown, who never lived up to potential. When Jordan owned the Charlotte Bobcats, he signed Brown again.
The Bobcats gave Brown more minutes than ever, but he struggled to thrive. Jordan kept throwing good money after bad, unable to admit his mistake and stinging under the increasing criticisms about his management. Powerful communication tries to establish dominance, and takers are attracted to this style.
They speak loudly and forcefully, express certainty, promote accomplishments, and have large body language. Picture a military general issuing orders. Powerless communication tries to build prestige and admiration, and givers are attracted to this style. Picture a warm, supportive teacher. In Give and Take, Adam Grant examines how givers and powerless communicators succeed in four areas: In sum, powerless communication is effective because people are naturally skeptical of intentions, bristle at being ordered around, and have their own egos to protect.
Give and Take: Adam Grant, My Dad and The Man on The Plane
By asking questions and indicating vulnerability, givers become approachable, show reception to new ideas, and learn new information that helps them persuade.
Presenting When giving a presentation, revealing vulnerability and humanity make you approachable and get people to empathize with you. In contrast, takers worry that showing vulnerability will limit their ability to gain dominance.
Their powerful communication, however, can clash with other people who want to assert dominance, or when the audience is skeptical of your influence, and the message gets lost. Powerless communication only works, however, if you signal your competence in other ways, such as credentials or the content of your speech. This is the pratfall effect. When presenting to senior military officers, Adam Grant started his presentation with a powerless joke: It turns out givers are the most effective salespeopleshowing higher results across industries like insurance and pharmaceuticals.
Givers want to help their customers solve their problems, and they use powerless communication to achieve it. Adam Grant gives an example of an optician who approached a woman skeptical of buying expensive multifocal glasses. After asking questions about her daily sight problems and her potential use cases, the optician realizes she has a misconception that the glasses can only be used part of the day.
He ultimately makes the sale. A giving, powerless approach guides you to making your own conclusions. I want you to form your own conclusions: I try to walk jurors up to that line, drop them off, and let them make up their own minds. Thus by asking questions, givers inspire joy in the talker and enable introspection leading to a conclusion. Persuading In collaborative work, powerless communication provides a safe space for new ideas.
From a classic giver point of view, this signals that the speaker cares primarily about the goals of the group, rather than about personal ego. This is especially true in collaborative work, where people work together to achieve the same goal. In these scenarios, takers undermine group performance and stifle information sharing. Powerful speech here tends to signal that the taker cares primarily about asserting dominance and ego, not about the good of the group.
Cited studies show that powerless speech engenders more respect and influence in collaborative work, and when a group is passive. In contrast, when the work is independent and employees are passive, powerful speech is effective. Over time, powerless speech can allow you to build a reputation as a helpful contributor, rather than a competitor vying for political power.
What do you think of this line? Advice seeking combines expressing vulnerability, asking questions, and talking tentatively. Naturally, takers tend to avoid advice seeking because it jeopardizes their appearance of control and harms their ego of knowing all the answers. Advice seeking has four benefits: The advice giver is prompted to clarify details to give the best advice.
The advisee benefits from this expanded knowledge. This creates empathy for the advice seeker rather than setting up an adversarial structure. When you ask for someone for advice, you grant her prestige by showing you admire her knowledge and wisdom.
Congress And The Accounting Wars - Letter From Kenneth Lay | Bigger Than Enron | FRONTLINE | PBS
It makes her feel important. The adviser is also prone to liking the advice seeker more through resolving cognitive dissonance: Takers love having their ego massaged. Matchers like racking up credits they can use later. Adam Grant gives an anecdote of Annie, a scientist who was part of a downsized company branch in the Midwest.
She could keep her job by transferring to the East Coast, but this would mean giving up her nighttime MBA program.
She tried to argue for her position with a few managers but made no progress. Ultimately, she reached out to a HR manager and asked for advice: Now the HR manager was committed to delivering on this solution. If Annie had lobbied more assertively, she might never have learned about the jet. Experimental subjects were asked to negotiate the sale of commercial property. In the work force across industries, seeking advice is one of the most effective ways to curry influence and be rated as an effective manager in addition to rational persuasion and inspirational appeal.
This is an interesting study. All 3 of these work in all directions of the org chart downwards, lateral, and upward. Ingratiation, exchange, and personal appeal were used primarily in downward or lateral directions, and not upward. They were ineffective at changing effectiveness rating. Executives seeking board seats are most effective when asking a current board director for advice, rather than complimenting. In the words of one member of the DOJ task force, "In mafia cases, you flip capos against bosses.
Fastow, we believed, was an Enron capo. His attorneys signaled that they planned to dig in and defend their client in a trial. But prosecutors have means of applying pressure. In Fastow's case, prosecutors decided that filing criminal charges against his wife, Lea, might provide the pressure they needed to convince Fastow to plead guilty.
Fastow, they believed, might conclude that a plea agreement was preferable to having his two young sons raised by others while the Fastows served potentially lengthy prison terms. The basis for the charge against Lea Fastow was the tax form she signed identifying two checks she received as "gifts" rather than investment income.
The checks related to Andy Fastow's "RADR transaction" in which he received an above market rate of interest on a loan and obtained kickbacks from a co-conspirator were disguised in the form of Hanukkah "gift checks" in the names of his wife and children.
Although Lea Fastow was a bit player in a scheme wholly designed by her husband, prosecutors charged her with criminal tax evasion for knowingly signing the fraudulent joint tax return. Normally, tax evasion of the magnitude involved here would result in a civil settlement with the IRS, involving payment of back taxes and a fine.
Although a strong argument can be made that the hardball tactic used by prosecutors was unethical, it worked. On January 14,in Houston's Federal District Courthouse, Fastow stood before the bench next to his lawyers as Judge Kenneth Hoyt asked, "I understand you will be entering a plea of guilty this afternoon?
Fastow's decision to plead guilty would make him the star witness for the prosecution in the trial of Lay and Skilling. In the years between Enron's collapse and their trial, Ken Lay and Jeff Skilling took different approaches.
Lay laid low and made no public statements. Through his surrogates, however, he made clear his view that he was a victim undone by corrupt subordinates and now unfairly hounded by the media.
Skilling, on the other hand, took the offensive. In testimony before Congress inSkilling claimed that Enron suffered from "a liquidity problem" and "people got scared," sending the company's stock into a tailspin. All of the talk about fraud, he said "is ridiculous.
Skilling's lawyer, Daniel Petrocelli best known for representing the family of Daniel Goldman in their successful civil suit against O.
Simpson waved a copy of the indictment in front of reporters and pronounced it "sixty pages of nothing. The grand jury returned an eleven-count indictment charging him with conspiracy to commit securities fraud, four counts of securities fraud and two counts of wire fraud, one count of bank fraud and three counts of making false statements to a bank.
Lay was brought to a holding cell for three hours before his scheduled arraignment. During his brief stay in his cell, a fellow prisoner asked him for investment advice. Eventually seated were twelve jurors, including eight women and four men. Over the sixteen weeks of the trial, they would become a rather tight-knit bunch.
They began each morning in the courtroom with a prayer. They appeared to observers the type of jurors who could reach a unanimous decision--one way or the other. Prosecutors knew that they had a difficult case.
Lead prosecutor John Hueston noted they had "no smoking gun documents implicating either defendant," had little in the way of helpful electronic communications because Lay made no use of email and Skilling used it only rarely, and--in the case of Lay, if not Skilling--had a personable defendant who was anything but a "hands on" guy. Moreover, the fraud and insider trading arguments against Lay suffered from the fact that Lay continued to hold on to a considerable amount of Enron stock even as it fell into bankruptcy.
In his opening argument in defense of Skilling, Petrocelli told jurors, "This is not a case of hear no evil, see no evil. This is a case where there was no evil. He said that the prosecution would present witnesses who, except for Fastow, plead guilty even though "they're not guilty"--"They've been hooked, hooked into pleading guilty for complicated reasons, reasons about their lives, their children, their families. But inside the doors of Enron, something was terribly wrong. It is not about accounting.
It is about lies and choices. They chose to lie. Prosecutors chose to open with Koenig because of what they saw as his "personal credibility" and "unique ability to explain in simple terms many of Enron's complex businesses.
Skilling showed his displeasure with Koenig's testimony, at one point mouthing "son of a bitch" as his former colleague testified. Over four days of cross-examination, defense attorneys suggested that Koenig had shaped answers to please the government. Asked whether he had "a fear of giving an answer that might alienate the government because of the control they have over the rest of your life," the witness answered that he had no fear: Johnnie Nelson, a pipeline worker who lost his Enron pension, told jurors of his dashed dreams.
Patti Klein, a utility worker, testified that her savings had been reduced to "pennies" and that she had been forced to postpone retirement. Hueston explained that the state's goal was to present witnesses who were much like the jurors themselves, people who they could identify with and conclude, "there but for the grace of God go I.
Ultimately, prosecutors chose to call Fastow in the middle of their case, concluding that a witness less vulnerable to a brutal cross-examination would make a stronger closing witness. Hueston wrote that he decided to "aggressively front Fastow's weaknesses in direct examination" hoping, in the process, to diminish the sting that exposure of those same weaknesses might have in cross-examination and to "create traps for the defense when they predictably tried to distinguish Fastow's crimes from those of Lay and Skilling.
Of course he did.
If you're stealing from the house, you don't tell the boss. Fastow answered, "What I'm saying is when you misrepresent the nature of your company, when you artificially inflate earnings, when you improperly hide losses, when you do things like this to cause your stock price to go up so you can sell your stock and cause yourself to make earnings targets, that otherwise you'd be unable to make so you get high salaries and bonuses, that is stealing.
Paula Rieker, Enron's corporate secretary, provided testimony about the reaction of the Enron Board of Directors to revelations without presenting the risks for the prosecution that might call from calling any of the actual Board members, who most likely would have been subjected to lengthy cross-examination. Hueston asked Rieker if she could recall the response of Board members when information about Enron's questionable loan activity was presented to them. Rieker answered that Director John Duncan complained "Mr.
Lay was using Enron like a damn ATM machine. Prosecutors slotted Glisan last because he could corroborate the worst corporate abuses, but lacked Fastow's record of self-dealing. In addition, Glisan had what prosecutors called "a boy scout demeanor" and a "professorial, balanced delivery. Glisan also told jurors that he had informed Lay about the dire financial problems of Enron, then listened as his boss told the world that everything was going swimmingly at the company.
Defense attorney Ramsey, after Glisan's testimony, dismissed Glisan as "a trained monkey," but most courtroom observers found his testimony compelling.
Best Summary + PDF: Give and Take, by Adam Grant | Allen Cheng
The Defense Case Jeff Skilling and defense attorney Daniel Petrocelli Defense attorneys chose to take the risk of calling the defendants. Skilling was on the stand for eight days. In his four days of direct examination, Skilling testified first about his innovations in the energy business, then was lead through a series of rebuttals to just about every accusation of misbehavior against him offered during the state's case. In the view of the lead prosecutor, "Over time, the very number of disagreements that Skilling presented to the jury began to appear implausible.
He also secured an admission that Skilling attempted to sellshares Enron stock soon after he left the company. Ken Lay, expected to be the more even-keeled defendant on the stand, instead showed several flashes of temper, replying to questions of prosecutors in a contemptuous tone.
Prosecutors confronted Lay with evidence that he sold more shares of Enron stock than was necessary to meet the margin calls that he testified was the sole reason for the sales. Prosecutors also suggested he had other assets, such as a second home in Aspen, that could have been sold instead of stock to meet the margin calls. Asked whether he had contacted prospective witnesses before trial, Lay hesitated: Lay eventually conceded that he had called witnesses "to at least make sure that my recollection of those meetings was the same as theirs.
Lay admitted he did not follow the rules: Jury deliberations began on May 17, after sixteen weeks of testimony and arguments. Six days later, the jury reached a verdict, convicting Lay on all counts and Skilling on nineteen of the twenty-eight counts he faced. Jurors said later that they admired much of the work Lay and Skilling did in building Enron.
They said reaching a verdict had been a difficult task, forcing them to put together "a puzzle with 25, pieces dumped on the table.