Abstract
Relatively early in the life of the Enron Corporation, the firm established a trading operation for oil under the direction of a man named Louis Borget. “Within Enron, he was a shadowy figure who divulged as little as possible about the details of his operation,” Bethany McLean and Peter Elkind report in their masterful history of the firm’s rise and fall. Borget’s operation began to generate substantial profits, and his confidence in his methods grew along with the profits. He sent a 1986 memo to the board in which he argued that highly trained “professionals” were using “sophisticated tools” to “generate substantial earnings with virtually no fixed investment and relatively low risk.”1
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Notes
Bethany McLean and Peter Elkind, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (New York: Penguin, 2003), 17.
Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves (New York: Penguin, 2010), 543.
There is a substantial empirical literature on the role of personality traits and personal style in shaping risk perception on the part of senior decision-makers. See, for example, John C. Henderson and Paul C. Nutt, “The Influence of Decision Style on Decision Making Behavior,” Management Science, Vol. 26, No. 4 (April 1980), 387–400;
and Paul C. Nutt, “Decision Style and Strategic Decisions of Top Executives,” Technological Forecasting and Social Change, Vol. 30, No. 1 (August 1986), 39–62.
Orlando Figes, The Crimean War: A History (New York: Metropolitan Books, 2010), 156.
Roger Lowenstein, The End of Wall Street (New York: Penguin Press, 2010), 32–33.
Scott Patterson, The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It (New York: Crown Business, 2010), 199–202.
William D. Cohan, House of Cards: A Tale of Hubris and Wretched Excess on Wall Street (New York: Doubleday, 2009), 209–211. For a discussion of Greenberg’s complex views on risk, see pp. 196–197.
James G. March and Zur Shapira, “Managerial Perspectives on Risk and Risk Taking,” Management Science, Vol. 33, No. 11 (November 1987), 1408.
Brian Burrough, “Bringing Down Bear Sterns,” in Graydon Carter, ed., The Great Hangover (New York: HarperPerennial, 2010), 8.
John Cassidy, How Markets Fail: The Logic of Economic Calamities (New York: Farrar, Straus and Giroux, 2009), 199.
James H. Barnes, Jr., “Cognitive Biases and Their Impact on Strategic Planning,” Strategic Management Journal, Vol. 5, No. 2 (April–June 1984), 133–134.
Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), 87, 255, 257.
See also Robert J. Shiller, Irrational Exhuberance, 2nd ed. (Princeton, NJ: Princeton University Press, 2005), 152–155.
Roger Lowenstein, When Genius Failed: The Rise and Fall of Long Term Capital Management (New York: Random House, 2000), 13, 166, 197, 211.
Alan Greenspan, The Map and the Territory: Risk, Human Nature, and the Future of Forecasting (New York: Penguin, 2013), 5–6.
Greg Farrell, Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America (New York: Crown Business, 2010), 22–29, 69–70, 480.
Gretchen Morgenson and Joshua Rosner, Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon (New York: Times Books, 2011), 185–188.
Daniel L. Byman and Kenneth M. Pollack, “Let Us Now Praise Great Men: Bringing the Statesman Back In,” International Security, Vol. 25, No. 4 (Spring 2001), 107–146.
Nate Silver, The Signal and the Noise: Why So Many Predictions Fail—But Some Don’t (New York: Penguin Press, 2012), 57.
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Mazarr, M.J. (2016). Risk Becomes Personalized. In: Rethinking Risk in National Security. Palgrave Macmillan, New York. https://doi.org/10.1007/978-1-349-91843-0_8
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