Mindset: The New Psychology of Success

Ken Lay, the company’s founder, chairman, and CEO, considered himself a great visionary. According to Bethany McLean and Peter Elkind, authors of The Smartest Guys in the Room, Lay looked down his nose at the people who actually made the company run, much the way a king might look at his serfs. He looked down on Rich Kinder, the Enron president, who rolled up his sleeves and tried to make sure the company would reach its earning targets. Kinder was the man who made Lay’s royal lifestyle possible. Kinder was also the only person at the top who constantly asked if they were fooling themselves: “Are we smoking our own dope? Are we drinking our own whiskey?”

Naturally, his days were numbered. But in his sensible and astute way, as he departed he arranged to buy the one Enron asset that was inherently valuable, the energy pipelines—the asset that Enron held in disdain. By the middle of 2003, Kinder’s company had a market value of seven billion dollars.

Even as Lay was consumed by his view of himself and the regal manner in which he wished to support it, he wanted to be seen as a “good and thoughtful man” with a credo of respect and integrity. Even as Enron merrily sucked the life out of its victims, he wrote to his staff, “Ruthlessness, callousness and arrogance don’t belong here.… We work with customers and prospects openly, honestly and sincerely.” As with Iacocca and the others, the perception—usually Wall Street’s perception—was all-important. The reality less so.

Right there with Lay was Jeff Skilling, successor to Rich Kinder as president and chief operating officer, and later the CEO. Skilling was not just smart, he was said to be “the smartest person I ever met” and “incandescently brilliant.” He used his brainpower, however, not to learn but to intimidate. When he thought he was smarter than others, which was almost always, he treated them harshly. And anyone who disagreed with him was just not bright enough to “get it.” When a co-CEO with superb management skills was brought in to help Skilling during a hard time in his life, Skilling was contemptuous of him: “Ron doesn’t get it.” When financial analysts or Wall Street traders tried to press Skilling to go beyond his pat explanations, he treated them as though they were stupid. “Well, it’s so obvious. How can you not get it?” In most cases, the Wall Street guys, ever concerned about their own intellect, made believe they got it.

As resident genius, Skilling had unlimited faith in his ideas. He had so much regard for his ideas that he believed Enron should be able to proclaim profits as soon as he or his people had the idea that might lead to profits. This is a radical extension of the fixed mindset: My genius not only defines and validates me. It defines and validates the company. It is what creates value. My genius

is profit. Wow!

And in fact, this is how Enron came to operate. As McLean and Elkind report, Enron recorded “millions of dollars in profits on a business before it had generated a penny in actual revenues.” Of course, after the creative act no one cared about follow-through. Thatwas beneath them. So, often as not, the profit never occurred. If genius equaled profit, it didn’t matter that Enron people sometimes wasted millions competing against each other. Said Amanda Martin, an Enron executive, “To put one over on one of your own was a sign of creativity and greatness.”

Skilling not only thought he was smarter than everyone else but, like Iacocca, also thought he was luckier. According to insiders, he thought he could beat the odds. Why should he feel vulnerable? There was never anything wrong. Skilling still does not admit that there was anything wrong. The world simply didn’t get it.

Two Geniuses Collide

Resident geniuses almost brought down AOL and Time Warner, too. Steve Case of AOL and Jerry Levin of Time Warner were two CEOs with the fixed mindset who merged their companies. Can you see it coming?

Case and Levin had a lot in common. Both of them cultivated an aura of supreme intelligence. Both tried to intimidate people with their brilliance. And both were known to take more credit than they deserved. As resident geniuses, neither wanted to hear complaints, and both were ready to fire people who weren’t “team players,” meaning people who wouldn’t keep up the façade that they had erected.

When the merger actually took place, AOL was in such debt that the merged company was on the brink of ruin. You would think that the two CEOs might work together, marshaling their resources to save the company they created. Instead, Levin and Case scrambled for personal power.