Module 2 is all about culture, and what better way to start than to share story of a movie. It's a famous movie starring Tom Cruise. It was called The Firm. Do you remember it? Tom is this hotshot young lawyer, graduates at the top of his class, then gets a job in the number one law firm in Memphis, Tennessee. He's newly married, he moves into a house in the suburbs, everything looks wonderful. In the movie, he comes across some papers, maybe he shouldn't have seen, some documents, he shouldn't have seen. The security force of the firm, find out about that and they go tell Tom, you don't want to do that. Of course, he keeps on poking around because, if he listened to the security force of the firm, and said, okay I'm not going to do anything, the movies over in 15 minutes and we're all going home. So he has to keep on poking around, and he's looking and he's discovering things, and then the security force of the firm, they tried to frame him by filming him with a woman who is not his wife. Then towards the end of the movie, they tried to kill him. By the way, I think I may have given away the punchline just now. But hopefully you've seen the movie. If we were to look at that story and take away the murdering part, the killing part to be sure, in many ways the firm is actually Enron. Remember Enron, one of the most famous corporate disasters of the last 25 years and counting, and I want to tell you why I think that's the case. Remember Enron was this big energy trading company in Texas. They had risen to something number 6 in the Fortune 500 ranking. There were articles written about how smart they were, and how great they were, how much money they were making. But what happened is that there was a young reporter by the name of Bethany McLean, who started to investigate a little bit of the accounting policies of Enron. She was about to write this story in the Fortune magazine, and the title was, Is Enron Overpriced? This is when Enron stock was flying high and everybody was excited about the company. When you have a controversial article like that, what are you supposed to do? You go to the principals and you talk to them. So she flew to Houston, head office of Enron, and talked to Ken Lay, who was the chairman of the board at that time. She describes her research, and what she's doing, and what the story is going to be, and Ken Lay goes berserk. He's furious to hear this, and he kicks her out of the office, and he says, you don't know what you're talking about, get out of here. She at least tried to get the commentary from the company, from the most senior person in the company, the chairman of the board, but that didn't happen. She flies back to New York and no sooner does she land, that the Enron corporate jet touches down at LaGuardia Airport, this time with Andrew Fastow and two other senior executives. Andrew Fastow was the CFO, Chief Financial Officer of Enron. By the way, he ended up being sentenced to something like 10 years in prison for his role. These senior executives from Enron are now going to talk to Bethany, and Bethany's editors, and senior Fortune magazine editors. They're saying, you don't really have the story right, you should change. What they were trying to do is get them to water down the story, so it wouldn't have the same giant oomph that it did. But the editors to their credit, backed up Bethany. They supported Bethany and said, we understand you don't agree with what we're doing, what the premise of the story is, but the research is solid. It's backed up, there are multiple sources. We're going to run with the story. The story comes out, and we go back to Houston, and there's Ken Lay opens up his Fortune magazine, and he reads the article, Is Enron Overpriced, and he is furious. He can't believe that this story actually ran. He calls up on the phone, Gerald Levin, who was at that time the CEO of Time Warner, which was the ultimate corporate parent of Fortune magazine. If you think about it a little bit, Fortune magazine is this tiny magazine, imprint and Time Warner is gigantic, those days big in cable, in movies, in TV. He says, this is Ken Lay saying to Gerald Levin, about the young reporter Bethany McLean, "I want that woman fired." That's what he says. Gerald Levin says, because Ken Lay is pretty powerful, important person, he says, "Let me get back to you", because he doesn't know, how could he possibly know about this story. Gerald Levin was really into exercise in those days, so he walks down, you can imagine he's like in the 83rd floor, and Bethany is in some basement office. That's the difference in status. He walks down the stairs, an hour later he gets there, and he talks to Bethany, talks to the editors, and the same thing happens. He says, he's convinced that the research is good, that the reporting is good. He calls up Ken Lay on the phone and he says, we're not firing Bethany McLean, and we're not going to issue a retraction. We think we got the story right, and that's the end of the story. What message does this tell you about Enron? What words might you use to describe the Enron Corporation during this time. Would you call Enron a learning organization? Maybe, maybe not. Like an anti-learning organization because if there's anything that's against their party line, that's against what they believe in, the message that they're conveying, their reaction is not just to try to fix the problem, and in fact not at all to fix the problem, but to shoot the messenger, kind of the classic fable, shoot the messenger first. We don't want to hear the message, we don't want to know anything about it. That was the reaction. That was the reaction in the firm, that was the reaction for Enron, and that is the reaction in many companies that don't actually want to get better, that don't want to know that something is not going right. You remember in Module 1 when we talked about some of these strategic mistakes, around not facing up to reality, and one best way, and not wanting to change. Well, if you're not willing to even think about that, or consider that, and see whether there's some truth to it, what chance do you have? You just going to continue to go down a bad path and that's what happened. Probably I can give you another dozen such stories, but I bet many of you have seen for yourself an example or two of this type of thing over your careers. It's for this reason that I often say that success, sometimes even tremendous success, could be an early warning sign for failure. Of course we want success over failure, but when you have this great success, so much so that you block out any critiques that are out there, it becomes very difficult to adapt and change. It's a very important point we're raising right off the bat in Module 2. If you want to dig a little bit deeper to those strategic mistakes that we talked about in Module 1, and understand what went wrong, and why, and why couldn't they fix it? Well, it boils down to culture and to positive thinking. As much as we love positive thinking, it's not always made out to be. Sometimes you do need to call people on things. We're going to elaborate on this core point throughout this module and give you a lot of things to think about and some practice on it as well.
