Tuesday, January 02, 2007

A bit of real Journalism

And in the New Yorker, no less! There may be hope.

As enlightening as this article is about the whole Enron fiasco, his paradigm of analytical method, puzzle vs mystery -- as well as the "external" (analogous) examples he uses -- is particularly interesting. His approach to the story is actually more impressive than the story itself. This guy actually thinks about stuff.

I would like to see this kind of thinking applied to debunk the "Bush Lied" theory.

Enron, intelligence, and the perils of too much information.

One of my favorite bits is this analogy he goes to (while illustrating what he means by the puzzle/mystery paradigm):

The analysts listened to the same speeches that anyone with a shortwave radio could listen to. They simply sat at their desks with headphones on, working their way through hours and hours of Nazi broadcasts. Then they tried to figure out how what the Nazis said publicly—about, for instance, the possibility of a renewed offensive against Russia—revealed what they felt about, say, invading Russia.
Ok, so I like it because it's deliciously snippy and snide, but the example and argument really does go much deeper than that. And the analogy really does apply to how he is suggesting we're going to have to tackle analyzing companies, too. And probably lots of other things as well. Like "insurgents" and Al-Queda.

It is interesting, getting back to Enron, to note -- that he's saying here that Enron did not, in fact, really hide anything (in the sense of denying of failing to disclose anything). They relied on the complexity of the detail -- that nobody would take the time to figure out what they were doing by looking at their very public and largely accurate reports (and it worked for a while). This kind of "Puzzle" is better handled by using the "Mystery" approach because there is too much information. You can't see the forest for the trees. Which is basically what we did in Iraq. And it's basically how I believe much of Modern Intelligence works.

A very interesting tidbit comes up near the end where he talks about some Economic students analzying Enron in 1998 -- two or so years before the big collapse, and their findings using some standard economics analysis tools (and using the "mystery" approach):

The students’ conclusions were straightforward. Enron was pursuing a far riskier strategy than its competitors. There were clear signs that “Enron may be manipulating its earnings.” The stock was then at forty-eight dollars—at its peak, two years later, it was almost double that—but the students found it over-valued. The report was posted on the Web site of the Cornell University business school, where it has been, ever since, for anyone who cared to read twenty-three pages of analysis. The students’ recommendation was on the first page, in boldfaced type: “Sell.”

Compare that to the timeline for the Enron collapse.

Timeline for Enron Collapse

Not saying nobody did anything wrong here, mind you. But it certainly shines a different light on it than the popular version of the story.

At any rate, that really gets away from what impressed me most about the article -- the tools he used for his analyis, and how they might be applied to other things. Eye-opening.

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