Malik’s zeal for slamming the bad guys often leads to contradictions that are never resolved. In his section on Enron, he first calls the company “clueless” and then asserts that it was perpetrating a “scam.” Which is it? Elsewhere, he quotes the former head of a company that sold out to Qwest, whose own CEO, Joe Nacchio, is one of the book’s villains. The seller claims that he knew the bandwidth market would crumble, and that Qwest was on a losing path, so he “knew it was time to get out,” Malik says with apparent approval. But who is the “bandit” in this scenario, and who is the rube?
The biggest of the telecom disasters was WorldCom; the most recent estimate for the amount by which it overstated its earnings is $9 billion. That company’s collapse is the subject of Disconnected: Deceit and Betrayal at WorldCom (John Wiley & Sons, 2003), by Lynne W. Jeter, a business journalist and native Mississippian. Like Malik’s book, it is mostly based on previously published information. Jeter makes more of an effort to be evenhanded, ultimately shrugging at the question of what motivated WorldCom’s chief financial officer, Scott Sullivan, and how much CEO Bernie Ebbers knew about the situation. Also like Broadbandits, Jeter’s book seems to have been written in a great hurry. It often feels padded, and occasionally confused. At one point she tells us that Sullivan is accused of trying to “artificially boost revenues by reducing expenses,” which is obviously impossible (she means “boost profits”).
Malik seems to have more of a handle on the material, despite his repetitiveness and a weakness for inexplicable exclamation points, which are distracting! But ultimately both of the books teach us little beyond the most basic facts. Villain Theory is too one-dimensional to satisfy.
Because these scandals unfolded in the age of “synergy,” it was inevitable that the fallout would spread in unexpected directions — touching both the most-discussed merger of the 21st century and the largest financial institution in the world.
Stealing Time: Steve Case, Jerry Levin, and the Collapse of AOL Time Warner (Simon & Schuster, 2003), by Washington Post reporter Alec Klein, tells of AOL’s now-infamous purchase of Time Warner and the messy aftermath. Klein wrote a series of stories in the Post on AOL’s accounting, which is his book’s most compelling material. Again, quarterly projections turned out to be overly optimistic, and questionable steps were taken to make the problem go away. To make its numbers — which Klein says were weakening even before the company began its courtship of Time Warner — AOL resorted to such measures as converting the winnings from a lawsuit into advertising revenue and booking esoteric barter deals as though they involved cash.
Klein’s focus is tight, making his book mostly of interest to those who are interested in AOL in particular rather than business culture in general, but a couple of broadly applicable points emerge. One is that a lot of the questionable decision making seemed to be rooted deeper in the company, although this doesn’t let the executive suite off the hook. It was pressure from the top to make optimistic (and finally unrealistic) stretch goals that led to desperate tactics below. Also, AOL, the 800-pound gorilla of the Internet boom, extracted enormous sums from dot-coms desperate for advertising deals. “The bruising techniques and negotiations left a string of financially hobbled dot-coms that eventually couldn’t pay their bills,” writes Klein. “Many would soon die.” This points to two more valuable lessons in an endlessly interlinked business world. One is that negotiating one’s revenue sources out of existence is, in the long term, an extremely bad idea. The second is that it is not enough to look for positive synergies: In the modern economy, it is crucial to understand how quickly a bubble contagion can spread.