My interest in climate change derived in part from experience in the stock market where “consensus” is not infrequently established in favor of opinions that are completely incorrect. And, in many cases, the people promoting the views are competent and serious people. How are such things possible? I read about the Bre-X and Enron failures, trying to distinguish between the “shame on you” and the “shame on me” components – i.e. yes, the original misconduct and deceit was deplorable; but at what point should proper independent due diligence have been able to detect misconduct? At what point were regulatory agencies negligent? Obviously we’re going to see a new spate of such inquiries in the wake of the recent collapses.
I was particularly intrigued in the cases of Bre-X and Enron failures by the tremendous acolades meted out to the promoters right up to the eve of their collapses.
As evidence of this ongoing interest, a reflection on Bre-X was one of the very first Climate Audit posts (Feb 6, 2005). I observed that Felderhof and de Guzman were lionized at the 1997 PDA convention (March 10-16, 1997) and walked around like royalty only a few days before the fraud was revealed. de Guzman literally disappeared a few days later, supposedly either jumping or being pushed from a plane over the Indonesian jungle. Others speculate that he may have assumed a new identity in a Third World barrio somewhere. The “consensus” disappeared quickly. Take a look at the post.
In another early post, I observed the “consensus” that Enron was not only a well-managed company, but the most outstandingly managed company in the U.S., citing a couple of quotes from Kurt Eichenwald’s Conspiracy of Fools:
The next morning just after ten, Skilling stood beside Lay as a photographer snapped their pictures for an article in Fortune. They were more than happy to participate; already that year, in its annual rankings, Fortune had hailed Enron as America’s best-managed company, knocking General Electric from the number-one perch. (p.227)
After months of effort, Karen Denne from Enron’s public relations office landed the big fish: CFO magazine had selected Fastow as one of the year’s best chief financial officers. (p. 260)”
Lay opened his briefcase and pulled out the latest issue of CFO magazine, glacing at the cover. The Finest in Finance. Lay smiled to himself. He found the table of contents, looking for Fastow’s name. Beneath it were the words: How Enron financed its amazing transformation from pipelines to piping hot. Lay turned to the article, “When Andrew S Fastow, the 37-year old CFO of Enron Corp. boasts that “our story is one of a kind’ he’s not kidding" it began”. Fastow was obviously as creative and sharp as Lay and Enron’s board of directors had come to believe” (p. 267)
Turning now to Lehman Bros. I looked quickly at their website this morning, which reports that in the last two years, Lehman Bros has been ranked #1 by both Barron’s and Fortune:
2006 – Ranks #1 in the Barron’s 500 annual survey of corporate performance for the largest companies in the U.S. and Canada.
2007 – Lehman Brothers ranks #1 “Most Admired Securities Firm” by Fortune.
One more example of “consensus”.
I don’t want readers to start piling on with accusations or making uninformed comparisons of climate change to these corporate failures. For once, I want to be able to be nuanced statements without provoking a lot of piling on. I personally am unimpressed by “consensus”, especially when there is no independent due diligence. That doesn’t mean that I’m impressed by “skeptic” proposals either (BTW).
One of the curious aspects to Enron’s rise to prominence is that nobody understood how they actually made money. That’s one of the reasons why I’m so adamant about wanting clear A-to-B explanations of how doubled CO2 leads to 3 or more deg C and why excuses for not providing such explanations are so disappointing. I believe that forcing oneself to provide such an explanation would be very healthy for the AGW community.
In passing, recall that Enron had an early interest in climate change policy. I was prudent enough to save a pdf of their policy position, which I reported on a couple of years ago.
Lehman Bros also seem to have been actively interested in climate change, producing a couple of reports, most recently here dated Sept 2007. In their acknowledgements, they thank James Hansen for clearing up some “questions that had been niggling us”:
On the scientific side, we are grateful to Dr. James Hansen, Director of the NASA Goddard Institute for Space Studies, who, at the end of a particularly informative dinner hosted by Ben Cotton of the Man Group, gave generously of his time to clear up a number of scientific questions that had been niggling us. Dr. Peter Collins and Richard Heap of the Royal Society provided valuable input and brought us up to date on the more controversial areas of scientific developments in the domain of global climate change.
In the summer and September of 2007, we also spent a lot of time trying to understand “questions that had been niggling us” – like what data set was used in GISTEMP, why Hansen changed the provenance of GISTEMP data sets, how GISTEMP adjustments were done and why. Hansen was notably uncooperative, even saying that he refused to “joust with jesters”. Maybe we went about it the wrong way. Maybe we should have asked Lehman Bros to find out for us.