the energy sector,” Krueger went on. “So he said, ‘Let’s do them.’ It was about a six-week project, half a semester. Lots of group meetings. It was a ratio analysis, which is pretty standard business-school fare. You know, take fifty different financial ratios, then lay that on top of every piece of information you could find out about the company, the businesses, how their performance compared to other competitors.”
The people in the group reviewed Enron’s accounting practices as best they could. They analyzed each of Enron’s businesses, in succession. They used statistical tools, designed to find telltale patterns in the company’s financial performance—the Beneish model, the Lev and Thiagarajan indicators, the Edwards-Bell- Ohlsen analysis—and made their way through pages and pages of footnotes. “We really had a lot of questions about what was going on with their business model,” Krueger said. 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 $48—at its peak, two years later, it was almost double that—but the students found it overvalued. The report was posted on the website of the Cornell University business school, where it has been, ever since, for anyone who cares to read twenty-three pages of analysis. The students’ recommendation was on the first page, in boldfaced type: “Sell.”[4]
Million-Dollar Murray
WHY PROBLEMS LIKE HOMELESSNESS MAY BE EASIER TO SOLVE THAN TO MANAGE
1.
Murray Barr was a bear of a man, an ex-Marine, six feet tall and heavyset, and when he fell down—which he did nearly every day—it could take two or three grown men to pick him up. He had straight black hair and olive skin. On the street, they called him Smokey. He was missing most of his teeth. He had a wonderful smile. People loved Murray.
His chosen drink was vodka. Beer he called “horse piss.” On the streets of downtown Reno, where he lived, he could buy a 250-milliliter bottle of cheap vodka for $1.50. If he was flush, he could go for the 750-milliliter bottle, and if he was broke, he could always do what many of the other homeless people of Reno did, which is to walk through the casinos and finish off the half-empty glasses of liquor left at the gaming tables.
“If he was on a runner, we could pick him up several times a day,” Patrick O’Bryan, who is a bicycle cop in downtown Reno, said. “And he’s gone on some amazing runners. He would get picked up, get detoxed, then get back out a couple of hours later and start up again. A lot of the guys on the streets who’ve been drinking, they get so angry. They are so incredibly abrasive, so violent, so abusive. Murray was such a character and had such a great sense of humor that we somehow got past that. Even when he was abusive, we’d say, ‘ Murray, you know you love us,’ and he’d say, ‘I know’—and go back to swearing at us.”
“I’ve been a police officer for fifteen years,” O’Bryan’s partner, Steve Johns, said. “I picked up Murray my whole career. Literally.”
Johns and O’Bryan pleaded with Murray to quit drinking. A few years ago, he was assigned to a treatment program in which he was under the equivalent of house arrest, and he thrived. He got a job and worked hard. But then the program ended. “Once he graduated out, he had no one to report to, and he needed that,” O’Bryan said. “I don’t know whether it was his military background. I suspect that it was. He was a good cook. One time, he accumulated savings of over six thousand dollars. Showed up for work religiously. Did everything he was supposed to do. They said, ‘Congratulations,’ and put him back on the street. He spent that six thousand in a week or so.”
Often, he was too intoxicated for the drunk tank at the jail, and he’d get sent to the emergency room at either Saint Mary’s or Washoe Medical Center. Marla Johns, who was a social worker in the emergency room at Saint Mary’s, saw him several times a week. “The ambulance would bring him in. We would sober him up, so he would be sober enough to go to jail. And we would call the police to pick him up. In fact, that’s how I met my husband.” Marla Johns is married to Steve Johns.
“He was like the one constant in an environment that was ever changing,” she went on. “In he would come. He would grin that half-toothless grin. He called me ‘my angel.’ I would walk in the room, and he would smile and say, ‘Oh, my angel, I’m so happy to see you.’ We would joke back and forth, and I would beg him to quit drinking and he would laugh it off. And when time went by and he didn’t come in, I would get worried and call the coroner’s office. When he was sober, we would find out, oh, he’s working someplace, and my husband and I would go and have dinner where he was working. When my husband and I were dating, and we were going to get married, he said, ‘Can I come to the wedding?’ And I almost felt like he should. My joke was ‘If you are sober you can come, because I can’t afford your bar bill.’ When we started a family, he would lay a hand on my pregnant belly and bless the child. He really was this kind of light.”
In the fall of 2003, the Reno Police Department started an initiative designed to limit panhandling in the downtown core. There were articles in the newspapers, and the police department came under harsh criticism on local talk radio. The crackdown on panhandling amounted to harassment, the critics said. The homeless weren’t an imposition on the city; they were just trying to get by. “One morning, I’m listening to one of the talk shows, and they’re just trashing the police department and going on about how unfair it is,” O’Bryan said. “And I thought, Wow, I’ve never seen any of these critics in one of the alleyways in the middle of the winter looking for bodies.” O’Bryan was angry. In downtown Reno, food for the homeless was plentiful: there was a Gospel kitchen and Catholic Services, and even the local McDonald’s fed the hungry. The panhandling was for liquor, and the liquor was anything but harmless. He and Johns spent at least half their time dealing with people like Murray; they were as much caseworkers as police officers. And they knew they weren’t the only ones involved. When someone passed out on the street, there was a “One down” call to the paramedics. There were four people in an ambulance, and the patient sometimes stayed at the hospital for days, because living on the streets in a state of almost constant intoxication was a reliable way of getting sick. None of that, surely, could be cheap.
O’Bryan and Johns called someone they knew at an ambulance service and then contacted the local hospitals. “We came up with three names that were some of our chronic inebriates in the downtown area, that got arrested the most often,” O’Bryan said. “We tracked those three individuals through just one of our two hospitals. One of the guys had been in jail previously, so he’d only been on the streets for six months. In those six months, he had accumulated a bill of a hundred thousand dollars—and that’s at the smaller of the two hospitals near downtown Reno. It’s pretty reasonable to assume that the other hospital had an even larger bill. Another individual came from Portland and had been in Reno for three months. In those three months, he had accumulated a bill for sixty-five thousand dollars. The third individual actually had some periods of being sober, and had accumulated a bill of fifty thousand.”
The first of those people was Murray Barr, and Johns and O’Bryan realized that if you toted up all his hospital bills for the ten years that he had been on the streets—as well as substance-abuse-treatment costs, doctors’ fees, and other expenses—Murray Barr probably ran up a medical bill as large as anyone in the state of Nevada.
“It cost us one million dollars not to do something about Murray,” O’Bryan said.
2.
In the wake of the Rodney King beating, the Los Angeles Police Department was in crisis. It was accused of racial insensitivity and ill discipline and violence, and the assumption was that those problems had spread broadly throughout the rank and file. In the language of statisticians, it was thought that the LAPD’s troubles had a “normal” distribution—that if you graphed them, the result would look like a bell curve, with a small number of
