THE NUMBER

The recent Wall Street meltdown and dot-bomb implosion may have taken ordinary investors by surprise, writes New York Times business reporter Berenson, but it was no news to the executives whose bad accounting and fraudulent ways nearly brought down the whole house of cards.

Looking back a mere year, to March 2002, the author reminds us that “Osama bin Laden had hardly slowed the American economy. Dennis Kozlowski and Bernard J. Ebbers of WorldCom and Kenneth Lay of Enron brought it almost to a halt.” But they were not alone, declares Berenson; a whole culture underlay the collapse, a culture of book-cooking and wishful thinking whose bottom line was the simple but generally unattainable goal of returning an on-paper profit every single quarter of every single year, regardless of economic reality. Tracing the economy’s boom-and-bust cycles over the last hundred years, Berenson does a fine job of showing how this idea and a host of smoke-and-mirrors accounting practices led to the latest bubble and its inescapable, if particularly devastating, pop, which demonstrated at least one bitter truth: that “most investment professionals do not know much more—either about the individual stocks they own or the broad market—than smart individual investors.” Thus an apparently bulletproof market at the end of the Clinton years suddenly looked to be full of holes by the first year of Bush II. So ever it will be, Berenson suggests, so long as the market remains “obsessed with the number” and willing to overlook unpleasant realities such as product failure and the inevitable bad quarter in favor of pipe dreams and “whisper numbers.” The sole bit of good news? “Bubbles and antibubbles, for lack of a better word, have one thing in common: Neither lasts forever.”

Deserving of wide circulation in a time of corporate fraud and official look-the-other-way policy.