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crashed.
    Pipeline companies like Transco suddenly found themselves in a bind. Under old regulations, they were required to have adequate supplies to fill their pipelines before expanding their markets or capacity. To accomplish that, they entered into “take or pay” contracts with producers, committing to buy a set percentage of a well’s production over years—whether customers needed it or not. And they agreed to pay ever increasing rates. After all, if energy companies could sell oil at a hundred a barrel, they sure wouldn’t spend time looking for gas selling at thirty.
    Reality wasn’t quite that simple. When oil prices fell, the contracts kept gas at high prices, meaning that while producers might want to drill it, customers didn’t want to use the more expensive fuel. Pipeline companies were left with contracts worth billions for gas that nobody wanted.
    The problem hit Transco hard. Shortly after Lay joined, he found that the company, which had assured him it had no take-or-pay exposure, had failed to properly account for its contracts. If oil prices kept falling, he figured, his new employer would go bust. So Lay corralled a group of Transco analysts and urged them to play around with a new idea: setting up a spot market for gas. That would jettison the old system in which producers sold gas to pipeline operators, who sold it to distributors, who sold it to the final customers. Instead, in a spot market, producers—or at least the ones who released Transco from its contracts—would sell directly to customers; Transco would then be paid to move the gas through its pipeline.
    It seemed like a great idea. Lay worked for months obtaining the necessary regulatory approvals, and then sat back to watch it succeed. Problem was, no one was interested. On the first day of trading, Lay was on vacation in Florida with his new wife, the former Linda Phillips Herrold, his onetime secretary at Florida Gas. After some time puttering around the hotel, he called in to hear how things had gone. Not a single trade had taken place. Same on the second day. And the third. No one was willing to be the first producer to break ranks and utilize the new system.
    By the fifth day of failure, Lay headed back to Houston. He and his team worked the phones, persuading a few independent producers to try the new market. From there, Lay reached out to other contacts; the breakthrough came when Shell Oil announced it would use the spot market. Within eighteen months, the spot market had pretty much taken over all new contracts, and Lay emerged as an industry legend, a man who had transformed certain disaster into a new business. Plenty of other companies took notice.
    On a Thursday afternoon in May 1984, Lay was in the Woodlands, a part of suburban Houston, playing tennis with a Transco banker, when he heard he had a call. He ambled off the court and picked up the phone. On the line was John Duncan, chairman of the executive committee of Transco’s smaller rival Houston Natural Gas, or HNG. Duncan said that the HNG board was eager to meet with Lay for breakfast that Saturday; Lay thought the suggestion sounded suspiciously like the opening gambit in an effort to persuade Transco to purchase HNG.
    That Saturday, Lay drove over to Duncan’s home near the Houston Country Club for breakfast. Over eggs and toast, Duncan lobbed in a surprise: the HNG board wasn’t interested in Transco; they were interested in Lay. They wanted to bring him in as chairman and chief executive. Lay was flattered but dubious. Over the weekend, though, Duncan and other HNG directors kept up the pressure, throwing all kinds of incentives into the mix.By Sunday, Lay agreed to come aboard, so long as Bowen, who was counting on him to take over Transco, gave his blessing.
    The next morning, Monday, Lay arranged to have a private lunch with Bowen and spent the entire meal spelling out the details of the HNG approach. Bowen seemed a little disappointed HNG hadn’t asked