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Saturday, December 3, 2011

Fannie and Freddie: Lavish Corporate Lifestyle

Fannie Mae and Freddie Mac spent more than $640,000 to send 100 employees to a mortgage-industry conference in Chicago in the fall of 2011. According to a letter from the Federal Housing Finance Agency, which oversees Fannie and Freddie, the spending included nearly $342,000 for travel, food, hotel and meeting-room space. Incredibly, $74,000 was spent on four invitation-only dinners for mortgage-lending companies that are regular customers of Fannie and Freddie. Because Fannie and Freddie “dominate the U.S. mortgage market, purchasing and guaranteeing about 70% of new loans from mortgage lenders,” who in turn thus have few alternative potential buyers, managers at Fannie and Freddie still felt the need to wine and dine their customers under the subterfuge of valuing “face-to-face meetings with customers as a way to understand their needs,” according to the Wall Street Journal. Apparently the folks at Fannie and Freddie were not familiar with customer surveys or even the telephone. Instead, Freddie spokesman Doug Duvall bragged, “[We were able to meet] with our lender customers in a cost-efficient way. In just two days we held approximately 200 meetings.” Undoubtedly some of those “meetings” were held at the dinners, each of which cost the taxpayers $18, 500.

The $640,000 spent on the conference can be racked up to the lack of competitive pressure facing a government-owned organization that is close enough to the private sector to want to enjoy perks that are no doubt common on Wall Street. In other words, while it might be less bothersome to us to see stockholders’ money spend on corporate luxuries, it is not clear that Adam Smith would feel very comfortable amid modern corporate capitalism (and he did include a role for government in his economic theory).

The particularly sad thing about the lavish spending by managers at Fannie and Freddie is that those agencies had been firmly opposed to refinancing the mortgages of borrowers “under water” since the collapse of the housing bubble. Over 3 million foreclosures had taken place in the three years since September 2008. The luxury amid harm bespeaks such inequity that even underlying societal values may be at issue—namely, I should be able to eat, drink and be merry while people I don’t know lose their homes. Beyond the ethical problems with this attitude, it evinces a pathology—that of malignant narcissism and perhaps even sociopathy. It is interesting (i.e., convenient) that no terms could be given up on even the questionable (i.e., the producers’ role) mortgages, while plenty of money was available to be spent on lavish dinners ostensibly for guaranteed customers. The managers at Fannie and Freddie could not very well say that they could not afford to relax some of the overly-stringent terms of the ARMs in the sub-primes (and Alts). In fact, given the roles of policy makers and mortgage producers in enabling the housing bubble with questionable mortgages, a moral obligation exists for the government (and the related agencies) to act so as to obviate the foreclosures (which would have obviated the need for TARP for the banks, as the toxic assets were based on the bad mortgages in default). Had the managers at Fannie and Freddie recognized this point rather than stood on sanctity of contract, the Obama administration might have found a way to compensate the two agencies for doing so—perhaps even throwing their managers a lavish dinner at the White House.

Click to add a question or comment on Fannie and Freddie spending lavishly amid the foreclosures.

Source:
Alan Zebel, “Fannie, Freddie Spend $640,000 on Conference,” The Wall Street Journal, December 1, 2011. http://online.wsj.com/article/SB10001424052970204397704577070752397313184.html?mod=googlenews_wsj


Thursday, December 1, 2011

Conflicting Business Models at Singapore’s Airport

Singapore’s Changi may be “the world’s most fabulous airport,” according to Scott McCartney of the Wall Street Journal. To be sure, the airport’s amenities are amazing. How they are operated, however, detracts in certain respects with the goal. “We wanted to transform the way travel is done and create a stress-free experience,” Foo Sek Min of the airport’s management said. This goal dovetails with the airport being “a key economic development element” for Singapore. Accordingly, the state-owned company that runs the airport receives “plenty of government support.” In line with these goals is a business model that is long-term oriented? Rather than trying to “nickel and dime” customers so as to minimize the funding from airlines and the government while maximizing revenue on a daily basis, resisting such urges in order to provide a truly stress-free experience is more consistent with the goals. To the extent that Changi provides such a business model, other industries (and airports) might follow suit—revolutionizing (or at least challenging) what had come to be the dominant business mentality by the second decade of the twenty-first century.

I contend that a stress-free experience in a pure (and realistic) sense does not include feeling manipulated or pressured to do or buy something. More concretely, paying for X and Y during one’s stay brings with it stress. Even the thought of one’s credit card or cash balance brings with it some stress. To be stress-free, an experience should not include even the thought of money—much less using it. This is where Changi falls short of its own mission: to attract more flyers to the airport and ultimately to (indirectly) add positively to Singapore’s economic development.

Not charging for the local bus tour that for immigration purposes is considered within the airport is perhaps the epitome of how the stress-free and economic development objectives dovetail with a business model. The lack of stress that comes with not having to do anything but get on the bus and take in the sights could lead to interest in investing in Singapore in some way. Indeed, potential business deals may even be negotiated during the tour as tourists chat. The lack of stress (i.e., lack of demands) on the people using the airport can thus benefit Singapore down the line, whereas charging for the tour, collecting the fare, and having the passengers go through immigration would hardly be conducive to a mood to invest or even visit Singapore.

In a general sense, charging for each service in order to (ideally) cover the airport’s operating costs on a daily basis is eons away from the business model that is oriented to long term investment even with regard to particular services. Having the roof-top pool free to customers who stay in one of the airport’s in-transit hotels while costing people going through the airport $11 not only adds to stress monetarily, but also insinuates an insider/outsider exclusivism that is not going to endear the travelling public to Singapore, whether to visit or invest in economically. Similarly, having a four-story amusement-park type slide “tied into retail” at the airport by requiring users to show a receipt from an airport merchant showing roughly $8 or more in purchases or else you can only ride the bottom one and a half stories of the slide evinces a pettiness that even in itself gives rise to stress in others—not to mention the stress involved making sure your receipt is “enough” as your kids pull at you demanding a FULL ride. Feeling manipulated to buy something at the airport’s “mall” would just add to the stress. Considering the limited cost of the slide and how eliminating the financial “rules” and price itself would make a huge difference in terms of stress (both for the employees and the public), one might wonder if the stated goals are authentic, or even known by the managers themselves. This is not rocket science, after all.

My favorite example of Changi’s management working at cross-purposes with its own mission unnecessarily would have to be the $17 for 20 minutes—are you ready for this?—“to put your feet in a tank with tiny fish that eat dead skin.” I must admit that having only the necessary amount of skin on my feet is enticing (I usually use a file, which never seems to do the job on the hardened skin . . . which we ALL have). Still, paying $17 for 20 minutes plus the inevitable worry—what if one of the fish likes live skin too?—is not likely to contribute much to a stress-free experience at the airport.

Similarly, charging $23 for three hours in a nap room would detract from one’s ability to sleep, let alone feel rested and comfortable. What if someone oversleeps? Are they charged more (and might they miss their respective flights?), or are they woken up by a loud “stress-reducing” horn or buzzer just after 2:59?  It is no wonder the bus tour of Singapore is free—people using the airport after having their dead skin eaten off and being woken up by some noise or demand for more money after having had to deal with a child unsympathetic to the $7.50 receipt are likely to want to get away from the damn place for an hour or so. Lest the butterfly garden seem like an alternative escape (it is free), it is also apparently a smoking garden, as smoking is not allowed "in doors." There are, however, two (smoke-free) complimentary movie theatres. Even so, given the apparent thoughtlessness that has gone into some of the payable amenities, I would not be surprised if an airplane crash movie were playing.

In short, while the innovative approach at Changi airport does warrant some praise (e.g., free wifi and movies, and in general for the extent of amenities), the major incongruences within the business model show how difficult it is to fly from the dominant model to one characterized more for its long-term investment orientation to eventual pay-offs. Given the government’s involvement in the state-owned corporation, the airport’s management company should have enough cushion from competitive pressures to be able to go all-out with the new model. Either amenities like the pool and nap rooms would be free, or everyone passing through the airport would pay a general airport fee that would cover all of the perks (other than in the merchants’ stores, of course). The fee would either be low enough that it is not stressful and inconvenient (given the sheer volume) or, more ideally in terms of the new model, money would be “recouped” in future tourism and foreign investment instead of any fee on air travelers. The government’s involvement in the operating company could effectively support the longer-term and less direct financial loop, as well as buffer any “pressures” from the old model for specific charges to be added during customers’ “experience.”

Imagine the stress-relief among the flying public just in knowing that for a few hours no employee will demand money for something or other. In knowing that one doesn’t have to worry about money—even from being reminded of it in being manipulated into using it—one can spend a few hours in an oasis of sorts where “real life” is put on hold. The butterfly garden (if smoke free) intimates such an atmosphere, which the airport itself could reflect, given a conducive business model. Besides endearing the travelling public (and the employees!) to the airport “experience,” Singapore itself would surely benefit in the long term, and not just economically. Unfortunately, this takes faith, which the extant business model does not allow for, at least in terms of the requisite patience.

So my verdict on the most fabulous airport in the world—which, admittedly, I have not seen in person—is: so close and yet so far. The sad thing is, the airport’s management need not be so far from their own objectives; we are not talking about rocket science here (and yet to business schools it probably is). Given the gravity of the “maximize daily revenue” business model that assumes that a constant focus on getting and an uncompromising rigidity are necessary in dealing with customers, a rocket—rather than merely a jet—is undoubtedly necessary to travel to the sort of business model that I have in mind, and not just for airports. If I am correct in this, then business schools are perpetuating the problem in their training rather than teaching alternative business paradigms. That dog is chasing its own tail.

Behind the new model hinted at (but not achieved) by the example of Changi airport is the basic feeling that life doesn’t have to be as hard as we make it. We don’t have to check receipt totals before letting a kid slide down a slide. It is as though managers set up jungle-gym bars right in front of themselves (and their customers) and then convince themselves (and others!) that the equipment must be navigated in order to get to the other side. Moreover, managers seem to have great difficulty simply in relaxing enough to play and enjoy other’s playing. Beyond the greed and urge to manipulate others (i.e., selfishness), the modern managerial mentality is too constricted, even as it paradoxically assumes that societal rules do not apply to it. So, for example, we have managers redefining words such as “guest” to suit a business interest; the rest of us are somehow obliged to recognize the validity of the misuse as a legitimate use, as in “customers are guests” (who must pay nonetheless). It is as though managers as so fixated on manipulating others without any limit or external constraint that the too-serious creatures cannot let themselves or other people simply enjoy something without required procedures and an immediate monetary exchange. The new model rejects the typical managerial mentality as too petty—too small.

I suspect that many elderly people on their death-beds shake their heads as if in achieving distance from us they have suddenly been freed in the awareness that the world is much more petty in what it takes as important and necessary that it knows. We moderns, complicit stewards of the hegemonic business model, micromanage ourselves right out of life experience itself, and we even impose our modern sickness on others. Then we act surprised when they get annoyed at us!

It is like the steward on the Titanic who (in Cameron’s film at least) shouts (little men do that), “You’ll have to pay for that!” to the young couple just after they have broken through a wall to escape the rapidly rising water. Everything must be paid for. No free ride, even on the Titanic on its way down to the darkness. This is the modern dogma that has been instilled in all of us, and we are utterly ignorant of the fact that it is exceedingly petty and narrow-minded even in its ideal. In the movie, the steward gets hit (justifiably) by the hero.  In cheering this, we, the audience, feel the hero’s natural reaction is our own, vicariously. We regard it as a valid verdict on the extant business model that stood for modernity itself back in 1912. A century later, that model had become the default—“the way the world is.” Even so, this need not have been so. Modernity could have developed differently than it did. The example of Changi airport hints at a better alternative in terms of business models. So in advertising a “stress-free experience” only to undercut it by demanding money for various “amenities” and making explicit (or creating) different classes of customers (which is also a theme in Titanic), the managers running Changi airport deserve annoyed customers and charges of insufficiency and even outright hypocrisy. Even so, we can take the Changi example as at least pointing to a different alternative.


Source:
Scott McCartney, “The World’s Best Airport?” The Wall Street Journal, December 1, 2011. http://online.wsj.com/article/SB10001424052970204397704577070502443425304.html




Tuesday, November 29, 2011

An American President Meets the E.U.: Corrective Exigencies of a Debt Crisis

Political protocol can take some time to catch up to changed political realities. For over two hundred years, it has been assumed that U.S. presidents have met with their counterparts in E.U. states such as Britain, France, and Germany. During the European debt crisis, the New York Times reported, “in numerous private conversations and increasingly forceful public statements, [American] policy makers are urging their European counterparts to take big steps and move fast to reassure markets.” It was undoubtedly assumed that the counterparts were at the state level in the E.U., rather than in E.U. governmental institutions. So how are we to situate Barak Obama’s meeting on November 27, 2011 with José Manuel Barroso, president of the European Commission; Herman Van Rompuy, president of the European Council; and Catherine Ashton, the European foreign policy chief? Indeed, the title of “foreign policy chief” is a deliberate subterfuge used to evade the more governmental-sounding “foreign minister.” The matter of comparison seems to have been intentionally obscured so as to maintain the status quo wherein officials of the U.S. Government have viewed their counterparts in the French, Belgian, and Italian governments, rather than in the E.U. Government. Perhaps the protocol was already changing amid the E.U. debt crisis and the related pressure for still more power to shift from the state governments to the federal level. That is to say, the E.U. debt crisis may have put in to motion changes that would allow the perception of equivalences to “catch up” to the actuality of two unions of states separated by an ocean.

                                                                   Doug Mills/NYT

Even though the state governments in the E.U. enjoyed the balance of power in the E.U. during the debt crisis, something seems amiss in the president of one union of states treating the heads of the individual states of another union as his counterparts, even if those governors hold more power than do the formal heads of the E.U. legislative and executive branches. For much of early American history, the states held most of the power in the federal system, while the U.S. Government was viewed as limited to a few empire-level functions such as regulating commerce between the members and defending the union itself. Just as this power arrangement made it difficult in the war with the British Empire, the salience of the state governments in the operation of the E.U. posed difficulties during the debt crisis. “It is unbelievably hard to create new mechanisms during a crisis,” a senior [Obama] administration official said. “They are facing legitimately difficult political and institutional constraints.” Even so, president Obama’s decision to meet with presidents of the E.U. instead of state leaders may have helped the Europeans to do just that.

If as I suspect the meeting included whether the Federal Reserve should reduce the interest rate on loans of U.S. dollars to E.U. banks to ease the liquidity difficulty created by the state debt crisis. If so, the content of the meeting was in part geared to providing external pressure on the European state leaders to shift more governmental sovereignty—specifically fiscal powers—to the E.U. Government. Reporting that various central banks around the world had decided to make it cheaper for European banks to borrow various currencies, the Wall Street Journal claimed that some “officials sought to use the latest move to put additional pressure on Europeans for more aggressive action in their own right.” Masaaki Shirakawa of the Bank of Japan was more specific in pointing out that the added time was intended for the Europeans to “proceed with their fiscal and economic reform.” On the following day, the Journal reported that the president of the European Central Bank (the equivalent of the Federal Reserve), Mario Draghi, spoke in the E.U. Parliament (the equivalent of the U.S. House of Representatives) on the need for a “new fiscal compact.” This is “European-speak” for a transfer of more governmental sovereignty from the states to the union. According to the Journal, Draghi stressed the need to accept “a tighter union bound by enforceable fiscal rules and the alignment of economic policies.” Even though state officials in the E.U. had been resisting such a move, Sarkozy reacted to Draghi’s comments by declaring, “There cannot be a single currency without economic convergence, or the euro zone will explode.” While such convergence could only be achieved in the long term, governmental fiscal convergence on the state level could be obtained much sooner.

Even as Draghi and Sarkozy were speaking, state leaders in the “euro zone” had been crafting “new rules that would make budget discipline legally binding and enforceable by European authorities.” That is, E.U. officials under Barroso, rather than officials in the states themselves, would be able to hold state governments to task, fiscally-speaking. This level of integration had not even occurred in the U.S., even after a century of consolidation! Even in 2011, U.S. officials could not veto a state government’s budget. The ECB president was essentially making such a power the quid pro quo for more intervention by the central bank. Interestingly given the conflict of interest in state officials willingly handing off competencies to the E.U. Government, at least two of the largest states—notably France and Germany—were going along with it. In fact, Merkel was pushing for “full fiscal submission to a euro-zone budget supervisor.” No such “supervisor” exists in at the federal level of the U.S.  Furthermore, the new rules being hashed out by state officials in the E.U. could evade the “laborious and uncertain process of amending” the E.U.’s basic law. Unfortunately, Draghi did not add that perhaps the ratification process of amendments should not require unanimous support from the states, given the integration already achieved. Switching to qualified majority voting might make changes to the federal system more legitimate from a democratic standpoint in being formally ratified. In other words, the state governments still held too much power in the union at the time of the debt crisis. Given the responsibilities of the E.U. in managing a common currency, E.U. officials should have been playing a greater role—even if as a check against the conflict of interest in relying on state officials to willingly hand over additional power to the E.U. Government.

Aside from having the head of the ECB address E.U.’s parliament, for Europeans to see the E.U.’s chief executive (Barroso) and figure head (Van Rompuy)—offices that together roughly correspond to the office of the U.S. Presidency—at the White House meeting with the U.S. president (aside from the meeting’s content) could facilitate the transfer of additional governmental sovereignty to the E.U. Government from the states. For one thing, Europeans would doubtless respect the credibility and stature of the E.U. officials more. If seen repeatedly, such meetings at the White House could reinforce the hope that in standing together outside of Europe, Europeans could have greater weight politically in impacting governments abroad. They might not be so resistant to transferring more fiscal sovereignty to the E.U. In fact, rather than resisting the E.U.-U.S. comparison, Europeans might actually relish having the E.U. counted internationally as a counterweight to the U.S. if this brought with it greater influence for the E.U. abroad. So even apart from giving the E.U. a fiscal-monetary balance in its competencies, it is in the Europeans’ interest to view the E.U.’s executive and figure-head presidents as the counterparts or equivalents of the U.S. president.

Click to add a question or comment on the U.S. and E.U. as commensurate politically.

Sources:

Annie Lowrey, “Obama Meets Leaders of the European Union,” The New York Times, November 28, 2011. http://www.nytimes.com/2011/11/29/business/obama-meets-with-european-union-leaders-on-debt-crisis.html

Jon Hilsenrath and Jeffrey Sparshott, “Central Banks Move to Calm Fears,” The Wall Street Journal, December 1, 2011. http://online.wsj.com/article/SB10001424052970204012004577069960192509068.html

Brian Blackstone and David Gauthier-Villars, “A Euro Crisis Deal Emerges,” The Wall Street Journal, December 2, 2011. http://online.wsj.com/article/SB10001424052970204012004577071921721647802.html




Monday, November 28, 2011

Syrian Offensive: Taking on International “Enforcement” of Human Rights

In Geneva on November 28, 2011, the Independent International Commission of Inquiry on Syria presented its report, which had been requested by the UN Human Rights Council. According to the report’s summary, the “deteriorating situation in the Syrian Arab Republic prompted The Human Rights Council to establish an independent international commission of inquiry to investigate alleged violations of human rights since March 2011.” The Commission interviewed 223 victims and witnesses. The Commission was able to document “patterns of summary execution, arbitrary arrest, enforced disappearance, torture, including sexual violence, as well as violations of children’s rights.”One might suppose that the Syrian government would have been seeking to placate the international organization and other governments.

The New York Times reports instead that Sryia’s foreign minister, “(o)utraged at the Arab League’s unprecedented battery of sanctions on Syria,” denounced the Arab League’s “unprecedented sanctions” as instantiating “economic war” by “brethren states.”  Hinting at retaliation, the foreign minister, Walid al-Moallem, told reporters at a televised news conference in Damascus. “Sanctions are a two-way street. I am not warning here, but we will defend the interests of our people.” It sounds rather like he was actually defending the interests of his government (and his own job). The Commission’s report itself points to evidence that the two interests were not at the time identical.

Because a government receives its legitimacy from other governments on the basis of protecting a people, it is astonishing that officials in the Syrian government thought they were any position to push back. If anything, the international accountability had been extremely lacking. This is astonishing in itself, given the success of the UN-sanctioned NATO effort that facilitated the downfall of Qaddafi in Libya. To be sure, NATO had at the very least stretched its mandate to protect civilians by going on the offensive against Qaddafi’s compound. Even so, given the Syrian government’s documented human rights violations and its utter refusal to recognize its crimes—let alone to hold back from striking out against justified international reactions—international action with teeth was urgently needed as it was wan at best.

Within the E.U.’s “euro zone,” 2011 was a year in which state leaders were coming to grips with the necessary for “ever closer union” on fiscal matters to support the monetary union. Similarly on the international level, I suspect it was dawning on people around the world that mechanisms with teeth are needed to enforce the norm of governmental sovereignty being contingent on a given government protecting rather than attacking its citizens en masse. If it was gaining ground, such a recognition would have challenged the status quo before the downfall of Qaddafi. Specifically, it had been accepted that tyrants having power in the world is an inevitable fact of life, so it is pointless to try to remove one or two of them. This fallacy even allowed U.S. Government aid to brutal dictators. The year 2011 might have shifted the ground under this conservative plank.

In the context of the unrepentant Syrian government, people must surely have been realizing that depending on unions such as the E.U. or U.S. to have strategic interests in line with taking on an independent state or even another empire like China or Russia that is violating its mandate to rule by violating its citizens’ human rights is woefully inadequate. Indeed, looking the other way after the Libyan case could be looked at as criminal in nature. I suspect that although below the radar of the media, this realization was tacitly gaining ground at the grass-roots level around the world. The Arab Spring along with the specific case of Libya may have subtly shifted the ground even as recalcitrant rulers like Assad in Syria looked the other way. The fruit of the Spring would likely take years to mature, being in the form of new international mechanisms with teeth that represent a revised, explicitly conditional, conception of national sovereignty.

Click to add a question or comment on human rights and Syria: international accountability.

Source:

Neil MacFarquhar and Nada Bakri, “Syria Calls Arab League Sanctions ‘Economic War.’” The New York Times, November 28, 2011. http://www.nytimes.com/2011/11/29/world/middleeast/syria-calls-arab-league-sanctions-economic-war.html?ref=world


Sunday, November 27, 2011

Hugo

Martin Scorsese’s Hugo (2011) is an intriguing story based on vocational functionalism, which in turn is based on deism. In other words, the film essentially applies an early modern theological "argument from design" to a pillar of modern society: one’s profession. In this regard, the film is not just a kids’ movie. The visual "3D" feature is not where the real depth of the film is located. The story achieves its fullness beyond the visuals in having several levels around a core philosophy, which serves as the story's core meaning. For this reason, Hugo has the potential to become a classic. In this essay, I explore the philosophy that lies at the basis of the film's story. I begin with deism and tie it to functionalism.

Deism posits that God is akin to a “clock maker,” designing Creation, “winding it up,” and then "stepping back" to let it work without divine intervention. The salient divine attribute is that of designer. The world, in turn functions as designed. Because the design comes from God, malfunction due to a problem of design is theologically problematic. Indeed, not functioning as designed can be viewed as evil, or at least immoral. Furthermore, if perfect design ensues from a divine designer, bad fits in nature's design must be held to be problematic. For example, the bodies of a man and woman to fit together quite well sexually; the same cannot be said of two men, yet what if the two men are in love? Those who value love are not likely to view the physiological relative lack of natural fit as problematic, yet the fact that the male and female fit is better is difficult for them to ignore. Lest it be objected that the relative lack of fit is not from God, it is difficult to hold that God is omnipotent and still maintain that design-induced malfunction is not sourced in God.

In Hugo, the deism is not made explicit, so its theological problems are not dealt with directly. Rather, the theology is implied as Hugo observes the world could be one big machine. If so, it follows that even people might be machines. Because each machine contains just the number of parts needed, if the world is a machine, then—Hugo reasons—he must have a purpose even though he doesn’t know it because he has no parents to tell him what it is. In other words, Hugo faces existential angst because he does not know his function.

Combining society-as-machine with deism, Creation itself is one machine consisting of machines. In one scene, Hugo dreams that he himself consists of the internals of a clock, and furthermore, that everything is wheels. An implication is that God does not create extra parts (or extra machines). Put another way, God does not permit unnecessary machines to go on existing. The orphanage represents the place where such machines—the reprobate—go. As enforced by the train station’s inspector, kids without parents do not work, and therefore much be removed from society. To work again, Hugo says, is to do what one is supposed, or meant, to do, as per how one was designed (by God); it is to have a purpose, without which one faces nothing short of nihilism. Essentially, this is functionalism, the philosophy that one is what one does. In business schools and especially in the business world itself, people tend to assume that function explains what one is. Even in ordinary conversation, someone is wont to say something like, “I am a lawyer.” The implication is that the vocation identifies who one is. Alternatively, the sentence could read, “I do lawyering.” This sentence refers only to function, rather than ontology.

The film identifies having a function—working (as a machine works and in the sense of having a job)—not only with what one is supposed or meant to do, but also with having a home. This is ethically problematic, for it implies that people who do not work do not deserve having a home. This problem provides the basis of the film’s dramatic tension. According to Hugo’s understanding, an orphan without a home (i.e., parents) cannot know, and therefore perform, his function; he cannot work as designed. He is thus surfeit in society-as-machine, whose parts can only be necessary. Kids that don’t work (at recognized jobs) do not legitimately exist, from the vantage point of society so conceived. More abstractly, meaning is presumed to depend on function, or being able to work. Everything, including everyone, is supposed to work—meaning being meant to have a particular function. This is the deist ethic.

What of mentally or physically impaired people who cannot work as designed? Does vocational deism justify the Nazi killing of members of society deemed worthless because they are retarded? Should unemployment compensation be stopped because the unemployed are not working? Moreover, does human worth come from function or design? A person who has not found his or her functional raison d’etre might wonder if he or she deserves to exist. This is essentially what Hugo is about.

Hugo’s objects of desire all represent means he thinks will lead him to discover what he is “meant” or “designed” to do—how he was designed to function. He is driven to overcome all odds to work; he is a machine, as are we all, and he is driven to discover his purpose. His antagonist is ultimately nihilism, which can be defined here in terms of not having a purpose. Home represents the security of having evaded non-existence (or expulsion from society, as in going to the orphanage) by having found one’s necessary function and thus being able to work “as intended” and thus as one should. Deism provides the theological background here, as the design is presumed to be the basis of purpose. Ironically, Hugo’s function is to fix human machines that no longer function as designed. His function is sourced in the design of his heart in having compassion for others who have broken down. Interestingly, he didn't have to recognize his design or function in order for it to work throughout his journey. To function vocationally making use of one's design (e.g., as in Asa Butterfield being a natural actor), however, one must first recognize the natural ability in order to apply it in a job.

Hugo is an amazing story in covering several levels precisely because it goes from Deism (abstractly) to functionalism as vocation (tangible). In laboring (i.e., working), a person works like a machine works. For the viewer, the questions go from whether function proffers worth to whether our function from design is that which we use in our work. In the documentary on Woody Allen on PBS (2011), the comic points out that some people can draw really good pictures, such as of horses. Allen admits that he does not have that talent. He goes on to say that jokes, however, naturally come to him, even while he is taking a walk. It is simply how he sees the world; the jokes just come to him. He has an aptitude that is natural for him. The obvious implication is that each person naturally does some things better than other things. If a person has no idea of what comes naturally—perhaps because he or she is so close to it—that person could presumably benefit greatly by discovering it. There is indeed very little choice in one's "gifts." They are what given in one's design. If a person realizes and functions in line with one's natural excellences, one is on what Joseph Campbell called “the blissful path.” However, if worth is not derived only or primarily from function, then the blissful path does not depend on discovering one's natural talents; being transcends doing. In Hugo, this issue is front and center, with Deism serving as the foundation.

See related essay: "Oscars: Beyond Eye-Candy"

Click to add a question or comment on deism and functionalism.