Charles Ferguson could arguably be called one of the smartest men in film, but not in the traditional Hollywood sense. He didn't greenlight the hit movie no one wanted to make, discover the next megastar, or crack the code for foolproof box office success. Ferguson, director of best documentary Oscar frontrunner Inside Job, is just smart -- like, real smart.
After received a B.A. in mathematics from the University of California, Berkeley and a PhD in political science from MIT., Ferguson went on to study technology's effects on globalization and government policy, even sharing his opinions with the Defense Department and White House staff as a consultant. He went on to consult with some of the world's biggest tech companies, including Apple and Intel, before starting his own software company, which he sold to Microsoft two years later. With that money, Ferguson decided to make a documentary, the award-winning No End In Sight, considered by many to be the definitive film about America's botched occupation of Iraq.
Quite an accomplishment for a first-time filmmaker. So for his next film, Ferguson decided to take on a topic of equal or greater complexity: the financial meltdown. That film, Inside Job, is being hailed as the definitive documentary on that topic, making many critics' top ten lists of 2010 and sure to be a nominee for the best documentary Oscar. It turns out that book smarts come in handy when trying to sum up two of the biggest stories of the decade in two hours or less. See the trailer for Inside Job below.
I met with Ferguson in mid November at the opulent Beverly Wilshire Hotel in Los Angeles, the kind of place I'm sure the financial "wizards" who nearly wrecked the economy would feel at home.
Q: I've heard you say in interviews that when you spoke to many of the CEOs of financial firms and those who advocated for deregulation of the financial sector, that they were not accustomed to being challenged or questioned.
A: First of all, a lot of the people who were most responsible for the decisions that caused the crisis declined to be interviewed. Some did agree to be interviewed and some of their academic defenders agreed to be interviewed. Among the academics, I would say that I was rather shocked by kind of their obliviousness, and it was clear, I would say, that they were the group that was most shocked at being challenged and the most un-used to being challenged, particularly in regards to their financial arrangements and their conflicts of interest.
I filmed a lot of people outside the United States, and it became very clear in the course of those interviews that America's days as kind of the automatic role model for the world were over. That had probably been eroding for a while as a result of many things, but the bubble and the crisis certainly put an end to that view of the United States as the place that you look to for economic theory, for guidance with regard to how to regulate your economy, how to run your affairs. That was one quite striking thing.
And another striking thing, perhaps related to that, is that if you look at the people who were the most articulate people to warn about the crisis in advance, they were in significant measure outsiders in one way or another, and a significant fraction of the ones who were inside the system were nonetheless foreign-born and foreign-raised. Who noticed this and spoke out about it? Nouriel Roubini (Professor of Economics at the Stern School of Business at New York University), a Turkish Jew raised in Italy. Raghuram Rajan (Chief Economist of the International Monetary Fund (IMF) from 2003-2007), an Indian who came to the United States as an adult. Simon Johnson (Chief Economist at the IMF from 2007-2008), British, also an immigrant, a United States citizen but came here as an adult, was raised outside the United States. George Soros (currency speculator, investor, philanthropist), Hungarian holocaust survivor. And I don't think that's totally a coincidence.
It's not that everybody who warned about the crisis was foreign or an outsider. Alan Sloan (senior editor) of Fortune, completely raised in the United States. Charles Morris (author of The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash), completely raised in the United States. But even Charles Morris is in some ways an outsider -- he wasn't an academic, he didn't have a tenured position at a major university, so he was independent in that sense. And George Soros, of course, has been a maverick in a lot of ways. So the reason I raise this is that, as the film points out, there has been a significant co-opting and corruption of the insiders, the most inside of the insiders in the United States financial community and in the parts of the academic community that studies finance and regulation. I think that's dangerous and I think that it was interesting that a significant fraction of the people, a disproportionate fraction of the people that noticed this and warned about this in advance were outside the US system.
Q: Talking about outsiders and conventional wisdom, something that I've always been curious to ask conservatives and republicans about is this idea that deregulated free markets are clearly the best way to go. Yet in the history of the world, has there ever been a country that had completely deregulated markets that was super awesome and was good for all its citizens? It seems like it's such a purely theoretical, philosophical concept when most of the evidence that we see, whether it's the US or Iceland now or what happened during the Great Depression, points to the opposite of that, that deregulation ends up being a terrible thing. So I was wondering if you have a sense of where that comes from, or if they feel that it's as purely ideological and philosophical and theoretical as it seems to me when they seem to be treating it as an absolute concrete truth.
A: Well, I think there's several things going on. First of all, as Soros says in the film, a lot of people say this because it's in their financial self-interest to say it, and it's not totally clear how much people really believe. There are some people who clearly do believe it and there are many people in the economics discipline who clearly do believe it. How come? I think that there's something in the culture of economics that attracts people who hold that view, and now that economics has kind have been taken over by those people in significant measure, I think that there's actually, in a subtle but important way, a kind of a free speech issue. I don't think that people who hold contrary views are likely to do well in the economics discipline. They're not going to get their papers published, they're not going to get promoted, they're not going to get hired, they're not going to get grants. I think that that's a real issue. But that still leaves the question of why people believe this. I'm not a social psychologist, but I do sense that there's something in their individual personalities that is related to their intellectual and political ideologies.
Q: Something like that self-made man, go it alone, rugged individual idea?
A: Something like that. I made it, so can you if you try, etc. That's too crude -- it's more complicated than that. But I do sense that, as a group, there are individual personality traits that are more prominent with this group.
Q: I've reviewed movies about the economic crisis like Capitalism: A Love Story and American Casino, and I've heard this argument that seems so strange to me, that the problem with the economic crisis and the housing crisis wasn't capitalism but greed, as if greed is an aberration of capitalism, whereas I see it as the fuel. Have you heard anything like that? Does that argument make any sense to you?
A: I have heard that argument.
Q: It makes me think of something Jon Stewart said, that we have a system that benefits the pathologically greedy. And that's sort of what capitalism is -- to get as much as you can, even if you couldn't possibly use it or need it. So what do you think of that argument?
A: There's a difference between saying that the problem here is greed, and there's another statement which is that the current rules of the system reward the pathologically greedy, which is a statement that I have more sympathy with and that I think does actually mean something. I agree with you that the crisis was caused by greed, but what sense does that make? It's just kind of weird to think that somehow the American population became greedy starting in 2002 (laughs). So I don't find that to be a coherent explanation. The times that I've heard that statement made, it's been made in defense of the financial services industry as an accusation that there was this epidemic of greed in the general population which led people to buy houses they couldn't afford and leverage themselves too much and take out home equity loans so they could buy cars and boats, and that's the kind of argument I've heard which is not an argument that makes a lot of sense, I don't think.
Q: In terms of arguments that don't make sense, several people in the movie claim that people who work in the finance industry deserve all the money they got, they deserve their massive bonuses. But can someone rationally make the argument that someone who makes $30 million/year works 1,000 times harder than someone who makes $30,000/year? And you definitely can't say that the person who makes $30 million/year took 1,000 times as much risk in their job in terms of risk/reward. What do you say to people who claim these huge salaries and bonuses are justified?
A: I think there are two different issues there. One is if it's ever okay for people to make enormous amounts of money and become extremely wealthy. I personally have no problem with that as long as what they're doing is real and legitimate and productive. I have no problem with the people who founded Intel getting really rich. If you invent random access memory (RAM) and you invent static memory and you invent microprocessors, it's fine with me if you get rich from doing that. And they did take risks. I don't know how you can quantify those, but they worked extremely hard for a long period of time and started the company with very little money and certainly no personal wealth. So I have no problem with that type of scenario.
The problem with what happened in the crisis is that these people made enormous amounts of money by behaving unethically and endangering the financial system and causing millions of people to lose their homes and their jobs, and that I have a big problem with, getting rewarded for that. And then actually I'd say there's a third question which is just, even when people in finance are behaving legitimately, do financial services create the same kind of value as somebody who starts Intel or Google or Apple. And the evidence for that is, for the most part, they don't. Finance is not an activity that creates great wealth. It's a service industry, and there are some very productive and useful things in it, but I wouldn't put it in the same category as these other activities. So I think what happened was crazy.
Q: How do we reform the financial system when it seems we mostly have to rely on politicians who are owned by Wall Street?
A: First of all, it's not my department. I'm actually not really a political person. That might sound like a strange statement. I'm interested in policy questions. I'm interested in investigative journalism. I'm interested in making films and writing books. But I've never been involved in electoral politics. I've never been in government. I'm just not that kind of animal. But I've certainly thought about this, and many people have spoken with me about it since the film came out. Most people seem to think it's going to be one of two things -- that there's going to be some change in the partisan political system, which might be an internal revolution inside one of the political parties or it might be a third political party. Or if it's not going to be that, it's going to be a nonpartisan social movement like the progressive movement or the environmental movement, something that starts from below and mobilizes a large number of people and that is independent from any political party but has a policy agenda it tries to force the political system to adopt. And I'm optimistic that something like that can still happen in the United States, but those kinds of things take a long time, and that's frustrating and disappointing. But that's where we're at.
Q: Your first two movies have been No End In Sight and Inside Job. No End In Sight is considered the definitive movie about the Iraq occupation and Inside Job is considered the definitive movie about the economic crisis, two of the biggest things in the past several decades. What's next?
A: Right now I have no idea, honestly.
Q: I come from a family of scientists and my brother and my dad are both professors. I'm wondering how your academic background influenced your filmmaking.
A: I think it had a big effect. Filmmaking is my third life, actually, and I think both of my previous lives had an effect. The other one being that I was a software entrepreneur. I think my training as an academic had a lot to do with my ability to put together these films. I was really put through the wringer in my education, in a very good way, by a lot of people at MIT and Harvard. My graduate work was at MIT and my thesis advisor to whom Inside Job is dedicated was an amazingly brilliant man and had no tolerance for bad thinking. So I learned how to think and how to structure things and make arguments, and I think that helped a lot in making these films.
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