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Interview with Niall Ferguson and Jeffrey Sachs; Argentina's Dramatic Turnaround; Interview With Bernard-Henri Levy; Interview With Michael Lewis

Aired October 30, 2011 - 10:00   ET


FAREED ZAKARIA, CNN HOST: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

We've got a great show for you today. First up, do we finally have some good news about the economy? To talk about the United States and Europe, Harvard's Niall Ferguson and Columbia's Jeffrey Sachs will be my guests.

Then, most incumbents these days are being voted out of office, but we found a world leader who was just re-elected by a landslide. How, why? We'll explain.

Next up, Libya after Gadhafi. I'll talk to Bernard-Henri Levy, the French philosopher, who was instrumental in getting France and in a sense the world to intervene there. He's just back from Tripoli.

Then, as another baseball season comes to a close here in America, we sit down with Michael Lewis, the author of "Moneyball," to talk about baseball and its lessons for business and life.

But first, here's my take. Regular GPS watchers will know that I was in Tehran last week to interview President Mahmoud Ahmadinejad. You can go to our web site and watch excerpts of the interview.

But being in Iran made me think about our policy toward that country which strikes me as being stuck in a time warp. You will remember that early in the 2008 presidential campaign, Barack Obama signaled that he was going to have a different foreign policy than George Bush, less black and white. And he chose as his example, Iran. He argued that simply pressuring the country was not a policy, and Obama offered to talk to Iran's leaders to try to establish a dialogue and reduce tensions.

Well, two years into his presidency, Obama's Iran policy looks a lot like George W. Bush's. Pressure, pressure, and more pressure. Now the punitive tactics have paid off in some measure. Iran faces economic problems. But they are also having a perverse impact on the country as I witnessed last week.

The sanctions are stifling growth, though not as much as you might imagine. The basic effect is to weaken civil society and strengthen the Iranian state. The opposite of what we should be trying to do. By some estimates, Iran's Revolutionary Guard, the hard line element of the Armed Forces supported by the Supreme Leader, now controls 40 percent of the economy.

Is that the goal of our policy? In fact, what is the goal of our policy? Is it to overthrow the Iranian regime? Is it to make it bleed until it gives up its nuclear program altogether?

A wholesale revolution continues to strike me as a distant prospect. The regime still has domestic support. It uses a mix of religious authority, patronage, and force quite effectively. And we keep forgetting that even if the regime changed the nuclear energy program, which is popular as an expression of Iranian nationalism and power will continue, even the leaders of the green movement strongly support that program.

Obama should return to his original approach and test the Iranians to see if there is any room for dialogue and agreement. Engaging with Iran, putting its nuclear program under supervision of some kind, and finding areas of common interest as exist in Afghanistan would all be important goals. It might not work. The Iranian regime is divided and often paralyzed itself, but it's worth trying.

Strategic engagement with an adversary can go hand in hand with a policy that encourages change in the country. That's how Washington dealt with the Soviet Union and China in the 1970s and '80s.

Iran is a country of 80 million people, educated, dynamic. It sits astride a crucial part of the world. It cannot be sanctioned and pressed down for decades and decades. It is the last great civilization to sit outside the global order.

We need a strategy that combines pressure with some path to bring Iran in from the cold.

Let's get started.

A deal to save the euro, 2.5 percent growth in the U.S., business spending up more than 16 percent here. Is this all good news? What does it mean? That's what I hope to get to the bottom of with my two guests.

Niall Ferguson is a Professor at Harvard University and the Harvard Business School. He's the author of a new book called "Civilization." Jeffrey Sachs is the Director of the Earth Institute at Columbia University. Jeff has a new book, too, "The Price of Civilization." Both of them have "Civilization" in the topic, so we are going to have a very civilized conversation.

Niall, does this - explain what this deal in Europe means and does it save the euro?

NIALL FERGUSON, PROFESSOR, HARVARD UNIVERSITY: Well, the deal in Europe is in fact more vague than it's precise, and I think there's a great deal of what used to be known as wishful non-thinking going on here because the devil really lies in the detail. And any deal that leaves Greece with a public debt to gross domestic product ratio of 120 percent and requires the recapitalization of who knows how many banks doesn't by any means solve Europe's problems.

So I think we're going through what we call a relief rally, and I wouldn't be at all surprised to see it displaced by an anxiety sell- off within a matter of days.

ZAKARIA: Would you agree with that?

JEFFREY SACHS, PROFESSOR, COLUMBIA UNIVERSITY: I think the euro is going to survive. And I think they took steps forward, and I don't think they're going to let the euro fall down.

So the divisions between Northern Europe and Southern Europe are real and serious. And I think they could be doing better than dancing at the edge which is where they've been operating for more than two years. But they made progress this time around, and there still, in fact, are a lot of details to be worked out in this agreement.

I do think that it shows that each time when push comes to shove, they do step forward, and they do get their act together to preserve the common currency.

ZAKARIA: So you see a relief rally. Do you think that there is still the possibility that a bank one day calls up and says, we're - you know, we're going under. I mean, what's the scenario in which things just spiral downward?

FERGUSON: Well, the two things that haven't been solved here. One is that there are really a large number of banks in Europe that are teetering on the brink of insolvency. And if you mark their balance sheets to market, particularly the sovereign debt holdings, they'd all go under. And we don't know the size of that problem because we've been given so many different answers and not to mention fake stress tests.

The second problem is if this is a problem to be resolved at a national level, there are a bunch of states that don't have the fiscal room to maneuver to bail out their own banks. And that may even include France. It certainly includes Spain, Portugal, and Italy.

So the problem hasn't really been solved. And what I fear is that they're going to limp along in just this way with piecemeal solutions, never quite enough, never quite making it to being a federal state. And the result will be practically zero growth. I mean, the nightmare scenario is that Europe's actually turning into a version of Japan here, weighed down by public debt, with zombie banks and practically no growth.

And then the problem becomes political backlash. Many populist movements are gaining strength from this in some unlikely countries. From Finland to the Netherlands, places you don't really associate with radical politics. And if anything is going to cause Europe to begin to disintegrate, not only economically but politically, it will be populism. ZAKARIA: Do you think that when you look at Europe's growth issues, that this problem, the fundamental problem Niall was talking about, that you have Germany but Northern Europe in general pretty competitive, and Southern Europe not, is - you know, does that have to ultimately be resolved in order for this to work?

Or can the Northern Europeans kind of bail out, you know, the Southern Europeans? I mean, Northern Italy has been bailing out Southern Italy for 100 years.

SACHS: I think the real point is that every part of the high income world is in trouble right now. And so there's something more systemic going on than what's going on within the eurozone.

You have the United States which fit the same description that Niall just gave. You have Japan which is the example that he gave. You have Ireland, you have the U.K. It doesn't really matter whether you're in the eurozone or outside of the eurozone. We're seeing the weight of globalization and how it is reacted to by different countries as really the underpinning of what's happening right now in my opinion.

Now there are a few countries that are doing quite well. There are big winners. And then there are large parts of society or large regions that aren't winning that can't face the competition from abroad very effectively. And that's a more general phenomenon.

ZAKARIA: All right. We are going to talk about one country in the developed world in particular and that is the United States when we come back - right back.


FERGUSON: It seems to me actually rather reckless, and having watched what you said at Occupy Wall Street, I have to say I thought you overstepped the mark and ceased to be an academic and became a demagogue at that point.

SACHS: Whoa, Niall -



ZAKARIA: And we are back to talk about America, the decline or rise of civilization with Niall Ferguson and Jeff Sachs.

Jeff, you were at Occupy Wall Street. You've in a sense lent it support. Why do you do that? What do you think is going on there?

SACHS: Well, I think they have a basically correct message that when they say "we are the 99 percent," that they're reflecting the fact that the top one percent not only ran away with the prize economically in the last 30 years, but also took the power, manipulated it, twisted it, broke the law. Brought the world economy to its knees actually, and it's time to correct things. And I think that that's what Occupy Wall Street is really about. The fact that every marquee firm on Wall Street broke the law in a major way, it's now paying a series of fines. Some people are going to jail. People are disgusted about this.

ZAKARIA: But isn't what has caused the one percent or five percent of the top to do well, these very broad forces of technology, the information revolution which have empowered global knowledge workers, which have empowered capital rather than labor?

So if it's all these much bigger structural forces, is it going to be remedied by some -

SACHS: I don't think it is -

ZAKARIA: -- kind of political solution like a Buffett tax?

SACHS: I don't think it is all that. I think that markets caused a widening of inequalities in just about every high-income country. But some governments did something constructive about it, where starting in 1981 the U.S. government amplified this in quite reckless ways.

Because when Ronald Reagan came to office, rather than saying we have globalization, we have competition, we now have to do something about our skills, our technology and so forth, he said that government is not the solution to our problems. Government is the problem. It was a fateful call. And this is the path that we've been on for 30 years of dismantling that part of our social institution which - institutions which could actually help with job training, help with education, help with science and technology in a more effective way.

But more than that, Wall Street didn't just gain from globalization, it has been completely reckless. They gamed the system. They packed toxic assets. They sold them to unwitting investors. They let the hedge funds bet against them. And the SEC is finally calling them to account.

But the public is disgusted because after that happened, lo and behold, the next thing is that they begged for bailouts, they got the bailouts. The moment they got the bailouts, they said, leave us alone, deregulate free markets. So they're completely hypocritical in this behavior.

We want everything of ours until we need help, then we want your help, once we get your help, then we want everything again. And it's that kind of impunity that has brought people out around this country deeply angry.

FERGUSON: Well, first of all, I think it's important to avoid criminalizing one percent of the population which you just did, Jeff. I mean, there's no question that major financial institutions have been fined and rightly so. But to turn that into an indictment of three million people seems to me -

SACHS: Well - FERGUSON: Wait a second. Let me finish. Seems to me actually rather reckless. And having watched what you said at Occupy Wall Street, I have to say I thought you overstepped the mark and ceased to be an academic and became a demagogue at that point.

SACHS: Whoa, Niall. You're the one who said that this -

FERGUSON: No, let me - no, let me finish, Jeff.

SACHS: The last time bankers came close to ruling America -

FERGUSON: Hang on, hang on. I let you have - I let you have your say.

SACHS: No, don't call me names like this.

FERGUSON: This is a demagoguic argument especially for somebody who knows that the principal driver of inequality has actually been globalization, not malpractice by Wall Street.

SACHS: I would -

FERGUSON: The second part of your argument is that banks misbehaved in Europe, too. I mean, those countries that did not go down the Reagan route have got banks that are insolvent, banks that were guilty of incompetence and malpractice.

SACHS: Yes, people are demonstrating there also.

FERGUSON: Right. The degree of leverage - and so you argued that this was something specific to the United States. And the faults of - and the faults of -

SACHS: And then you asked in the City of London led a great deal of -

FERGUSON: -- Ronald Reagan.

SACHS: Of course it was.

FERGUSON: Just a second. The banks in Europe are in just as big a mess but they didn't go down the Reagan route. So it's not only bad economics, but it seems to me it's bad history and certainly bad politics.

SACHS: Let's talk what I said and what is important here.

And what I've said is that in a society that is so unequal as ours and where the very top has abused the system repeatedly in the banks, the CEOs of this country taking home take-home pay hundreds of times their workers' pay, unlike any other part of the world, the hedge funds and the banks got unbelievable terms of the deal to get capital gains taxes, carried interest down to 15 percent tax rates. So outrageous compared to what the rest of America bears.

FERGUSON: But wait a second, Jeff - SACHS: Then they repeat it. The big hedge fund -

FERGUSON: You can't believe that this is the reason why the bottom quintile of the population is in poverty and has very limited social mobility. That's nothing to do with what happens on Wall Street, as you well know.

The real - the real problem that we have in this country, it seems to me, is declining social mobility, and not enough is said about that.

SACHS: Well, I write a great deal about it. And the big difference of social mobility -

FERGUSON: Right. And what is the principal of -

SACHS: But let me just get to it - the big difference - the big difference of social mobility in this country is the lack of public financing for early childhood development, for daycare, for preschool, for early cognitive development, for nutrition programs, for decent schools, unlike all of the rest of the high-income world. We do not help the poor.

And that's why our social mobility has come to the lowest level of any of the high-income countries.

FERGUSON: But, Jeff -

SACHS: And we are 10 or 15 percentage points lower in government revenues to help for that. And I'm asking in the book for just a few percentage points and some decency at the top that they start paying their taxes at a decent rate so that we can actually pay for preschool and pay for childcare. And that's what's - that's what low social mobility is about, Niall.

FERGUSON: But when you look at the quality of public education in this country, you can't simply attribute its low quality to a lack of funding. And I think there's a legitimate argument that the biggest obstacle to social mobility in this country right now is not the fat cats of Wall Street, whom I do not rush to defend, but the teachers unions, who make it almost impossible to improve public school in cities like New York where we are today.

ZAKARIA: But would you - but would you comment on Jeff's basic point which is, you know, yes, it's not true that the gap has - has been produced entirely because of government policy, but that you could use government policy and government resources to help in various ways. Education may be one part of it, child nutrition would be another part of it. You know, and that that becomes impossible because you're taxing at 14 percent and spending at 23 percent?

FERGUSON: So a major problem here is that the projects of transforming the United States into something more like a European country does imply significant increase in taxation as well as an expenditure. And there are two obstacles to this. One, it's very clear that this would not be timely given the situation that the economy finds itself in. And two, most Americans don't believe that that is going to deliver the kind of improvement that they would like to see in education.

Look how the federal government fares and the programs that it does spend a lot of money on. Health care, social security, I mean, it's already insolvent with its provision through Medicare. This is one of the hugest unfunded liabilities in the world.

And the answer that Jeff has to the U.S. problem is let's create an even bigger federal spending program on - on public education. I mean, it's just not critical, Jeff.

SACHS: Niall, you're confusing so many issues. My point is that if we are going to be decent and competitive, we have to invest in it. That's paying the price of civilization. That costs money.

The fact that the United States collects in total revenues at all levels of government right now about 27 percent of national income compared with 35 percent and above in other country is the gap of decency right now where -

ZAKARIA: But it's also the gap you're saying of competitiveness.

SACHS: It is.

ZAKARIA: Now, the path to competitiveness for you is a larger government that spends more, correct?

SACHS: If it invests properly, of course. And on -

FERGUSON: You can understand why people might be -

SACHS: I'm talking about investment in education. I'm talking about investment in job skills. I'm talking about investment in science and technology. Talking about investment in 21st century infrastructure.

And we've been for 30 years demonizing government. We've been demonizing taxation. We have neglected to understand that a proper economy runs on two pillars, a market and government. And until we come back to that basic level of understanding that we need a mixed economy, not just a market economy, we'll continue to fail.

ZAKARIA: Final thought on -

FERGUSON: Well, I'm sure the Chinese are listening to this debate with glee thinking, well, there are still academics in the west who think that the route to salvation is to expound the role of the state because that's certainly not what is happening in China. It is not what is happening in India. It is not what is happening in Brazil. The most dynamic economies in the world today are the ones which are promoting market reforms and reining in the rule of the state which in those countries grew hypertrophically (ph) in the 20th century and that is a big problem in Jeff Sachs' argument.

SACHS: Thank you for the lecture. But the catching up phenomenon is quite different from the problems that the United States or other high income societies face right now, and for us -

FERGUSON: The problem is the falling behind phenomenon.

SACHS: -- and for us to be able to have high prosperity at the living standards we want, we need training, we need education. We need infrastructure. We need governments that can pay for that.

FERGUSON: But you forgot and we need higher progressive taxation on the private sector, because that's the most important part --

SACHS: And we need the rich to pay their way, absolutely. Because they've run away with the prize. And they've run away with the -

FERGUSON: There's a simplification.

ZAKARIA: Unfortunately -

SACHS: Part of the solution, stop calling it just one thing, Niall.

ZAKARIA: All right. I don't think - I think this is one of the rare cases where I was superfluous as a moderator. Niall - Jeff Sachs, Niall Ferguson, thank you very much.

We will be right back.


ZAKARIA: Now for our "What in the World" segment. If you're the leader of a country these days, chances are you have a historically low approval rating. It's true of Obama, Sarkozy, Merkel. It's also true of the prime ministers of Japan and India, the leaders of the Arab world. We're living in an age of global dissatisfaction.

It has been a year of protests from the Arab spring to the Occupy Wall Street movement in New York, to similar ones in London, to Madrid.

So I found it surprising that one nation just re-elected its president by a whopping margin. The incumbent won 22 of 23 provinces and beat out the nearest contender by 37 percentage points. No, this is not a Russian election.

It's actually the leader of a pretty vibrant democracy - Argentina's Cristina Fernandez De Kirchner. You get the mood from her victory parade. Argentineans are happy and prosperous. They've had eight years of strong growth leading up to a nine percent rise in GDP this year. Annual salary increases there are approaching 30 percent. Imagine if your boss put 30 percent more in your paycheck next year, you'd be happy, too.

People are partying, nightclubs and restaurants are packed, and rock stars from all over the world are adding Buenos Aires to their list of must-tour cities.

Argentina's biggest export, soybeans, keep hitting record high prices on the market, and the nation's main trading partners, Brazil and China, both of which have had a surge in domestic consumption, are creating a ready market for manufactured goods.

Argentina's economic rise reads like a dramatic turnaround. In December of 2001, recall, it declared the largest debt default in history. Sparking a period of all-out chaos. There were five presidents in just two weeks. And it was disastrous for the Argentine people, many in the middle class had their entire bank savings wiped out leading to deadly riots and widespread poverty.

They have done well to emerge from all this. Helped especially by the devaluation of their currency. If only Greece and Italy had their own currencies and had that option, there probably would be no euro crisis right now.

And Mrs. Kirchner is right to avoid massive austerity programs at a time when what is needed is growth.

But the success of Argentina's comeback may also be blinding the country to a build-up of problems. Loose money, large subsidies, and a cheap currency are leading to inflation. While Kirchner's administration puts the figure around nine percent, the number is widely regarded to be false and doctored. Reliable private estimates put inflation at closer to 25 percent.

Kirchner's populist campaign has promised beef for all, fish for all, even TVs for all. Further subsidies on energy, transport, and water are said to cost up to five percent of GDP.

Meanwhile, the surpluses that led to Argentina's decade of fiscal stability are now dwindling at the rate of $2 billion per month. While the remedy to all of this is structural reform to spur growth, Kirchner has instead resorted to a series of protectionist measures. And external headwinds are on the way. A global slowdown will mean lower incomes from agriculture, reduced demands from China from Brazil...

Simply giving people subsidies wouldn't work in the long term. Sooner or later, the money will run out. And so will Mrs. Kirchner's popularity.

There was a lovely moment from her election night celebration last week. As the people roared out victorious, the president began dancing.

The crowd soaked it in. It was a moment to remember. But it's also an analogy for the Argentine economy. Partying hard is great fun, but it is often followed by a painful hangover.

And we'll be right back.


CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Time for a check of today's top stories.

NATO officials confirm a suicide bomber killed at least 17 people in Afghanistan's capital of Kabul. Five NATO troops and eight civilian workers were among those killed in the attack on a military convoy Saturday.

It was the deadliest attack since 31 Americans were shot down in their helicopter this summer.

The trial of former Egyptian President Hosni Mubarak has been put off for two months. CNN's been told that supporters of the uprising have objected to the judge presiding over the case.

Palestinian groups in Gaza have agreed to re-establish a cease- fire after recent violence left nine Palestinians and one Israeli dead.

Tens of thousands of air travelers around the world are stranded as Qantas Airlines is grounded for a second day. The cancellations affected more than 600 flights and 70,000 passengers.

A labor dispute led the Australian airline to cancel all flights. The grounding will continue at least until noon Monday.

A freak snowstorm barreled up the East Coast overnight, cutting off power to more than two million households and causing at least three deaths. The unseasonably early snow caused heavy damage to trees and power lines. Four states declared weather emergencies and major delays were reported at a number of northeast airports.

Those are your top stories. Now back to "FAREED ZAKARIA GPS."

ZAKARIA: Moammar Gadhafi's body was buried this week in Libya, but that doesn't mean his 42-year reign wouldn't haunt the nation for many years to come.

So what does the immediate future hold for Libya? Will it devolve further into tribal warfare? Is Sharia law in its future?

Bernard Henri-Levy, the French philosopher and early ally of the Libyan rebels, has been back and forth from Libya in recent weeks. He joins me now from Paris. Welcome, Bernard.


ZAKARIA: Bernard, one of the things people are trying to understand is what is the significance of Gadhafi's death? Is it just symbolic, or does it mark something important where the old regime has finally been laid to rest? HENRI-LEVY: First of all, it is a mistake. It is the first mistake which the Libyan rebels committed. Gadhafi should have been delivered, sent to the international penal court or to a Libyan court, but it was for sure a mistake to kill him and to kill him in these conditions.

Now, what does it mean? The end of the old regime. Maybe also it means the last pearl, the last black pearl which has been given by the Gadhafi oyster, you know? It is the last step of the Gadhafi zone. The venom - the venom, the poison of the Gadhafi zone was, if I dare say, raging (ph) to himself in these acts of savagery and cruelty, of which we are witnesses.

It is the end, for sure. Not the best end, but it is the end of the old times in Libya.

ZAKARIA: What about Islam, Bernard? One of the senior members of the new Libyan order said that Libya will be under Sharia law.

Now, as you know, this can mean many, many different things, but I want to get your sense. You know all the characters on the ground. You have a sense of their appeal. What is the - what is the likelihood that we will see a - a very strong component of political Islam in Libya's future?

HENRI-LEVY: I don't - I don't think so. I don't think so. I can tell you that there is a lot of people in Libya and in the ruling circles of Libya who disagree with that, who are not ready to accept - to go from Gadhafi to an Islamist rule in a real strict way.

Sharia, as you know, may mean a lot of things. The fact that Libya will be - that the laws of the future Libya will be under the cover of the general moral rules of Koran, this, of course, there is no doubt on that. Libya is an old Muslim country, and this will be the atmosphere of the future of Libya. But a strict Koranic state, sort of new Iran or you don't know what, this is impossible.

ZAKARIA: Let me ask you a final question, Bernard. You were at that extraordinary public meeting with President Sarkozy, Prime Minister Cameron, the transitional committee, and also, you know, in front of tens of thousands of Libyan people.

Is it your sense that - that there is genuinely in Libya a broad sense of being thankful to the west or grateful to the west for having intervened? Because so much of the Arab world, the underlying condition is still one of deep hostility to the west and to NATO and to America. And, I'm wondering, you were - you were there. What was your sense?

HENRI-LEVY: I was there. This the - the sense - my sense was, my feeling was the feeling of great enthusiasm of the crowd, both in Benghazi and in Tripoli.

But, beyond that, I saw a lot of these guys, even in the extremist groups. I had the chance to have a long talk, a nice talk with Abdul-Hakim al Hasadi, who is considered - who is the military chief of the City of Derna, which is considered as the fatherland of Islamism in Libya. I had a face-to-face confrontation with him on everything - on religion, on politics, on human topics and so on.

And what I was struck by is the following thing - his logic, his way of seeing the world was completely disoriented, was completely discarded by what happened in Libya. This idea of President Sarkozy, President Obama, Prime Minister Cameron, this idea of civil persons in territories like me, giving hand without conditions to an Arab country, an Arab people, fighting for its liberation, destroyed completely the idea that this man, even him, had in mind of a clash of civilization, inevitable inescapable between the west and the rest.

So the west, so even single Jewish French intellectual giving the hand, helping, being with them on the frontlines, and certainly all those blah, blah, blah about the crusader and the Jews being against Islam as such, really was ruined, really was meaningless. And I saw that in the speech, in the - in the face, and maybe in the brain of this guy, who was an honest guy, with good faith, and who sincerely told me that something happened which changed his way of seeing the - the world. The clash of civilization maybe begun to withdraw, begun to be meaningless for the first time in this war led by France, America and England, in Libya, with these Libyan people.

ZAKARIA: An optimistic view of Libya. Bernard Henri-Levy, as always, thank you. We hope to see you in person the next time are you in the United States.

And we will be back.


MICHAEL LEWIS, AUTHOR, "MONEYBALL": While the scouts were being misled because they were, one, relying on just their eyes, and - and their eyes told them that, you know, a player who was good looking was better than he actually was.




ZAKARIA: Michael Lewis had a best selling book and blockbuster movie in "Moneyball." Many think "Moneyball" is about baseball. It is, of course, but it is really about market inefficiency wrapped in baseball, with some human drama mixed in. So what can we learn from the deeper part of the book?

Joining me now, Michael Lewis.

The reason I look at the deeper part of the book is because I grew up playing cricket, and so I really don't know enough about baseball. But explain, if you will, what is the central premise of "Moneyball?"

LEWIS: When I did the book, in 2002, I was struck by how a - a poor baseball team, a team that had much less money to spend on players than its rivals did, the Oakland A's, were able to win lots and lots of games, more games than its rivals, with this lower budget.

In an - in an efficient market, base - and when baseball players were properly valued, you would think that the rich teams would just buy all the best baseball players and win all the games. And the question I had was, why isn't that happening?

And the answer, which is unspooled in the book, is the market doesn't value baseball players properly, or strategies for that matter. And that it - that it - the market was operating with bad data, the wrong data, relying too heavily on - on human judgment, unaided by statistics, to make sometimes very bad decisions about who was a valuable baseball player and who wasn't. And all the - all sort of the biases that people have when they're relying on their judgment as opposed to facts were - were on view in the market for baseball players.

ZAKARIA: And this - I mean, this is, in some ways, attacks a kind of central mythology about baseball or any sport, that there's - that there's an enormous amount of it that's intangible, that's about judgment. You - I mean, there's - in the movie, there's a scene which is straight out of the book, of all these scouts who spend all their time trying to figure out who good players are.

LEWIS: Right.

ZAKARIA: And - and Billy Beane says, this is all nonsense, you know? If you look at the - if you look at the numbers, everything you're doing is - is worthless.

LEWIS: Right. Well, the scouts were being misled because they were, one, relying on just their eyes, and - and their eyes told them that, you know, a player who was good-looking was better than he actually was. That they were - weird biases like that.

And they were also relying on bad - on bad stats. They were using the wrong stats to value the players. And what happened in Oakland was that because they were poor and they needed to find a better way to - to do what they were doing, they found better - better data to analyze the baseball players.

And it does - to me, what was so interesting about the story - it actually wasn't a baseball story in my mind. This was really a story about the way markets - markets generally misvalue human beings.

ZAKARIA: Do you think there's a corollary in business? I mean, you know the world of - you know, particularly finance very well. There's so much of what you can do to manipulate company data and make something look sexy, make earnings pop for a particular quarter.

Do you think that there are, you know, there are - there are sort of strong, silent types in the world of - of business that get overlooked in the same way?

LEWIS: So, when I went into the Oakland A's fronts office, they had become so inured to the idea that markets screwed up, they just assumed markets screwed up, because they were in the middle of this market that screwed up.

They weren't rich people. They hadn't - weren't being paid a lot to do their job. They've subsequently become rich people, but they - they had small stock market portfolios. And when they invested in companies, they had learned that the people who - that something like 60 percent of - of the CEOs of Fortune 500 companies are white men who are six feet or taller.

And they said to themselves, this is the equivalent of the good- looking baseball player, that - that we're going to invest only in companies that doesn't have - that have CEOs who are not - were not white men who are six feet or taller, because those people have to know what they're doing because they don't look right. The ones who don't look right and were doing - we trust them more than the ones who do look right.

Just like maybe you don't want to vote for the guy who looks like he should be president because maybe the only reason he's gotten as far as he's gotten is he looks like he should be president.

So you - so there's that analogy.

ZAKARIA: How did their portfolios do?

LEWIS: They do well. Very well. They ended up being very Buffett-like, their portfolios. They overlapped a lot in the - the spirit in which they invested with Warren Buffett.

ZAKARIA: All right, so I've got to ask you about the inevitable critiques of the book.

LEWIS: Sure.

ZAKARIA: So lots of people say the Oakland A's had a couple of good years and, after that, it didn't work out so well so maybe the theory isn't so good.

LEWIS: Well, so let me say two things to that. One was, it wasn't a couple of good years. When I rolled in, the management had been in place for five or six years, and they - they were paying so much less for a win than any other team in baseball, they looked like they were in a different industry. If it were normal business, they would have acquired all the other teams and just put them out of business.

Two, even though they haven't actually got to the playoffs much in the last few years, I've been sent analysis of - of their - on their performance since the book - since the book came out that shows they're still the most efficient with their money over the last eight years of any team in baseball.

This surprises even me, because when the book came out, the market adjusted. The inefficiencies they were exploiting went away pretty quickly. ZAKARIA: The - teams like the Red Sox started doing the same thing.

LEWIS: Started doing exactly - everybody started to do what they're doing. So they don't actually have an advantage anymore. They have no intellectual advantage. They shouldn't be doing better with their money. So something else is going on there.

ZAKARIA: You are writing the screenplay now to "Liar's Poker," your first book, which is being made into a movie. Who's going to play you?

LEWIS: My 12-year-old daughter wants Zac Efron. But, after seeing "Moneyball," I want Jonah Hill. And I'll tell you why -

ZAKARIA: He's got to lose a lot of weight.

LEWIS: He's already lost it. But I'd rather - I don't care how much he weighs, because the interesting thing - what I want in the actor, it's all about being ingenious in how you react. He is a genius at reacting. You give him something, and he go - yes. No.

And - and it's this wonderful - he has this wonderful - in fact, you watch "Moneyball," it's unbelievable, what he does to the movie just in his reactions. And I want someone who's going to be reacting to the culture, so he'd be perfect.

But we'll see. I wouldn't have any say in it. So we're just - this is - this is fun, but, you know, it wouldn't be my choice.

ZAKARIA: Michael Lewis, pleasure, as always.

LEWIS: Thank you.

ZAKARIA: And we'll be back.



ZAKARIA: Our question this week from the "GPS Challenge" is which Eurozone member is projected to have the highest growth rate in 2011? Is it A) Germany, B) Poland, C) Estonia, or D) France? Stay tuned and we'll tell you the correct answer.

Make sure you go to for 10 more questions. While you're there, check out our website, The Global Public Square. You'll find interviews, takes, all kinds of things by fascinating people.

And, don't forget, you can follow us on Twitter and Facebook.

This week's book is called "Civilization: The West and the Rest," by one of today's guests, Niall Ferguson. It is a big book. It attempts to answer the big question, how did a handful of Western countries come to dominate the world, and is that domination now coming to an end? Niall thinks it is, partly because the means by which great civilizations come to power are now better understood. There has been a diffusion of knowledge. It's sweeping, fun, relevant, readable, controversial. You'll love it.

And now for the "Last Look." You can never get tired of the adventures of He-Man, Vladimir Putin. One day the Russian prime minister is shooting whales with a crossbow, the next day he's a judo expert. You've seen him shirtless and flexing his muscles. You've also seen him diving into the sea to discover treasure.

What about President Medvedev, the other half of the Russian ruling duo? Don't worry, the Kremlin isn't ignoring him. They've just released this video on the president's web site. Medvedev is playing the macho sport of - um - badminton.

The message is clear - Putin gets to brandish crossbows, Medvedev gets to hit a birdie or a shuttlecock. Very macho, indeed.

The cruel comparisons don't end there. We found this picture at a doll exhibition in Moscow. Yes, it's a decidedly nerdy Medvedev, tourist camera and all, right beside a warrior-like Vladimir Putin. We get it, Kremlin spin department. We know who's really the boss.

The correct answer to our "GPS Challenge" question was, C) Estonia. The IMF projects that it will grow by 6.5 percent in 2011, more than any other Eurozone member.

Go to our website for 10 more questions.

Thanks to all of you for being part of my program this week. I will see you next week. Stay tuned for "RELIABLE SOURCES."