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Latest From Hot Spots Around the Globe; Interview with Steven Kotler; Interview with Tim Harford on Possible Causes of Economic Crises

Aired March 23, 2014 - 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.


ZAKARIA: First up we will bring you the latest live from the hot spots around the globe.

Next, will robots take over the world? Probably not, but computers might take your job. I will tell you how to keep it safe.

And pushing the limits of what used to be possible. Why are world records being broken on a regular basis? It's all about Superman -- not that one, these ones. I'll explain.

Finally --


ZAKARIA (voice-over): What happens to the Union Jack if Scotland succeeds? We'll show you some of the artistic options.

But first, here's my take. Whatever happens in Ukraine over the next few months and years, the crisis has reminded me that there are really two kinds of rulers around the world, those who think about the past and those who think about the future. And if it weren't abundantly clear already, it is now.

Vladimir Putin is the first group and his country will be the poorer for it. We've all learned some lessons in Russian history. Crimea was the first great prize for Russia, wrested from the Ottoman Empire and a mark of Russia's rise to great power status.

It also gave the Russians something they never had, a warm water port with direct access to the Mediterranean and thus the wider world. Russia held onto the region even though it lost the Crimean War in the 19th century. Almost a century later it maintained its grip on the region after reclaiming it from the Nazis in early 1944.

Then came the strange and fateful twist in 1954 when Soviet Premier Nikita Khrushchev gifted Crimea to the Ukraine, an internal transfer within the Soviet Union. Why Khrushchev did that remains somewhat unclear. Whatever the cause, the consequences are lasting and dramatic.

That is the history. But history is bunk, as Henry Ford said. By that he did not mean that it was unimportant but rather that people should not be trapped by it, that they should not think backward but rather forward.

His exact words were, "History is more or less bunk. It's tradition. We don't want tradition. We want to live in the present and the only history that is worth a tinker's damn is the history that we make today."

The history that leaders make today has much less to do with geography or constraints from the past. When Singapore was expelled from Malaysia in 1965, the experts said that the small, swampy town in the middle of nowhere could not survive as an independent country. It is now one of the world's great trading hubs with a per capita income higher than that of its erstwhile colonizer, Great Britain.

That's because its founder, Lee Quan Yu (ph), thought less about the disadvantages of history and more about the advantages of the future.

When the Nationalist Chinese were abandoned by the world on a tiny island after the Communist Revolution in mainland China in 1949, most assumed the place would not survive. Yet in the most precarious position with zero natural resources, Taiwan became one of the world's fastest growing economies for over four decades.

That's because it didn't worry about geography. It obsessed about competitiveness.

When Paul Kagame took over Rwanda, the country was more deeply ravaged by history than almost any nation. Scarred by a genocide of a speed never seen before in the past.

Rwanda's also landlocked with no geographic advantages at all and a bloody war in the neighboring Democratic Republic of Congo. But Kagame looked to the future, not the past. The result is a small African miracle, a country that is healing its wounds.

There are those who are still trapped by history and geography; think of Pakistan's generals, still trying to establish strategic depth in their backyard while their country collapses.

Or think of Putin, who is, as Secretary of State John Kerry said, playing a 19th century game in the 21st century. What has he achieved? Ukraine has slipped out of his grasp, its people suspicious of Moscow even in Crimea the 40 percent who are non-Russian are probably restive and resentful.

Moscow's neighbors are alarmed and once warming relations with Poland will be set back, trade and investment with Europe and the United States will surely suffer. Meanwhile Russia continues along its path as an oil dependent state with an increasingly authoritarian regime that has failed to develop its economy or civil society or foster political pluralism.

But no matter, Moscow controls Crimea. In today's world, is that really a victory? For more go to You can read my "Time" column. Let's get started.


ZAKARIA: I'll be back with much more later on in the show.

But for now let's go to CNN's Jim Sciutto for the latest.

JIM SCIUTTO, CNN CHIEF U.S. SECURITY CORRESPONDENT: Thank you, Fareed. And let's begin where you left off, with Russia's annexation of Crimea which President Putin finalized with a flourish of the pen.

Also at the end of the week, of course, came the U.S. and E.U. sanctions against Russia and counter-sanctions from Moscow. The U.S. sanctions target some 20 individuals seen as close to Putin as well as bank used by that inner circle of his called Rossiya, that is Russia in Russian. The E.U., for its part, sanctions 12 individuals including Russia's deputy prime minister and chairwoman of the upper house of parliament.

So how is Moscow reacting? For that, we'll go to CNN's Fred Pleitgen, who's in Russia's capital today.

Fred, it's a small group but a very powerful group and these sanctions designed to hit them right in the wallet.

Are they working? Any signs they're working? And are the Russian leaders of that inner circle hurting from them?

FREDERIK PLEITGEN, CNN CORRESPONDENT: I would say, Jim, that they hurt a lot more than the first round of sanctions that happened last Monday. You can tell that the Russian reaction to it has been a lot more sour than you would have seen in the past. It's really a mixed bag of reactions that we're seeing from the Russian government.

There are those in the foreign ministry who say we now have to hit back with really hard sanctions against the United States. There's also people in the government office who are saying they want mirror sanctions and to hit additional U.S. lawmakers, not just the ones that they've already put sanctions on.

So there are those people who are very angry. Vladimir Putin had a very interesting reaction to all of this. He was in public and he said, he really didn't want to have any sort of counter-sanctions at this point. He felt that there needn't be any sort of reaction.

It is, however, the case, Jim, that these are hurting these very -- these people who are very close to Vladimir Putin very, very badly. You can tell that there is a degree of nervousness, not just among them, but among a lot of the other top Russian business people. And especially the fact that that bank was hit was something that really hit Russians very, very hard. There were apparently some people abroad who were trying to pay with Visa and MasterCard, some very high-profile Russians who couldn't get any sort of money.

However, it's not something that's deterred Vladimir Putin at all. The process of annexing Crimea, as you mentioned, went forward. They're now talking about what the additional things are going to be that they're going to do in the future.

It doesn't seem as though it's holding Vladimir Putin back. But there is a sort of a more sour reaction than you would have seen in the past, Jim.

SCIUTTO: Well, the U.S. news aiming right for the very top. Thanks very much, Fred Pleitgen in the capital, Moscow, in Russia.

So in the end, will the U.S. and E.U. sanctions against Russia be at all effective?

What could make them more effective as well?

And what about Russia's counter-sanctions against Washington?

Officials like House Speaker Boehner and Senate Majority Leader Harry Reid, do those have any bite in the U.S.? For our answer, we're going to go to two experts. Juan Zarate, who worked in the White House and Treasury Department in the George W. Bush administration, literally wrote the book on sanctions, "Treasury's War" The Unleashing of a New Era of Financial Warfare," explains how Zarate and his colleagues took sanctions and other economic measures to a whole new level against enemies like Al Qaeda and Saddam Hussein.

He is also a CBS senior national security analyst.

And we have Ian Bremmer, he's the president and founder of The Eurasia Group, he is one of the best in the business when it comes to analyzing how political developments will affect markets and economies.

Welcome to both of you.

I want to start, if I can, with Juan.

You are the architect of this strategy of sanctions, as your book mentions, Saddam -- going back to Saddam Hussein but also continuing currently with Iran, sanctions that arguably have had a great deal of success. It is early admittedly in this game, but do you see any signs at this point that the sanctions against Russia are working, are changing Putin's behavior?

JUAN ZARATE, CBS SR. NATIONAL SECURITY ANALYST: Well, thank you, Jim. I do think these are the kinds of sanctions that will work but likely in the long term. The whole premise behind these kinds of measures is to unplug Russian banks, businesses, key business elites, from the international banking and commercial world. That is really what has been at the heart of the isolation of Iran and the other sanctions of processes that we've put in place.

And so what you've seen, especially with the naming of Bank Rossiya, the 17th largest bank in Russia, is the first I think salvo in beginning to unplug the Russian banking system from the global system. And that's why you saw a shiver both in the markets, which I think is a good indicator, and also in the investment community.

And I've heard from a lot of them where they're just very concerned about the instability and the uncertainty as to what comes next. And that ultimately hurts the bottom line of the Russian elite, Russian businesses and Putin's inner circle.

Whether or not that can impact short-term, that's a different question. I don't think these are a silver bullet, but certainly these can bite and they will cost the Russian economy.

SCIUTTO: You know, there are reports of Russian energy traders, for instance, uncertain whether they can access certain banks in Europe to make trades. And that's certainly hitting Russia right in the wallet.

I wonder, Ian, if I could bring you in, because you've been something of a skeptic of this strategy. I've been following your comments on Twitter and elsewhere. I'm just, for the sake of our viewers, going to put one of your recent tweets up regarding the U.S. and Russian standoff over Ukraine.

You said recently: "War of words between U.S. and Russia. Pretty much a draw. Actions all Putin." Do you still agree with that now that we've begun to see some sanctions that all the actions are on Moscow's side as opposed to Washington's side and Europe's side?

IAN BREMMER, PRESIDENT, EURASIA GROUP: Well, the actions are asymmetric, there's no question, I agree with Juan that this is having a negative impact on the Russian economy.

But let's be very clear, Putin's approval ratings have gone up almost 15 points since this Ukrainian crisis has begun. Gave a historic speech that many Russians, I would say a strong majority of Russians, were waiting at least 20 years for a Russian leader to give.

That said, look, the Americans have been happy with Russian decline, they have assisted it in terms of NATO enlargement, in terms of energy diversification, and we're not going to take it anymore, we're going to stop them at Ukraine, which we consider to be our territory.

The fact is that Putin's interest and the Russian government's interests in maintaining their hold on Ukraine is vastly greater than that of any economic sanctions that the United States, and to a lesser degree, as we're seeing, the Europeans can actually effect upon them.

And so as a consequence, we can cause some damage to the Russian economy. We can certainly rupture further U.S.-Russian relations, and that may be something we wish to do because we want to prove a point.

But if what we're trying to accomplish in the near term with these sanctions, if the goal in the near term is to try to bring this crisis towards a close, certainly the sanctions will not accomplish that end.

SCIUTTO: Juan, Ian makes a good point there, that going in, Vladimir Putin must have made a calculation of what the economic costs of this might be. Do you think he has made such a calculation and how high do you believe a cost that he would be willing to endure on this, particularly as these sanctions begin to target not just individuals but entities, like, as you mentioned, the Bank Rossiya?

ZARATE: Well, I think Ian is absolutely right. Putin has had first-mover advantage here all along. And in some ways we've been calibrating and reacting with whatever measures we can absent, of course, military force.

But I think what President Putin probably calculated was twofold. One, that the response would not be as vigorous as it could be. Europe is obviously dependent on Russian oil and gas, trade between Europe and Russia is about 10 times the trade that the U.S. has with Russia. So he understands the dependencies there.

He also understands that Russia can bite back. His aides, his foreign minister and others, have made very clear that not only will there be tit for tat measures, listing of U.S. legislators and others, but that they can take similar economic measures against Western businesses and banks.

We've seen them use tax investigations in the past to harass. And they can things that are a bit more nefarious in the economic realm.

And so I think he has calculated that not only is the West probably cowed in going too far in the measures, but that Russian bite-back can actually deter further economic pressure. And I think that's where we are in the policy calculus in Washington as well as in Brussels.

SCIUTTO: Ian, I wonder, though, you know, you can ban Boehner and McCain and Reid from Russia, but it's a different situation, right? I mean, Russian leaders have a lot of investments abroad, they store their money abroad, they own apartments in London and New York, but Boehner, McCain, and Reid don't do the same in Russia.

I mean, are they -- can they really exact a price that's equivalent from American officials, from European officials?

BREMMER: No. Because the economy of the United States is vastly greater. We're not very exposed to Russia. Europe's economies are much more exposed and that's why the Europeans have chosen thus far not to go after the oligarchs, not to go after a Russian bank.

The European response a little softer than the American response. Believe me, Putin very aware of that. But you have to understand, when the United States says consistently our formulation has been, look, Putin, if you don't behave, we're going to isolate you, that's exactly the language we use against North Korea.

North Korea is a tiny little country. You cannot isolate the Russians. The Russians have a very strong economic relationship with China, which is going nowhere. Putin is going to go to Beijing in May. He is going to sign a massive energy deal.

It's going to make it very clear that if the Americans want to isolate the Russians, that's a lovely policy in principle, it's just not one we actually have the ability to follow up on.

And I would think that after our experience with the failed red line on Syria, we would want to be a little more temperate as to ensuring that when we're making emboldened claims against countries that are doing stuff that we don't want, that we can actually follow through with them. We are not going to be able to do that here.

SCIUTTO: Well, you make a good point. That alliance between Russia and China already key in the U.N. Security Council, could be key here as well. Thanks very much to both of you, Ian Bremer, Juan Zarate.

Coming up next, I have two intriguing new developments to tell you about the search for that missing Malaysian Airlines plane. I'll tell you all about them right after this break.


SCIUTTO: Welcome back to FAREED ZAKARIA: GPS. I'm Jim Sciutto, filling in today.

It's now been 16 days since Malaysia Flight 370 and the 239 souls on board disappeared without a trace.

But in recent days, a series of satellite images have been found showing large pieces of debris in the southern ocean. Most recently, today, Malaysia announced that French satellite images showed, quote, "potential objects," unquote, in the same vicinity of the southern corridor of that search area.

Neither France nor Malaysia has released those satellite images yet.

Joining me now, CNN aviation analyst, Miles O'Brien.

And, Miles, I want to get to those new satellite images but also another interesting development today, that's Malaysian authorities saying that, indeed, there is no evidence that turn to the west after the plane lost contact was, in fact, preprogrammed into the flight computer.

That's a key detail because that information was used to buttress the theory that this turn and, in fact, the disappearance might have been intentional somehow on the part of the pilots.

I wonder if you can walk our viewers through how important this word is from Malaysian authorities.

MILES O'BRIEN, CNN CORRESPONDENT: It's a game-changer if this turns out to be true. We've had so much inconsistent information I never know what to take as gospel at this point.

But let's assume for a moment that this is the case and that wasn't preprogrammed in. That was the one really shred of evidence that was out there that would indicate that the crew might have had some intent to do something that was nefarious.

Now, so if you accept that it wasn't preprogrammed in, that raises the possibility or puts a higher on the list a possibility that some sort of catastrophic event occurred shortly after that signoff which, for some reason, made it impossible for the crew to communicate and necessitated a turn to the nearest piece of land or landing strip.

So, you know, at this point, it seems to be a theory, just about every hour, but if it's coming from the Malaysian authorities and they're trying to set the record straight, we should take it as what is true. And if that's the case we need to probably scale back a lot of the discussion about the crew possibly having some intent here.

SCIUTTO: Yes. You raise a good point because there has been so much conflicting information. We always have to allow for the possibility of another change. But I wonder if I could talk, too, about the search.

So for the third time now we have three satellite images that started with the Australian images then Chinese and now French images today which show what appear to be possible large pieces of debris in that south Indian Ocean but then those search planes that go to that area and in the last several days still have not seen anything, what's happening here?

Is it just such a large piece of the sea that invariably it's going to take a while to find what the satellites see via a search plane?

O'BRIEN: Yes. I mean, these are small objects in a big ocean. Couple that with the fact that they're moving. By the time that satellite image gets to the searchers and they're designing a mission to go and look for it, they've moved along.

And then you couple that with the fact that the conditions there are terrible. You're getting close to the pole. Any time you get close to the pole, especially the southern oceans, horrible weather, high seas, low clouds, low visibility, not good conditions at all to conduct a search.

There were reports that the P-8 aircraft, the U.S. Navy aircraft was down at 300 feet above the surface, which is not an ideal altitude for them to do their work. I mean, they can look out the window and do what they, you know, what they can, but with the seas they way they were and the ceiling the way it was and the visibility, it's a very difficult challenge to identify these moving pieces of debris. You know, it isn't a news flash that the ocean is filled with a lot of debris. So we have to keep that in mind. There is a hunk of plastic the size of Texas in the Pacific that we all know about as well, so let's not forget that.

SCIUTTO: Yes, 10,000 shipping containers, it's estimated, floating around in the waters as well. You make a great point, the P- 8, just to remind our viewers, that's a 737, this P-8. So a 737 flying at 300 feet, difficult maneuver and must be hard to see, considering the speeds that they're going.

One thing if I could just ask you before we go about the politics of this, because one of the frustrations has been, you know, whether countries are sharing all the information they have and quickly. Sensitivity is about sharing radar capabilities, satellite capabilities.

But now you have this incredible collection of countries down there, including countries that don't generally get along very well, Japan and China, for instance, flying planes together in the search now, the U.S. there.

Do you get a sense that the politics of this are getting better and that there is real cooperation, real intelligence sharing in the search?

O'BRIEN: Yes. You know, I think this is bringing the -- some of these rivals together, which is a good thing, but having said that, you know, there's still some information, there are holes in the information.

You have to wonder why authorities at some level weren't scrambling jets to intercept this primary target that was passing over the land mass of Indonesia, this aircraft.

So were the military radar facilities either inoperative or were the people there who are manning those facilities not paying attention?

These are questions which countries don't necessarily want to volunteer because it might indicate some sort of breach in their defenses.

So I think there's -- you know, there's a bit of a, I guess, a game here of how much to reveal and that does ultimately impede the investigation, particularly when you start thinking about the possibility that this aircraft might have headed north.

Is that still a possibility? Is that -- that certainly should be considered. We've been focusing a lot on this location off to the west of Australia, but, you know, that's based on primary radar returns, which are kind of sketchy and in MARSAT, satellite return from a turned off communications device called the ACARS on the aircraft which is not designed to track an aircraft. So we really have sketchy information to identify this location. SCIUTTO: And you make a good point. Another reminder to our viewers, though, most of the assets are now focused in the southern Indian Ocean, Malaysian authorities made a point of saying yesterday that the northern corridor search area still open and in fact Kazakhstan, I believe, has offered their air base as a central point for searching that area.

Thanks very much to our Miles O'Brien joining us, aviation analyst in Washington.

Coming up next on GPS, Fareed will be back.

And in this day and age where computers and robots are doing everything from making cars to practicing law, he'll tell you how to make sure you don't lose your job to a machine, right after this break.



ZAKARIA: Now for our "What in the World" segment. Many people are worried that in tomorrow's economy, a machine might take their job.


UNIDENTIFIED MALE: This is jeopardy. The IBM challenge.


ZAKARIA: If you think your job is safe you would do well to remember Watson. That's the IBM computer that beat "Jeopardy" champ Ken Jennings. If a computer can handle the complex challenge of playing a trivia game like "Jeopardy".






ZAKARIA: It is mastering the kinds of subtle judgments that we used to think of as the sole province of humans. Erik Brynjolfsson and his MIT colleague Andrew McAfee recently wrote a book called "The Second Machine Age, an Insightful and Sometimes Startling Look at How Computers Are Becoming Smarter by the Minute." They know that computers can pull off some truly remarkable tasks these days. Driving cars by themselves, and even talking to us.


UNIDENTIFIED FEMALE: I found a number of supermarkets.


ZAKARIA: Why is this happening? It's because while all machines improve over time, computers do so on an exponential scale. Moore's Law states that computer processing power doubles every two years or so. A fascinating way to visualize the power of exponential growth is the myth of the invention of chess. In one telling the inventor of chess, a brilliant man from India, impresses a ruler with his new game. So much so that the ruler invites him to name any reward. The inventor's request seems modest. He asked just one grain of rice be placed on the first square of a chess board and then please double the grains on every new square until all 64 squares have rice. The king is bemused by the seemingly small payment and he tells his treasurer to go with the man and pay him. It looks like small numbers at first. One grain becomes two, then four, eight, 16, 32, 64, 128, 256, 512, 1024, 2048, but keep going and you will see that by the time you get to the 32nd square, the last square on the top half of the board you have over 4 billion grains of rice in total on the board. The treasurer is said to have winced when calculated that they had enough in the granaries to pay this guy out. But we're not done. You now have to get to the second half of the board and you begin with over 4 billion on the 33RD square, which becomes 8, 17, 34, 69, 137, 275, 550 billion, 1.1 trillion and on. When they get to the last square the 64th square, the total on the board is over 18 quintillion. That is 18 with 18 digits after it. 18 quintillion grains of rice. That is a bigger pile of rice than Mt. Everest. And more than it's produced in the entire world. In some versions of this story, when the king hears this he orders that the inventor be executed.

Computing power is now in that second half of the chess board. You have the results in your hand. NASA says that the computer if your cell phone has many, many, many times more power than the computers used in the Apollo space program to get man to the Moon and back.


UNIDENTIFIED MALE: The eagle has landed.


ZAKARIA: And remember, computing power continues to improve dramatically every year. Now that computers are reaching such great heights, where does that leave humans? Here's an example. From Brynjolfsson and McAfee's book. When the computer Deep Blue defeated chess champion Garry Kasparov in 1997 it may have appeared that humans could no longer match up against computers in chess. But in tournaments in the ensuing years, when teams of humans and computers played against the best machines, they did well. Like when a human chess player using a simple laptop computer was able to defeat a chess super computer in 2005. The combination of a human being and a computer, appeared to be the best of all worlds. So human beings still have a role to play. To succeed in tomorrow's world they will have to use their creativity and insight and they will have to use computers. Up next, how do the world's greatest athletes keep shattering records? We'll be right back.


ZAKARIA: Have human speed and strength reached their pinnacles? We often thought so. In 1936 Jesse Owens set a world record time of 10.2 seconds to complete the 100 meter dash. Could anyone ever break that ten second barrier, we asked? Of course, they could. In 1968 Jim Hines did just that, clocking in at 9.95 seconds at the Mexico City Olympics. Could anyone go better? Of course they could. Record speeds have constantly been bettered all the way down to Usain Bolt's time of 9.58 seconds set in 2009. And he says he can go faster. What is behind these advances? My next guest says it's not just physical, it is also in the mind. Steven Kotler is the author of "The Rise of Superman: Decoding the Science of Ultimate Human Performance". He joins me now.

So when people look at these kinds of athletes, we always think that today's athletes are just much stronger, much fitter than the baseball players of the past, the basketball players of the past. But you're saying that's not the only thing going on.

STEVEN KOTLER, AUTHOR, "THE RISE OF SUPERMAN": Well, certainly the physical capabilities have gone up. Our training programs are better, et cetera, et cetera. But elite athletes, they're pretty physically equal. It's a mental game at the upper edge of performance and the people who have the edge there are the ones who are winning.

ZAKARIA: And you call it something called "The flow." What does that mean?

KOTLER: Flow is an optimal state of performance. It is -- means we feel our best and we perform our best. And everybody has some experiences. Flow are those moments when we totally lose ourselves in the moment and everything else goes away.

ZAKARIA: Why do you look at extreme sports as a way to study flow?

KOTLER: In extreme sports something astounding has happened in the past 25 years. There's been nearly exponential growth in ultimate human performance. Nothing like that has ever happened before in history. So, these guys give us a phenomenal case study for looking at flow and the level of performance has gone up so much we know that these athletes have to be in flow to perform. If they're not the general rule they're ending up in the hospital or dead.

ZAKARIA: Who are the most impressive athletes that you studied?

KOTLER: All the athletes I studied are astounding. If they're in the book their stories are there because they did something impossible. There's a paradigm shift in athletic achievement. The one I look at as a climber named Dean Potter. Dean Potter is a free soloist, he climbs without ropes, he climbs without protection. At the time he started climbing, most people were free soloing hundred feet walls, 200 feet walls. He went down to Patagonia and free soled mountains, 3,000 foot walls, 4,000 foot walls. He was staying in flow three days, four days at a time. That's what's really incredible. That this - he had to figured out how to extend the state, so it's not just a brief moment of victory, it can last for days in certain cases.

ZAKARIA: You write about surfing. Give that example.

KOTLER: Surfing is a phenomenal example of this nearly exponential growth and - performance. It's a thousand year old sport, for 488. In 1996, the tallest wave anybody has surfed is 25 feet. Above that was believed impossible, scientifically impossible. Now we're pushing into waves that are 100 feet tall. That's a 75-foot jump in wave height after a thousand years is insane and that's what we're looking at across the boards in all action adventure sports.

ZAKARIA: And you talk about how this is actually something that can be learned. And it can be learned relatively quickly. I mean, one thing you talk about which is you don't need Malcolm Gladwell's 10,000 hours to make this work.

KOTLER: No, you really don't. One of the things that happens in flow is you get a big neurochemical dump in the brain. And neurochemicals are essentially tags for memories. So, the more neurochemicals that show up the more things are saved for later. In studies run by DARPA with military snipers when they induce flow artificially using narrow feedback, they found the time it took to train novice snipers up to experts was cut in half. So, that 10,000 hours might actually be 5,000 hours.

ZAKARIA: Wow. And so, what does this mean for somebody who's not going to try and become the world's greatest surfer, what does it mean for - you know, if I want to perform better in my tennis game what should I be thinking?

KOTLER: The great thing about all this is we now know there are 15 flow triggers. These are preconditions that lead to more flow basically. And anybody can tap into these triggers. Anybody can apply these triggers in their life. What happened in action adventure sports is simply that they surrounded themselves, they built their entire lives around these flow triggers. But anybody can do this. Business, education, health, it doesn't really matter. Across the board it all works.

ZAKARIA: Fascinating. Steven, thank you so much for joining us.

Up next, economics can often be complicated and boring. My next guest makes complex topics like the Federal Reserve seem as easy as pie. And tasty too. Tim Harford, the undercover economist is up next. Stay with us.


ZAKARIA: What could babysitting tell us about the Federal Reserve? What could prisons tell us about the wider economy? If you think there are no connections think again. My next guest, Tim Harford is an economist who makes the complicated very simple. He writes the undercover economist column for the "Financial Times" and he has a new book out "The Undercover Economist Strikes Back." How to Run or Ruin an Economy." Listen in to our conversation.

Tim Harford, pleasure to have you on.


ZAKARIA: And most people I think don't really understand what the Federal Reserve does. And you have a nice analogy about babysitting that explains it.

HARFORD: Yeah. It must be amazing to be the chairman of the Federal Reserve. Because you or I, Fareed, when we log into our bank accounts and we check our bank statements online, it's just a fact, the amount of money that's there is the amount of money that's there. But when Janet Yellen, the new chairman of the Federal Reserve, when she logs in to her bank statement, she can just create as much money as she likes. She just adds an extra zero or another zero or as many as she wants. That's what it's like to be a Central Bank. The babysitting story, this is a real story. This happened in Washington, D.C., in the late 1970s. It was a babysitting coop that fell into a depression and the reason was, there wasn't enough money to go around. They had these little tokens they were exchanging to do babysitting for each other's kids. Everybody in the baby sitting coop wanted to babysit and build up a reserve of tokens before they went out and because everybody wanted to do that nobody went out. And this is a classic Keynesian view of how depressions happen. But ...

ZAKARIA: Explain the analogy, so everybody is saving, nobody is spending.

HARFORD: Everyone is saving. No one is spending. Importantly, prices don't adjust. You know, I don't phone you up and say, hey, I'll babysit for you, but you have to give me twice as many tokens. That sort of stuff isn't happening. And in the end, it was fixed by what we might call central bank action. So the equivalent of the Federal Reserve in this case, was the babysitting coop committee and they had the ability to just create more tokens and just give them to everybody. And that fixed it. Which is really strange.

ZAKARIA: Because once you had more tokens you were willing to start trading then.


ZAKARIA: Then the analogy is once the Fed puts more money into the system people who were saving now feel like, well, I've got a little extra I can spend this.

HARFORD: Absolutely. But it's strange when you think about it because the willingness of people to babysit was still there, there were people who wanted to go out, people who wanted to look after each other's children and somehow it didn't happen and it actually took that monetary stimulus to make the economy work. Very important lesson. ZAKARIA: What is the analogy with the prisons?

HARFORD: So in economics, you're trying to look at the system as a whole and that can be hard, so what I wanted to do was to find simple systems that you could see the whole system working. So, the babysitting coop is one. It's quite a famous example. This other example was a prisoner of war camp in the Second World War. And again, this really happened. There were prisoners who were exchanging goods and services for each other, swapping cigarettes, they have futures market, breads today versus bread on Tuesday, had a different price, they were exporting coffee into Germany because they had coffee coming in from the Red Cross and they were in Germany and the Germans wanted coffee, so the coffee would go over the wire. Tremendously sophisticated economy under the circumstances. But it fell into a recession. And the reason it fell into a recession really tells us something about how modern economies work. And what happened was, there was no problem with the economic system, prices adjusted, there were lots of trades going on, but the Red Cross supply parcels dried up.

And so you have these two visions of why we have recessions. The baby sitting coop recession is internal problems that can be fixed with a government stimulus and the prison camp recession, which is the economy is fine, but we got an external shock, the Red Cross parcels dried up, China changed its sense of trade, oil prices went through the roof, there was a banking crisis. And there's nothing the government can do about it. And that's the big divide in economics is the economy like a prison camp or is the economy like a babysitting coop.

ZAKARIA: Now, you mentioned one thing that in the first example, prices don't adjust. Now, most free marketeers would say, but that never happens. Prices adjust very easily. One of the things you point out is prices can actually sometimes be very sticky. You point out that the price of Coca Cola has not changed in 75 years.

HARFORD: Yeah, but it's changed now, but there was a 76-year period where it didn't change. And of course, some prices do adjust very, very quickly. But this is a counter example. So, at first the Coca-Cola company, because of arrangements they had with suppliers and with retailers they didn't want prices to change. So, they advertised a coke is five cents, that's what it cost for a serving of a coke. They made these tea trays with the Coca-Cola is five cents. They put adverts on the side of buildings, painted into the brick work. You had to knock the building down if you wanted to get rid of this advert saying Coke is five cents. And then vending machines. And, of course, old-fashioned wending machines, you put one coin in, you get a coke out. How was Coke going to increase the price? The president of Coca Cola even wrote to President Eisenhower who was a golfing buddy and said Mr. President, have you considered introducing a 7.5 cent coin because that's what it would take for Coke to be able to increase its price, but not to double its price.

So, sometimes prices stick for a very, very long time and those same factors, advertising, consumer expectations, the cost of changing prices, they can make prices stick in a less spectacular way every day. And it makes a difference to the way economies work.

ZAKARIA: Tim Harford, pleasure to have you on.

HARFORD: Thank you.

ZAKARIA: Up next, why the Brits could have to say cheerio to more than whiskey and haggis if Scotland votes for independence this year.


ZAKARIA: According to Amnesty International, 21 countries executed citizens in 2012, but Saudi Arabia was the only one to use the method beheading. Beheading was a common practice in medieval Europe and during the French Revolution the guillotine was invented as a more human method of execution. So when was the last French execution by guillotine? 1832, 1899, 1939, or 1977? Stay tuned and we'll tell you the correct answer.

This week's book of the week is "Stringer" by Anjan Sundaram. It's an excellent debut book of reportage on the Congo, one of the most corrupt and broken countries in the world. The book is also the author's personal journey. He was a mathematician in the U.S. when he decided to buy a one-way ticket to the Congo. The result is a very well-written book.

And now, for the last look, in six months the people of Scotland will cast their votes on succession from the U.K. If they vote for independence, Scots have been warned that they risk losing the pound as their currency. London could lose some control over oil and gas in the North Sea, but they might also have to say cheerio to something more symbolic, the beloved Union Jack. You see, the current flag which hasn't changed in over 200 years is a mix between England's cross of Saint George, Scotland's Cross of St. Andrew and Ireland's cross of St. Patrick. If Scotland leaves the union would St. Andrew's cross get the boot? People send ideas for alternatives to the U.K.'s national flag charity, and the guardian experts to choose from 12 options. Should Britain incorporate the Welsh flag of Saint David, slide the Welsh national flag into the corner, what about adding the royal coat of arms to a modified Union Jack? The winner this one. Well, the Brits are nothing if not traditional. Scotland's blue has simply been replaced with black, perhaps to mourn the loss of Scotland. Luckily, many say this won't be necessary, after all what would happen to all the British overseas' territories and a few countries for that matter, that include the Union Jack in their national flags.

The answer to the "GPS" challenge question is actually D, 1977. This was the same year that Jimmy Carter became president.


UNIDENTIFIED MALE: We meet again at last.

(END VIDEO CLIP) ZAKARIA: The first "Star Wars" came out and Apple 2 computers went on sale. If that seems archaic, lawmakers in some U.S. states have recently suggested that firing sports, electrocutions and gas chambers be used since there's been a lethal injection drug shortage.

Thanks to all of you for being part of my program this week. I will see you next week.