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FAREED ZAKARIA GPS
Panel Talks about Elections in Afghanistan, Situation in Ukraine, Middle East Peace Talks; Interview with Michael Lewis
Aired April 6, 2014 - 10:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FAREED ZAKARIA, 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, live in New York.
We'll begin today's show with yesterday's election in Afghanistan. Will it change anything? What will happen to the Taliban and terrorism as American troops leave? We'll also talk about Ukraine and the Middle East peace talks with a great panel.
Then, I sit down with Michael Lewis. He says Wall Street is rigged. That some traders have an unfair advantage, skimming money out of your pockets and into their own. But is he right? Watch and find out.
Also in the wake of the Fort Hood shootings, we will introduce you to an Army general with the solution to the problem of mentally unstable soldiers with guns. And we will tell you why he can't get his way in Washington.
Finally, a Shakespearean tragedy related to Syria. But it's not what you're thinking. This one will actually make you smile.
But first, here's my take. For those of you tired of the coverage of Malaysian Airlines Flight 370, I want you to try and experiment. When you're with a group of friends whose eyes might roll over when you bring up the issue, ask them what they think happened to the plane. Very quickly you will find yourselves in the midst of a lively discussion with many different competing theories, each plausible, each with holes.
The plane was hijacked, someone will say. But then why were there no demands? It was an accident, someone else will say. But then why were there no distress signals?
This mystery of what actually happened is at the heart of the fascination with the story. And the mystery has now morphed into an ever-increasing number of conspiracy theories about what actually happened that fateful day last month when the aircraft disappeared.
There are YouTube clips suggesting that aliens are involved. Blog posts accusing the Iranians of hijacking the plane. And many who believe that the passengers and crew are alive perhaps on an island somewhere like in the television show "Lost."
I was thinking about some of these theories the other day as I was looking at a new book by Harvard law professor and former Obama official Cass Sunstein. It's titled "Conspiracy Theories and Other Dangerous Ideas."
The lead essay in the book explains why conspiracy theories spread. And Flight 370 is a perfect example of his logic. Sunstein treats conspiracy theories seriously, by which I mean he doesn't assume that people are crazy to believe them.
In fact, he argues that so many people in so many countries believe such theories that we need to understand why and how. A key condition that helps fuel conspiracy theories is a lack of information.
When information is scarce, conspiracies abound. We don't actually know a lot of things about what happened to that plane.
Now, the trend is heightened when there is distrust of politics, politicians, or people in authority. One can see that in somewhat opaque political systems like Malaysia and China. But one can also see that in the United States, a country famously distrustful of its government.
Sunstein points out that when a triggering event produces intense feelings and emotions, people in a state of fear or rage find it easier to believe in far-fetched ideas. An assassination, like that of JFK, a terrorist attack like 9/11, or an airline crash all tend to produce high emotions and a search for something or someone on which to put the blame.
Groupthink also takes over when the people who are affected or interested tend to gather, talk to one another, and communicate in isolation. Their convictions tend to get hardened. So if everyone you talk to and listen to and watch believes that President Obama is hiding his birth certificate, you get even more sure about the secret plot over time.
The most important overriding reason, however, is that we human beings don't like to believe that things happen for arbitrary reasons. We search for a pattern. And if we see one, no matter how implausible, we prefer that to the idea of randomness.
Sunstein points out that the philosopher Karl Popper said that human beings like to believe in intention. That an event is caused by specific human intention and action. So we exaggerate the competence of people or governments or big banks because someone must have directed things.
Now sometimes there are conspiracies. But my own sense of the world is that things often happen because of mistakes, bad information, and unintended consequences, or as Hanlon's law puts it, never attribute to malice what can be better explained by incompetence.
Perhaps the biggest driver of events is something truly mysterious, chance. Things go well or badly because of luck, sometimes good luck, sometimes bad luck, much more than we'd like to admit. And the combination of chance, ignorance, and incompetence often produces something that looks like a mystery and feels like a conspiracy.
Let's get started.
On Saturday in Afghanistan an estimated 7 million people went to the polls to vote for the nation's next leader. The war-torn nation and its international protectors were bracing for terrible violence. The Taliban, after all, had vowed to disrupt the vote in any way it could.
And there was violence. The ministry of information says there were 140 attacks or attempted attacks, and almost a thousand polling stations had to be closed for security reasons, one out of every six. CNN's Anna Coren joins me now from Kabul.
Anna, those numbers, actually, when you put them in the context of Afghanistan's history in the previous elections, are actually quite a success, correct?
ANNA COREN, CNN CORRESPONDENT: Yes, absolutely, Fareed. There is no doubt about it. Doesn't matter how you want to tell this story, it is a success story. And the people of Afghanistan are certainly celebrating.
You know, as you say, they turned out in the millions, 7 million in total. That's more than 50 percent of the voting population. Compare that to back in 2009. It was only 35 percent of the voting population.
And the other thing, really important thing, Fareed, to take into account is that a third of the voters that lined up at the polling stations yesterday were women. You know, this is a country that in some parts of it treat women like second-class citizens. So to see the enormous turnout of women was just -- you know, it was truly heartening.
This country just has so much promise, so much potential. And those people who lined up want to see that change. That was something that came from every single person that we spoke to yesterday, Fareed.
They want to see change. They want a president who is going to bring peace, bring stability, bring all those things that they'd hoped that President Hamid Karzai would have brought in the past 12 years.
And now they're relying on the next man to do that. That will either be Ashraf Ghani, Dr. Abdullah, or Dr. Rassoul. We won't have the preliminary results until the 28th of April. And even then, Fareed, it's likely that this will lead to a runoff. So that second election probably won't take place until the end of May.
ZAKARIA: Anna, I know you were with the Americans who were training the Afghan national army. And this election has been a success largely because of the security measures put in place.
We don't have a lot of time, but very briefly, what's your sense of what happens when the Americans leave? Do you think the Afghan national army can stand on its own and deal with things like these elections?
COREN: Well, they certainly had an enormous test yesterday and they passed with flying colors. Yes, all 350,000 of the Afghan national security forces were out to protect the people at the polling stations.
But earlier this week, Fareed, we sat down with ISAF Commander General Joseph Dunford. He's the man in control of this entire military operation in Afghanistan. And he said that the Afghans are now running the show.
Yes, the U.S. is withdrawing at the end of the year, but, you know, those three top presidential candidates, all of them have agreed to sign or at least they have said they will sign the bilateral security agreement.
And that, of course, Fareed, as we know, will ensure that there is an enduring presence here in Afghanistan post-2014. And that is critical. General Dunford believes that it will happen, that there will be an enduring force of perhaps up to 10,000 American and coalition troops...
ZAKARIA: We've got to...
ZAKARIA: We've got go, Anna.
COREN: ... here on the ground, Fareed, to ensure that this doesn't become a safe haven for al Qaeda in the future.
ZAKARIA: We've got to go, Anna. Fantastic reporting. Thank you so much.
We will be right back with a panel to discuss Afghanistan, Russia, and Middle East peace. Fantastic panel. Stay with us.
ZAKARIA: Welcome back. We are going to go around the world with a great panel. Richard Haass is the president of the Council on Foreign Relations. Peter Beinart is a contributor to Atlantic Media and a columnist for Haaretz. Carlotta Gall is the New York Times' reporter and the author of "The Wrong Enemy: American in Afghanistan, 2001 to 2014," which will be in book stores on Tuesday. And Bret Stephens is the foreign affairs columnist for The Wall Street Journal.
Carlotta, the elections in Afghanistan: do you think that this resolves anything? You know, what is the likely political orientation of Afghanistan going forward, in a kind of post-Karzai world?
CARLOTTA GALL, NEW YORK TIMES: I think, for starters, we see the three frontrunners will all sign the bilateral security agreement with the States. They've all said that. ZAKARIA: Which would allow American troops to stay?
GALL: Yeah, and to have some way forward, a plan forward. Because, at the moment, there is this drift, with President Karzai refusing to sign, talking of dealing with the Taliban. I think the next three -- the three frontrunners are very clear on their plans. And I think we will have some clarity and a better relationship.
ZAKARIA: So that's good news. But, Richard, Americans are certainly tiring of this war. For the first time, the numbers show that a majority of Americans think the Afghanistan war was a mistake. Are we going to keep troops and what would they do?
HAASS: Well, sure. If the Afghan government will agree to keep, say, 10,000, 15,000 American troops, we will do it. The president enjoys, as you know, enormous latitude when it comes to decisions of this sort. The American people won't object so long as there's not a lot of casualties.
And, interestingly enough, last month was the first month in, what, six, seven years when no Americans died in Afghanistan. And these troops will be doing some limited counterterrorism and training and advising. It's the sort of thing we should have left in Iraq. I think we will get it right in Afghanistan.
ZAKARIA: Do you think that there should be a much larger force? Because a lot of people feel 5,000 or 10,000 troops, which seems to be the number talked about, is too small to do much.
STEPHENS: You want about 15,000, 20,000 troops. You want to make sure that there is an American guarantee that the Taliban never returns to power, is never able to come back to major population centers in Kandahar, southern Afghanistan. You also want an American presence because it's from the U.S. bases in Afghanistan that we were able to get bin Laden, that we were able to conduct vital counterterrorism operations and make sure that Pakistan, AfPak, if you will, doesn't become again the locus of international terrorism directed at Europe and the West.
ZAKARIA: Peter, a lot of people on the left, though, feel like Obama is, you know, sort of, almost reneging on a kind of commitment to end wars and things like that. What do you think?
BEINART: No, I don't think so. I think what most Americans really care about is exactly what you said, the fact that no Americans have died in Afghanistan and Iraq. When you think about what just happened at Fort Hood and you realize it's not just the number of Americans who die but it's the extraordinary number of Americans who are severely injured both in body and soul, in terms of post-traumatic stress disorder, that I think this is one of Obama's major accomplishments as president. He said he was going to do this. He's doing it.
Now, is the future for Afghanistan? Not necessarily. But I think it's been pretty clear, and not that controversial domestically, that Obama's moving towards a counterterrorism strategy, as Brett suggested, and that our days of significant nationbuilding in Afghanistan are over. And I don't hear a lot of Republican objections to that.
ZAKARIA: Carlotta, what is going to happen to Afghanistan, given this one crucial factor?
And this was always my point of contention with David Petraeus when he would talk about the counterinsurgency, which was how can you succeed in a counterinsurgency, even perhaps in counterterrorism, when the neighboring country, Pakistan, is actively providing safe havens, assistance, training?
You had this fantastic piece in the New York Times magazine which basically outlined the ways in which it seemed very likely that the Pakistani government knew about bin Laden. What do you think Pakistan's role will be once we start pulling out? They're going to try to fill that vacuum, probably?
GALL: I think it's already clear they're determined to see a resurgence of the Taliban. They're supporting them. They're encouraging them. There's been a spate of attacks just now. I was just in Kabul two days ago. We had a suicide bombing almost every day that I was there in the last week. And that's all coming from Pakistan. The madrassas have closed, you know, they're all going in.
And that's clearly what needs to be looked at very strongly because the Pakistanis have not finished their war and what they want is, through a proxy force, to dominate affairs in Afghanistan, and they're still going to continue.
ZAKARIA: And that proxy force is the Taliban for Pakistan.
GALL: The Taliban, yeah. And, actually, Al Qaida -- I've shown that they were -- they were protecting and hiding bin Laden. And al- Zawahiri, who has taken over from bin Laden as head of Al Qaida -- he's in Pakistan. And I have a passage in the book which shows that they, certainly in 2005, they were hiding him, the Pakistani government.
ZAKARIA: Do you think the Pakistani government knows where Zawahiri, the head of Al Qaida, is?
GALL: Yes, absolutely.
ZAKARIA: What do you do with -- Pakistan is our ally. We give them -- I mean, the Pakistani military is sustained by American military aid.
HAASS: We should never use the word "ally" or "partner" when it comes to Pakistan. Let's not kid ourselves. They're not. We're often operating at cross purposes. The reason we've had as much trouble in Afghanistan as we've had is because of more than a decade of Pakistani policy. They are going to use the Taliban as an instrument. I think you can probably expect the Taliban to gain significant ground in the south of Afghanistan where they have the Pashtun ethnic connection. The north will not be under their control. The real battle will ultimately be for Kabul, whether you have a functioning central area.
Pakistan will continue to be an enormous problem and we're limited simply by the fact that we can't do too much against them because we don't want Pakistan to fail. It's got the largest -- I mean, it's got the fastest-growing nuclear arsenal in the world. It's home to all these terrorists. In a funny sort of way, as bad as they are, we're immobilized by our fear that things could actually get worse.
ZAKARIA: Do you have any better ideas on how to handle Pakistan?
BEINART: No. I think what will be interesting though is the kind of -- the "Great Game" that follows as America withdraws a little bit. You know, some of the alliances could be interesting here. For instance, what role does Russia play, right?
Russia historically has actually been closer to the United States's side than Pakistan's side in terms of supporting anti-Taliban forces.
ZAKARIA: And notice on that front that India did not vote to condemn Russia on the Ukraine issue in the U.N., presumably because they want Russian support in the great game that will follow in Afghanistan.
BEINART: Right. And it just shows how American interests and alliances on that sphere, how different they look from Ukraine.
ZAKARIA: All right. We are going to come back and talk about what happens in Ukraine and the Middle East peace process, when we come back.
ZAKARIA: And we are back with Richard Haass, Peter Beinart, Carlotta Gall, and Bret Stephens.
I want to talk about peace process before we talk about the other stuff. What do you think this last week, the shenanigans have told us, you know, maybe we're pardoning Jonathan Pollard, maybe we're not, the peace talks are going to fail, that they're not going to fail? What's going on?
HAASS: In the long run, it's irrelevant for the purposes of peace whether Mr. Pollard is in prison or not. It won't affect the basics. The real question, is the situation right? Are the leaders involved willing and able to make peace? I'm skeptical.
But let's just say for a second I'm wrong. So what? Right now, I think what we have to admit is that the Israeli-Palestinian peace process is -- while it's of importance to Israelis and Palestinians, it has become a local dispute.
It won't affect the dynamics in the Middle East. It's not going to affect the trajectory of the civil war in Syria or what's going on in Egypt between the government and the Muslim Brothers, or what's happening elsewhere.
This has become a local dispute that, quite honestly, is not worthy of the time and attention the secretary of state and the United States are giving. He should be spending more time, I would think, on our next subject, dealing with the mechanics, if you will, of Ukraine, strengthening the government there.
And he should be spending more time in Asia where, for example, American diplomacy really could do a lot of good, say, keeping China and Japan away from one another.
BEINART: But, remember, America also sees itself, and I would support this, as Israel's protector as a country that has a special obligation to Israel. I think if the peace process is over, then I think America's capacity to actually protect Israel will be significantly diminished.
BEINART: Because we will move into a sphere in which international pressure on Israel comes to the fore, both the Palestinians going to the United Nations and especially the Boycott Divestment Sanction effort, which is a kind of end-run around the United States government, because it goes through universities, labor unions, church organizations, we won't be able to stop that.
So it may be in our interest, but I think the end of the American-led peace process is going to be a very bad development for Israel.
ZAKARIA: What do you think? Would it be a bad development for Israel?
STEPHENS: No, the peace process won't end. It will go into abeyance. The peace process is one of these things that will always be there at some stratum. It just doesn't need to be the first order priority for the United States.
And Richard was absolutely right. I mean, John Kerry was champing on a very green banana here, and it's no surprise that he ends up with indigestion. It was predictable from the start that you weren't going to find an agreement between an Israel that's very skeptical not just of the Palestinians, but also about the broader course of the Middle East, and a Palestinian Authority that's hopelessly riven between two factions that won't reconcile with each other much less with Israel.
So the focus, the attention, the pursuit of this was just squandered American political capital in a region that needs U.S. attention in Syria, in Egypt, in Iran, elsewhere.
ZAKARIA: Carlotta, what do you think of this broader premise that the Palestinians -- for so many years, people have said, if you solve the Palestinian issue it will help the United States, it will ease tensions?
ZAKARIA: You lived in Pakistan and Afghanistan. How important was that Palestinian issue in their perception of the United States?
GALL: It was in the background. And that's why I think as a background thing, it's really important because it was part of every sense of grievance, every sense of "we must fight," every reason for al Qaeda starting. You know, it was Abdullah Azzam, a Palestinian, who started al Qaeda.
And I'm now in North Africa, and all those Arab countries, you can see, it's an underlying theme. And it's not, I agree, today's immediate issue perhaps. But it would create an enormous change in general atmosphere in the Arab world, I believe, and the Muslim world if there was a way forward, because it feeds and fuels the youth and you can feel the resentment when you talk to people on the street. It's always there.
ZAKARIA: I know we could talk about Israel and Palestine the whole time. But, Richard, could the administration do much more than it has done on Ukraine? It feels like we're in a situation where Putin has taken Crimea, but he's paying a price with the reaction of the Ukrainians, other neighbors, NATO, the European Union, and the United States.
Could it -- could we have actually reversed this course?
HAASS: No. Real estate history rules, location, location, location. Sort of strategy. Geography, if you will, it favors the Russians. So in terms of Crimea, no. The Europeans simply would not have been there, Russian support for what Putin did was so robust.
Where the administration could have and still could do more is to make sure it doesn't go beyond this. The sanctions that would hit Russia if it were to do more, we should line up the Europeans and be very explicit in saying, here's what will happen if you do this, and here's, by the way, the cost to your economy, Mr. Putin, and potentially to your political position at home.
We could do more potentially to strengthen other parts of NATO. We should be in there really trying to make sure this Ukrainian government does not go the way of previous ones and fail. So, yes, there's more we can do.
ZAKARIA: But let me ask you this. There's a lot more that has happened than when Putin invaded Georgia, fair?
STEPHENS: Well, yes, because nothing happened when Putin invaded Georgia, which was a shameful climb-down by the Bush administration in its last days in office.
Sanctioning, what, 20 Russian individuals, one Russian bank, is just simply insufficient. And it sends a signal to Putin that essentially he can get away with this kind of thing. It whets his appetite for Transnistria, Moldova, even the Baltic States. Where would he go next? This is especially the case because this is a vote winner. This is popular among the Russian people. He sees himself re-legitimizing his role because taking Crimea has raised his popularity.
ZAKARIA: Quick thought.
BEINART: I think the most important thing for Ukraine as they go towards these elections, is that they have a government that has some degree of internal legitimacy especially in the East. We need to help this government be economically strong enough and be savvy enough to basically - to be able to win over loyalty, especially of Ukrainians in the eastern part and that takes away Russia's biggest card they want to play to try to destabilize the Eastern part of that country.
ZAKARIA: Last thoughts.
GALL: I wouldn't trust Putin an inch. I saw him in Chechnya. You know, he's very clever undermining a country that he has to invade and he is prepared to use brute force. I wouldn't - I would say you have to do a lot more, as you say, to warn him off. Because he's -- I think he won't stop.
ZAKARIA: On that sobering note, thank you all. Pleasure to have you on. Up next, is there a solution to the military mental health problems? A way to stem the bloodshed? Well, there is at least a partial solution. One advocated by many generals. I will explain.
ZAKARIA: And now for our "What in the World" segment. When I heard about the shooting at Fort Hood earlier this week, one thing stood out to me. The alleged shooter, 34-year-old Army Specialist Ivan Lopez, was being treated for mental health issues. Mental health issues, many believe to be caused by duty in Afghanistan and Iraq are a scourge upon our military. In 2012, a record 350 soldiers killed themselves. That's more than died on the battlefield. And between 2008 and 2010, nearly two thirds of all suicides in the United States military involve firearms. One former military heavyweight whom I talked with last year said, enough.
ZAKARIA: You're a general, and you are an Army man. You've spent your life around guns. You're comfortable with them. You know they can be used responsibly. But you also feel that when people are at risk in terms of mental issues, it is very dangerous for them to have access to guns.
GEN. PETER W. CHIARELLI (RET), U.S. ARMY: It is very dangerous for them to have access to guns. I believe that.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: General Chiarelli, will discuss the report and the suicide prevention efforts in the Army.
(END VIDEO CLIP) ZAKARIA: General Peter Chiarelli, now retired, took over as the Army's vice chief of staff in 2008. The Army suicide rate had doubled since 2001.
CHIARELLI: This is an area that we have to, in fact, attack.
ZAKARIA: And he was tasked with battling the epidemic.
UNIDENTIFIED MALE: As soon as they go silently (ph), run that ....
CHIARELLI: I would be very, very careful in not underestimating the impact of 13 years of war on an all-volunteer force. I think we were seeing in those suicide numbers some of the effect of repeated deployments and high stress and trauma.
ZAKARIA: To better understand the issue, Chiarelli was briefed on the details of every single suicide that occurred during the four years that he was the Army's number two officer. In 2010, a Eureka moment.
ADMIRAL MICHAEL MULLEN: I do want to express our thoughts and condolences.
ZAKARIA: Admiral Michael Mullen, then chairman of the Joint Chiefs of Staff had sent an article from a medical journal to the Pentagon's top brass.
CHIARELLI: It showed how this particular medical organization working with a really high risk population of people who could commit suicide had lowered their suicide rate to zero for a three-year period solely by recommending to people who were in crisis to separate themselves from their privately owned weapons. That was striking to me.
ZAKARIA: Another striking example. Israel. In 2006, the Israeli Defense Forces tackled the rising suicides among their troops. They forbid soldiers from bringing their weapons home on weekends. On weekends, the suicide rate dropped by 40 percent. The week day rate remained flat.
CHIARELLI: It's hugely powerful. And you don't have to just look at Israel. It's just so many studies.
ZAKARIA (on camera): What do you say to those who say, well, there is the Second Amendment and that's why you can't go much further with your efforts?
CHIARELLI: I don't buy that. I don't believe the Second Amendment was put in place to take a person who is at high risk for hurting themselves and put in their hands a weapon in an impulsive moment at a time when they're not thinking straight, they can end their life.
ZAKARIA (voice over): So what happened when General Chiarelli tried to institute it in the Army? He says Pentagon lawyers told him it was a no-go.
UNIDENTIFIED MALE: Our freedom is under attack like never before.
ZAKARIA: But the National Rifle Association would try to block him. They tried, but they didn't fully succeed. The National Defense Authorization Act passed in January 2013 now allows military leaders merely to ask troops about private firearms if they believe service members are at risk of harming themselves or others. Not the strong law Chiarelli asked for, but a start. We don't know whether a stronger law would have made a difference in this week's Fort Hood shootings, the alleged weapon are privately owned semiautomatic pistol was not registered with the base as rules require. But many senior military leaders believe that if there were in place a system by which soldiers who are identified as at-risk was separated from their guns, we would see many fewer of these kinds of shootings. When we come back, Michael Lewis, the best-selling author, explains why he believes the stock market is actually rigged.
ZAKARIA: When you picture Wall Street traders, you probably imagine the New York Stock Exchange and guys, it's almost always guys, in brightly colored jackets buying and selling stocks by making indecipherable hand gestures. But even though the guys are still there, they really exist mostly for photo-ops. According to Michael Lewis, it is computers, literal black boxes that rule the roost and make the trades on Wall Street these days. And he says people with access to those black boxes have rigged Wall Street and not in your favor. Lewis, the best-selling author of "The Blind Side" and "Moneyball" has a new book. "Flash Boys, a Wall Street Revolt."
When you picture Wall Street traders, you probably imagine the New York Stock Exchange and guys, it's almost always guys, in brightly colored jackets buying and selling stocks by making indecipherable hand gestures.
But even though the guys are still there, they really exist mostly for photo-ops. According to Michael Lewis, it is computers, literal black boxes, that rule the roost and make the trades on Wall Street these days. And he says people with access to the black boxes have rigged Wall Street and not in your favor.
Lewis, the best selling author of the "Blind Side and "Moneyball" has a new book "Flash Boys: A Wall Street Revolt."
MICHAEL LEWIS, AUTHOR: Thanks, Fareed. Good to see you.
ZAKARIA: So, everybody knows your basic assertion that Wall Street is rigged. But let me ask you to start by telling us about these amazing fiberoptic lines, the building of these lines and why and how you figured out that they had to be straight, straight, straight.
LEWIS: So what's happened in the last few years in the American stock market -- and actually foreign stock markets, too, is that some traders have a speed advantage on everybody else. They're willing to pay vast sums of money for very tiny increments of speed. And the speed with which they can get a signal from the Chicago futures exchange to the stocks exchanges in New Jersey is important to them.
Up until 2007, 2008, the fastest line that was available was like a Verizon wireless line and the cable, the fiberoptic cable went like this from Chicago to New Jersey. A trader on the Chicago exchange who was sensitive to the fact that people would pay a fortune for a tiny bit of speed realizes if he laid a straight line from Chicago to New Jersey, he could do it four milliseconds faster.
And he did it in complete stealth, dug a tunnel from the Chicago mercantile exchange in Chicago to a building outside of the NASDAQ stock exchange and laid this straight fiber.
And without knowing exactly what the market for it was or anything, he goes in to high frequency traders and basically says if you don't have this, you're out of business. And the fact that someone could dig a tunnel, I mean, it was evolving -- a project involving thousands of men, I mean, cost $300 million, $400 million, ran through states, public right-of-ways in states without anybody knowing what it was for.
ZAKARIA: And to improve speed by...
LEWIS: Four millisecond.
ZAKARIA: Four milliseconds.
LEWIS: Three or four milliseconds.
ZAKARIA: Which is about the time it takes for the Chicago S&P's futures to be sent to New York, that is -- so the S&P goes up...
LEWIS: So the point of the line from the point of view for the speed traders, is that the market movements, whether it's going up or down by a lot register first in Chicago in the futures exchange. So they're making, supposedly making markets in 4,000 individual stocks in New Jersey. If they can get the signal first, the market is going down, they can get out or they can even sell to other people. So it gives them advance news on price movements in the market.
ZAKARIA: So let me take you back, step back and if you look at what you're describing, it seems to me what you're talking about is more technology, more information, price information and more competition. And if you look over the last 20 years, haven't those three forces powerfully helped consumers in finance? That is to say, if you go back 20 or 30 years ago, it was much more expensive to buy and sell stocks. There were many more intermediaries, fancy brokers who you have to go to and that all these forces have been powerful kind of forces for the future. LEWIS: Absolutely true. So that's absolutely true. The information technology, what has happened is essentially made, put certain businesses on Wall Street out of business. It made certain functions that Wall Street used to serve, bringing buyers and sellers together, a human being bringing together unnecessary.
The problem is that, though a lot of the gains of the technology have been shared with the consumer, in this case the investor, and it's true that it's cheaper now to trade stocks than ever before, unnecessary rents have been captured by Wall Street. They still -- they didn't deliver all the gates. They have created a role for itself, for Wall Street to sit between buyers and sellers, completely unnecessarily and extract -- and tax, essentially levy a tax on the investor.
So, it's as if -- what's it like -- so it's sort of like 20 years ago when I lived in London and I had to make a call to my parents in New Orleans. I'd pay $3 a minute. And if I lived there now, what is it, pennies a minute, right?
It's as if someone -- whoever -- it's as the technologist who arranged that, gave me most of the gains but charged me 20 cents a minute now and said now I feel great, I can make my call for 20 cents a minute instead of $3 a minute. That's not the right comparison.
It should be cheaper. As cheap as its gotten, it should be cheaper and more frictionless and there should be less of a role for Wall Street in the middle of stock market transactions than there is.
ZAKARIA: Now, the "Wall Street Journal" in an editorial says the reason you have these complexities that you describe, that you just called the kind of intermediaries where Wall Street has been able to put itself in the middle of transactions between consumers and stocks is because of regulations, because there are a whole bunch of regulations that require a lot of this to happen. And that in other words, if you were...
LEWIS: They enable it. They enable it.
No, I think if you ask like who the culprit is, I don't think -- it's an interesting story, because it isn't a conspiracy that was cooked up in advance. It's an -- it looks like one in retrospect, but it wasn't. Nobody knew the consequences of regulation that was passed basically in 2007. And it isn't just high frequency traders, they aren't -- I mean they aren't really -- they're not the villain in this in any way, really, they're just -- they're taking advantage of a system that's broken.
ZAKARIA: What do you think of the characters you met in this? I mean, you've spent time on Wall Street, you've met people like this, but these -- a lot of the people seem like they're really kind of scientists of a kind -- mathematicians, engineers.
LEWIS: So, this is what's happening on Wall Street, it is happening in every market and the stock market in a way has gotten there first. Technology is supplanting traders. I mean, the technologists and the traders are merging. So it used to be in days when I worked there, the people who handled the computers were like IT geeks in the basement and nobody thought -- their status was low.
One of the reasons I think that high frequency trading industry has grown up outside of the big banks is the banks have trouble giving status to the technologists and this is all about technologists. It's all about the software.
ZAKARIA: So I guess my sort of conclusion from this, the part that I have a little bit of difficulty with understanding it seems to me, again, maybe as somebody who grew up outside the United States, that the great thing about American markets is that they are open, they're transparent, they're fast, they're well-regulated. And that the faster they've gotten -- you know, the more technology, the more transparency, the more competition has been great for consumers, for people like me.
It feels like you're almost saying that that stuff is bad?
LEWIS: No, no, no, no, not saying that at all. There's a distinction that needs to be made and that's between computerized trading and computerized scalping. And the problem is that when technology hit Wall Street, Wall Street figured out ways to use it for its purposes that were not in the interest of investors.
A lot of what happened was very good. What we need in a way is -- I mean, the computerization is fantastic. The technology is a force for good. We just need to remove Wall Street from the process. I mean, I think the technology is sort of telling us, you don't need these services that they're trying to provide you. You don't need all this trading, this unnecessary intermediation.
Goldman Sachs has come out and said that, that the system, as it's structured, the problem is not just that people are getting scalped. They are. But that's not the big problem. The big problem is that the system to -- that generates the scalping is so complicated that it is unstable. And the worry is that the system is, the flash crashes, and NASDAQ outages and the technology failures we've seen in the markets are a result of an overly complicated system and the complexity is there by design. It's there to disguise the scalping.
ZAKARIA: Michael Lewis, pleasure to have you on.
LEWIS: Thanks for having me.
ZAKARIA: Up next, why you will say bravo to a Shakespearean tragedy in Syria. We'll explain.
ZAKARIA: This week the Eiffel Tower celebrated its 125th anniversary. When it was completed in 1889 for the World's Fair in Paris, it was the world's tallest manmade structure measuring almost 1,000 feet. What landmark was the first to eclipse that height? A, the Statue of Liberty, b, Washington Monument, C, the Chrysler building or D, the Empire State Building? Stay tuned, and we'll tell you the correct answer. We have an exciting new way for you to get more of GPS even after the show is over. It is our flip board page, which has all of the great expert analysis you've come to expect as well as some insights from me. Check it out at flip.it/Fareed. This week's book of the week is David Runciman's "The Confidence Trap." If you think American democracy doesn't work these days, you have to read this well-written book. Runciman starts with World War I and takes us through the recent financial crash showing how democracies and American democracy in particular lurched from crisis to crisis muddling along, but somehow always surviving outlasting their enemies and even thriving. Now for the last look.
This month marks William Shakespeare's 450th birthday and people around the world are celebrating from Stratfordians to Syrians. Yes, Syrians. 100 Syrian children have just performed an adaptation of King Lear in one of the world's largest refugee camps located in Jordan. The Zaatari Camp is home to over 100,000 Syrian refugees over half of whom are under the age of 18. Many of the children are not educated and have never read or seen any of Shakespeare's work, but they are no strangers, of course, to the tragedy of the human condition. And this particular play, a story of exile, a ruler losing grip with reality, a land divided by rival groups, a tale of human cruelty seems especially relevant. While the refugee camp may seem like the unlikeliest of places to discover Shakespeare, the playwright himself, might not have thought so. After all, mentioning faraway places was common in his place. In both Macbeth and Othello, in fact, Shakespeare mentions the Syrian city of Aleppo. Another reminder that Syria is one of the oldest centers of human civilization, which makes the current violence there seem even more tragic.
The correct answer to our GPS challenge question is C, the Eiffel Tower looked down on the competition for over four decades until 1930 when the art-deco masterpiece, the Chrysler building was completed. The Chrysler building only enjoyed a year at the top bested by its neighbor, the Empire State Building in 1931. Today, the Burj Khalifa in Dubai reigns supreme measuring over half a mile high. That is higher than the Eiffel Tower and the Chrysler building put together. Thanks to all of you for being part of my program this week.