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FAREED ZAKARIA GPS

What Does Immigration Have to Do With Populism?; The Trump Doctrine; Education Testing; Populism in Europe; Interview with Michael Lewis. Aired 10-11a ET

Aired December 11, 2016 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


[10:00:47] FAREED ZAKARIA, CNN ANCHOR: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria coming to you live from New York.

We'll start today with the world that Donald Trump will soon face. Is he pushing back prudently against China or risking an unnecessary conflict?

What will he do about the Iran deal?

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT-ELECT: One of the worst deals ever negotiated.

(END VIDEO CLIP)

ZAKARIA: And even before he takes office, is the war against ISIS won? I'll ask former CIA director James Woolsey, Richard Haass, Ian Bremer and Robin Wright.

Also, math, science, reading. The global rankings on those subjects are just out and the U.S.'s report card is not impressive. What are Singapore, Canada, Hong Kong and Finland doing right? Lessons on education.

And Italy's centrist reformer prime minister Renzi resigned on Wednesday. Another win for the populists in Europe.

I talk to another centrist reformer, France's presidential candidate Emmanuel Macron about populism in the West.

Finally on GPS today, first Saddam, and now this. What is going on in this video? I will explain.

But first, here's my take. A joke among journalists is that we are taught to count this way. One, two, trend. But at this point, I think it's fair to say we are witnessing a populist trend around the world. The question is, what is fueling its extraordinary rise?

Supporters of Donald Trump and other populist movements often point to economics as the key to their success. The slow recovery, wage stagnation, the erosion of manufacturing jobs and rising inequality.

These are clearly powerful contributing factors but it's striking that we see right-wing populism in Sweden which is doing well economically. In Germany, where manufacturing remains robust. In France where workers have many protections.

Here in America, exit polls showed that the majority of voters who identified the economy as the most important issue facing the country cast their ballots for Hillary Clinton.

The one common factor present everywhere there is populism is immigration. In fact, one statistical analysis of European Union countries found that more immigrants invariably means more populist. According to the study, if you extrapolate from current trends as the percentage of immigrants approaches 22 percent, the percentage of right-wing populists exceeds 50 percent.

Hostility to immigration has been a core theme of every one of these populist parties. Another way to test this theory is to note that countries without large-scale immigration like Japan have not seen the same rise of right-wing populism. Another interesting case is Spain, a country that has take in many immigrants but mostly Spanish-speaking Latinos who are easier to assimilate. While you see traditional left- wing economic populism in Spain, you do not see right-wing nationalist movements.

The backlash against immigration must be admitted is rooted in fact. As I pointed out in a foreign affairs essay written in September before Trump's victory, we're living in an age of mass migration. In the last three or four decades, Western societies have seen large influxes of people from different lands and cultures. In 1970, foreign-born people made up under 5 percent of America's population. Today they're about 14 percent.

The rise is even sharper in most European countries now home to 76 million international migrants coming mostly from Africa and more recently the Middle East. Austria, for example, took in almost 100,000 immigrants last year adding 1 percent to its population in 2015 alone.

This much change can be unsettling. For most of human history, people lived, worked and died within a few miles of the place they were born.

[10:05:04] But in recent decades, hundreds of millions of people from poorer countries have moved to wealthier ones. This reflects an economic reality. Rich countries have declining birth rates and need labor. Poor countries have millions who seek better lives. But it does produce anxiety, unease and a cultural backlash. And we're witnessing it across the Western world.

What does it mean for the future? Western societies will have to better manage immigration. They should also place much greater emphasis on assimilation. Canada could be a role model. It has devised smart policies on both fronts and is a model where high levels of skilled immigration plus strong assimilation lead to no major backlash. Eventually, Western societies will be able to be adjust to this new

feature of globalization. Look at young people. In Europe and America, the vast majority of them deeply value the benefits of diversity and they seek to live in an open connected world. That's the future. We just have to ensure that we don't wreck the world before we get there.

For more, go to CNN.com/fareed and read my "Washington Post" column in week and let's get started.

Much to talk about today from Rex Tillerson to Taiwan, Russia to ISIS. Joining me to discuss our two guests in Washington. The former CIA director Jim Woolsey, now a senior adviser to Trump on national security, also Robin Wright, a contributing writer for the "New Yorker" which recently published an important piece by her on ISIS. Here in New York it, Richard Haass is the president of the Council on Foreign Relations and the author of a forthcoming book "A World in Disarray: American Foreign Policy and the Crisis of the Old Order." And Ian Bremmer is the president of the Eurasia Group and a "TIME" magazine columnist.

Robin, let me start with you. If Rex Tillerson is to be the secretary of State, we now have a complete team in place with Mike Flynn, with Mattis. What do you make of the team that is now advising Donald Trump?

ROBIN WRIGHT, CONTRIBUTING WRITER, THE NEW YORKER: Well, it's striking because you have so many people who've never been involved in policy making before. The military officials have been involved in enacting policy but not making, and of course Rex Tillerson as head of Exxon has been someone who has been actually acting sometimes as a challenger to American principles whether it's on human rights or transparency, has engaged in arrangements partnerships with corrupt governments with horrendous human rights records whether it's Russia, Angola, Equatorial Guinea.

This is also a time where you see this -- the idea of profit often overcoming principle. It reminds me of Donald Trump in 1989 during when President Bush, the first President Bush, was trying to make an arms deal with the Soviet Union. Donald Trump, then the best-selling author of the "Art of the Deal," wanted to be the man to negotiate with the Soviet Union.

And this is -- you know, this is uncharted territory for a lot of these people who have enormous responsibility in tackling some of the greatest challenges this nation has faced since World War II.

ZAKARIA: Jim Woolsey, what do you make of the Russia connection? It does seem as though this is now a fairly consistent theme for Donald Trump. You know, he's been all over the map on lots of things but remarkably consistent in being pro-Russia, pro-Putin, and Tillerson would seem to be part of that pattern. Tillerson, of course, being one of the very, very few foreigners to have been awarded Russia's highest civilian honor. I used to recall the Order of Lenin. It's now called something else. But do you think this is -- this speaks to some kind of coherent world view about Russia? JAMES WOOLSEY, SENIOR ADVISER TO DONALD TRUMP ON NATIONAL SECURITY:

Not really. I think this is largely a diplomatic niceties between senior people in government like Putin was in Russia even before he became prime minister and American business leaders. These sorts of have a dinner for me and give me an award things take place with some frequency.

I think the problem with Russia is not likely to be in something like this. But in what they call disinformation which they go to great lengths to produce and have a lot of people involved in it. And it's -- I think will help distort some of our views and ability to work with Russia at least for a time.

[10:10:09] But I think there's a reasonable chance that people like the CEO of Exxon and the former head of the Marine Corps and so forth can do a good job of dealing with Russia. They're used to dealing with tough adversaries.

ZAKARIA: Ian Bremmer, what do you make of this? Because it's not just the Tillerson thing, it's the fact that Trump is now publicly disputing and making fun of the CIA for having come to the conclusion that Russia hacked the DNC and tried to influence the elections.

IAN BREMMER, PRESIDENT, EURASIA GROUP: Yes, and he's not, as you know, been taking the intelligence briefings. Pence has. The idea that he'd say no to CIA is wrong. I understand why he'd do it for partisan purposes because, you know, he won the election, he doesn't want to suggest that he might not have. But the idea that you would go after the CIA when they've made this public. I mean, it's sitting uncomfortably with a lot of Republicans in Congress right now.

The Russia orientation has been the most consistent kind of tact away from the Obama's foreign policy that Trump has had all this way. And Rex Tillerson is more than just a competent CEO. He's a great CEO. But he's also said many, many times that he knows Putin a lot better than all these presidents do -- of the United States. And he felt that Obama's policy was extremely naive.

He probably knows Putin individually better than any American I can think of. And you know, given the fact that this is not going to be about human rights, this is going to be about a transactional tact of the United States toward Russia on Crimea, on Syria, on hacking, on all of these things, Tillerson is certainly a very capable person to implement that policy.

ZAKARIA: Richard, what do you make of the -- because it does strike me as bizarre because there's no particular political advantage to Trump being so pro-Russia. I mean, it's not like there's a big pro- Putin constituency in the United States. Why is it that there are so many ways in which he seems to be signaling a much -- a more conciliatory policy toward Russia.

RICHARD HAASS, PRESIDENT, COUNCIL ON FOREIGN RELATIONS: You know, the short the answer is I don't know. I don't know what strategic or other motives might be. But the fact is, it might be a good moment for the United States and Russia to find some common ground in Syria. I could see the United States and Russia have been talking about it for years, finding some way to have an exit of civilians and fighters out of Aleppo and even down the road.

I think there's a possibility to put some distance between the Russian government and the government of Bashar al-Assad. So I think there's some possibilities there. I think Europe is more complicated, Fareed, and whether we can get the Russians to not just stop doing what they're doing in eastern Ukraine but not to expand and do any challenging of the NATO countries and how we -- how we basically combine getting tougher in Europe in some ways reintroduce military forces into NATO Europe, at the same time, I think we've got to marry that with a diplomatic initiative to Russia.

Remember when Mr. Obama called Russia a regional power? There's no reason to insult them. There's no reason to belittle them. So I think we've got to be diplomatically open at the same time, though, we've got to be 20/20 about what our real interests are and our real differences are in Europe, in the Middle East, and obviously in terms of what it is they've been doing here in terms of getting into our cyber domain.

ZAKARIA: All right. When we come back, we're going to talk about a really interesting question. Is ISIS already on the brink of collapse even before Donald Trump takes office and has promised, of course, to bomb the hell out of them? When we come back.

(COMMERCIAL BREAK)

[10:17:55] ZAKARIA: Back now with Richard Haass and Ian Bremmer here with me in New York and in Washington, Jim Woolsey and Robin Wright join us.

Jim, I wanted to ask you about Robin Wright's excellent essay in the "New Yorker." Basically the argument she lays out is that ISIS is crumbling, that they are down to a very -- a small number of fighters in Mosul. They're likely to be squeezed out of Raqqa. And there's dangers of chaos but that the whole battle against ISIS is largely winning.

And what I want to ask you is this. If this is in fact happening and if the United States is confronting a new situation in Syria and in Iraq, what should its attitude be towards Iran? I know you've always been very tough on Iran and what I'm struck by is the President-elect Trump says we should just leave this all to President Assad in Syria, let him consolidate power. Let him -- you know, retake large parts of Syria but of course Assad is a very close ally of Iran. And in effect, you would be strengthening Iran by giving it its main regional ally a huge boost. So is that a good idea?

WOOLSEY: Well, I think Robin is right about what's happening in the home of the caliphate in Syria and Iraq and that part of the world. But ISIS operates in some 30, 40 countries in one way or another. And one has to deal with them on lots of home turfs, not just on one home -- big home turf. I think it is important to fracture Iran's support for any of its proxies in the Middle East. I think Iran is our main problem in that part of the world. And I

think that it's going to be for some time because it's a theocratic totalitarian set of revolutionaries and I'd say imperialists. They want to build an empire. And that --

[10:20:02] ZAKARIA: But they've been the ones fighting ISIS. I mean, they're allied with Assad.

WOOLSEY: Right.

ZAKARIA: And against ISIS, and again the president-elect seems to like that just fine.

WOOLSEY: These are tactical decisions. We had a tactical decision in 1941 whether to sign on with Stalin against Hitler and we did. And it was good that we did. Sometimes you have to ally temporarily with a bad guy in order to defeat another bad guy. It's happened throughout American history and world history. But I think that's a tactic. The key thing over the long run, the strategy I think has to be to weaken Iran. It's got a lot worse in store for us I think than it has shown so far. And it's the world's leading terrorist state.

ZAKARIA: Robin, what do you make of the kind of the anti-Iran, you know, if you look at James Mattis, he's -- you know, pretty anti-Iran. If you look at Mike Flynn, is there, you know, it feels like there is a very strong orientation that believes that these forces in the Middle East are very dangerous, out to get us. You know, do you see a common theme there? Does it worry you?

WRIGHT: Yes, I think these are all Iran haters basically. The important part of the Iran nuclear deal is it not just prevents Iran for the next 20, 25 years from getting a nuclear weapon but it also sets a precedent. It is the most important nonproliferation agreement in the world anywhere in the last quarter century and it sets us on a difference course. In the same way we came to terms a kind of detente with the Soviet Union, even with Vietnam after losing 58,000 American lives. This was trying at the end of 40 years of tensions to try to figure out a way that we could instead of confronting each other figure out common cause, try to defuse tensions whether it's Iran, Saudi Arabia. Figure out an end to the tragedy in Syria.

And so the Iran initiative was important for a lot of things beyond just Iran. The idea that we can engage in regime change in Iran is an illusion. The regime has proven that it can survive whether we like it or not. And in fact the most important things in many ways to look at in the region is the re-emergence of al Qaeda. And this is, whether it's Iran or ISIS, that the al Qaeda has emerged in Syria. Its strongest presence since 2001. It is becoming in many ways with a fall of Aleppo, the failure of Western-backed rebels.

Al Qaeda's attempt to re-exert its primacy in the region is something that I think will haunt the Trump administration and that we need to be very careful about what our priorities are and that the kind of long-standing hatred or suspicion of Iran is not going to be productive in dealing with the greatest challenges we face in that region. ZAKARIA: All right. We've got to do a lightning round so I just want

to get back to another big issue. So much generated this had week.

Richard Haass, the Taiwan phone call. Now seems ancient history but it's pretty significant. What does it mean and why has it so rattled the Chinese?

HAASS: U.S.-Chinese relationship is arguably the defining relationship of the 21st century. As that relationship goes, so will a lot of this century. And that relationship is based upon an arrangement. One China policy we recognize only the mainland as China. There's this other entity called Taiwan. And this has been the case of successful diplomatic finesse. The United States maintains its diplomatic relations with the mainland, with China, the People's Republic, but we're able to trade, we're able to sell arms, we have de facto diplomatic interaction with Taiwan.

And this has served everybody's interests. And the problem with the phone call, and the aftermath to the phone call, the tweets and so forth, is it essentially jeopardized this finessing and the question is, is the United States now questioning or challenging what has worked for several decades? And my simple analysis is, if it ain't broke, don't fix it. This has worked. And we -- we've chosen what might be the most existential issue for China. There's no one in China who has any flexibility on it. This could get in the way of their willingness and ability to cooperate with us on our agenda, say, a nuclear North Korea.

Be as if the Russians came to us and say, we want a really good relationship with America. But first you've got to give us Russia back. We're not going to do it. So I think we just have to lay off this, continue the status quo, which isn't ideal but it's worked for everybody and focus on working with China with again what I'm really worried about which is a North Korea that can in a couple of years take nuclear weapons, put them on missiles and reach the United States.

ZAKARIA: Very quickly and last word. You're just back from China and Japan. Is everybody in Asia thinking about a post-American world, an America that is stepping back, seems less active, and -- what did you hear?

BREMMER: Japan is not. They're panicked because they see the defense relationship with the U.S. as key. And that's why they're not worried about change in U.S. president. They immediately got on a plane and said we've got to work with you. But the Chinese see opportunity. One of the big problems with this Taiwan call is that American allies in Asia, it's one more question of, what's the consistency? Where do we go?

[10:25:07] China sees a big opportunity to become a bigger leader in the region and economically more broadly, while American allies in Europe, the Middle East and even Asia are saying, you can't count on the Americans. That's a very big problem for us.

ZAKARIA: Fascinating. Thank you all. Next on GPS, why are America's ninth graders ranked 39th in the world

in math? We'll explain.

(COMMERCIAL BREAK)

ZAKARIA: All right. Please take out your number 2 pencils, put them on your desk. We are preparing to talk about just released results of a global standardized test. It's called PISA which stands for Program for International Student Assessment. The report card for the United States was less than stellar. Out of 72 countries and territories in the study, 38 ranked above the United States in math, 24 outranked America in science, and 22 in reading.

Why? And what can we learn from the top ranked nations?

Here to discuss are Wendy Kopp, the founder of Teach For America.

[10:30:00] She now runs a global version of that organization called Teach for All. And Andreas Schleicher is the director of Education and Skills at the OECD, the organization that puts out these PISA rankings.

Andreas, let me start with you, to just understand, you know, that the United States is really extraordinarily -- does extraordinarily poorly here, particularly given how rich it is and particularly given that it spends an enormous amount on education.

So I want you to talk a little bit about what I thought was one of the most surprising countries, which is Vietnam, poor country, developing country, and yet massively outperforms the United States. Why?

SCHLEICHER: Yeah, you know, the world is no longer divided between rich and well-educated nations and poor and badly-educated ones. If you look at countries like Vietnam; so you can look at parts of China, Singapore and many parts of Asia, they have made education a priority. They make sure that they attract the most talented teachers into the (inaudible) classrooms. They get every student to benefit from excellent teaching.

I think they have made huge investments in education. And today, 10 percent of the most disadvantaged children in Vietnam -- and they grow up in very, very poor households -- those children do better than the average American child at age 15 and better than the 10 percent wealthiest children in some of the other countries. So there's huge...

ZAKARIA: So the 10 percent poorest Vietnamese do better than the American average. And to explain, these are probably people who are at a per capita GDP of, you know, maybe a few thousand dollars. And the United States is at a per capita GDP of $50,000.

SCHLEICHER: Yeah. You know, money doesn't buy a good education. It's a lot to do with how to invest those resources. And whenever these countries have to make a choice between, you know, a better teacher and a smaller class, they invest in the capacity; they invest in teaching.

ZAKARIA: What do you think, Wendy, does make for good education?

KOPP: Honestly, there's no magic to it, right? You're not going to find this one thing that makes it all seem easy. These are countries that aim at very high, rigorous standards for kids. They do a tremendous amount to attract their top talent into teaching and into the kind of education workforce more broadly. And then they go about the hard work of continuously improving, as they assess, like, what more do we need to do in order to move towards these standards?

ZAKARIA: But, you know, so you talk about high standards, national standards. That seems to be a core part of all these high-ranking countries. And yet, in the U.S., the Common Core is already -- which is barely one year, or a few years old -- is already under attack.

KOPP: Well, I guess I'd come back to what the PISA results represent as a learning opportunity. You know, having listened to the people who have led the charge on improving the school systems in, say, Finland or in Shanghai -- I mean, some of the -- you know, who have moved their systems from mediocre to the best in the world, the first thing they will say is we sent our educators abroad to learn to open their minds about what is possible. And I actually think one of our biggest challenges in the United States is that we're not doing that. We're not actually going out and seeing what are these countries that are doing so well doing differently?

ZAKARIA: So one final thought. The highest-performing country consistently is a very rich country, Singapore. What is the -- what -- if you had -- could wave a magic wand and have the United States adopt one Singapore strategy, what would it be?

SCHLEICHER: Coherence in policy -- a strong link. It's basically a system that is very carefully crafted and designed, that has a very close link between policy and practice. Teachers are designers of instructional processes, so they are really part of the professional system. They're not the last wheel in a kind of big bureaucracy.

So I think there's a lot we can learn from the success of Singapore. And, remember, in 1965, when Singapore became independent, 2 percent of the adult population could read and write. This is a fairly recent success story. Singapore has become rich because it invested in education.

ZAKARIA: Fascinating report, fascinating conversation. Thank you both very much.

Next on "GPS," David Cameron was toppled by the Brexit referendum. Matteo Renzi resigned after a failed referendum he had staked his political fortunes on. Will the wave of populism continue to roll across Europe?

I will talk to France's presidential candidate Emmanuel Macron.

(COMMERCIAL BREAK)

ZAKARIA: It was a topsy-turvy week in European politics. The far- right-wing victory that many anticipated in Austria did not materialize, but the centrist prime minister Matteo Renzi of Italy lost his job after the failure of a referendum that he had staked his political career on. In 2017, both France and Germany go to the polls to elect their leaders. In both nations, populism is on the upswing, partially emboldened, perhaps, by the one-two punch of Brexit and Trump.

I had the opportunity this week to sit down with Emmanuel Macron. He is a candidate for the presidency in France's upcoming elections. The Economist recently called France Europe's biggest populist danger. Listen in.

(BEGIN VIDEOTAPE)

ZAKARIA: Emmanuel Macron, pleasure to have you on.

MACRON: Hello, Fareed.

ZAKARIA: We are all looking at what is happening in Europe. You are living it. What do you think is going on when you look at the Italian vote?

You know, in Austria, it went the other way. But, in general, in France, you've had Monsieur Fillon do very well. Is this a wave of right-wing populism that is -- that is continuing?

MACRON: No. First of all, I would not compare the different countries and the different trends you mentioned because Mr. Fillon is a classical rightist. That's a conservative approach, but he's not an extremist and he's a very respectful man and nothing comparable with what could have happened in Austria or with, now, the big volatility in Italy after the results of the referendum.

But, for sure, in Europe today, you have a lot of tensions, a lot of tension because of, first, the economic slowdown, plus crisis, because Europe under-delivered in comparison with the U.S., for instance, After the 2008, 2010 crisis.

ZAKARIA: In terms of -- in terms of growth and in terms of jobs?

MACRON: Growth and jobs because, especially for the south of Europe, you still have something between 20 to 30 percent unemployment rate. And for young people, it could reach 50 percent, which is a big issue for me. That's our main challenge.

But, second, you have a lot of tensions in Europe due to the migration crisis and terrorist attacks. So all societies are under tension today. And that's the main challenge for Europe, which is how to address these new issues, how to deal with growth and investment in a new world, with climate change and digital information, and how to deal with security issues and preserve our open societies.

ZAKARIA: Why do you think Trump won? You're here in part to try to understand what you need to understand about the Trump phenomenon.

MACRON: Yes, I'm here to understand this phenomenon and the consequences of this election on our relationship and the relationship between France and Europe and the U.S.

I think it's a mixture of a lot of things. I think Mr. Trump was extremely smart to play with emotion, guts, of your people, and -- and that's the first point.

Second, it was disruptive in a certain way vis-a-vis the rest of the system, and people love that because now they are fed up with the political system.

And third, he understood the frustration of American middle classes and workers about this globalization and the increasing inequalities of this globalization. I'm very doubtful about the ability for Mr. Trump to deliver his program because I think there are a lot of inconsistencies. But we will see. And I do respect the American vote, but now...

ZAKARIA: What does it -- what does it mean for you in Europe?

MACRON: That's a big question mark. For me, the big consequences of Mr. Trump's election are, number one, climate change. Obviously, we need a strong cohesion between Europe and the U.S. to deliver. The Paris agreement was the first step forward, but we need now to deliver. We need to implement this agreement and we have to progress. If the U.S. decides to stop this effort and completely change its mind, it will be a big issue for all of us. That's the main risk for our planet following this election.

Second, security. Mr. Obama started to disengage the U.S. from the Middle East. But now what will Mr. Trump do for this region where classically and historically, the U.S. was involved? And what will be the relationship with -- with Mr. Putin?

For me, the main consequence is that Europe has to strengthen its defense approach, defense policy and its foreign affairs common policy, to preserve its own interests in this new environment.

ZAKARIA: But your main point in foreign policy is Europe may be on its own and may have to come up with its own foreign and defense policy, particularly with regard to the Middle East and Russia?

MACRON: Definitely, I think we have to take into consideration the fact that now it's so critical for us because, in terms of terrorism, in terms of migration, we in Europe have direct consequences of that, that I do think that, obviously, (inaudible) the United Nations, we have now to be much more organized and coordinated to take our responsibilities in this region.

ZAKARIA: Emmanuel Macron, pleasure to have you on.

MACRON: Thanks very much.

(END VIDEOTAPE)

ZAKARIA: Up next, the fantastic writer Michael Lewis has a brand-new book out. It's a fascinating tale of a friendship and collaboration that has changed the way we think, really, about everything. You won't want to miss this.

(COMMERCIAL BREAK)

ZAKARIA: Michael Lewis is one of the most successful book authors, ever since his debut "Liar's Poker." He has written "Moneyball," "The Blind Side" and "The Big Short," all later turned into movies.

"Moneyball" was about the Oakland As baseball team and its real-life quest to pick the best prospective players. The team figured out how to game the system by, as Lewis says, using better data and better analysis of that data to find market inefficiencies.

Now, there was a review of "Moneyball" by the academics Richard Thaler and Cass Sunstein, who pointed out that much of what the As were doing was stripping human bias out of the equation of managing a ball team. That kind of analysis had been pioneered, they pointed out, by a pair of Israeli social scientists, Daniel Kahneman and Amos Tversky, who did groundbreaking work on behavioral economics, as Lewis says, a field that focuses on the biases and irrational behavior of human beings.

Lewis had never heard of Kahneman and Tversky, so he dug into the topic and ended up writing a book about the duo, "The Undoing Project: A Friendship That Changed Our Minds."

Welcome back, Michael.

LEWIS: Thank you, Fareed. Good to see you.

ZAKARIA: So one of the things that we always talk about nowadays is the way in which people act, sort of, irrationally. And "irrationally" sounds bad, but not in a way that can be predicted easily.

So even in this election, people point out that, you know, people who think they're acting in their economic interests don't act in their economic interests. So there are all these irrational or hidden biases we have. To put it very simply, what is it that Kahneman and Tversky have made us understand about this field?

LEWIS: Generally, what their work was about was showing that the mind is, though roughly well-equipped to, kind of, get us through life and the judgments we have to make, it's not wired to make probabilistic judgments. And so when it's faced with, like, probabilistic situations, it doesn't do statistics; it tells stories. And sometimes -- and those stories are skewed in predictable ways, by memory, by the way we think in stereotypes, by -- I mean, there are a whole range of things that are (inaudible) but in ways that are predictable and -- and systemic.

So if people can be systematically irrational, then markets can be systematically irrational, which is why they -- how they infiltrate economics.

ZAKARIA: So one of the classic cases that they point out is what's called regression to the mean. So any time somebody has a streak, a lucky streak in gambling, in sports -- Hollywood executives are often promoted because, you know, the last six movies they made were fantastic. And then people are always surprised that the next six movies aren't that good...

LEWIS: Right.

(LAUGHTER)

That's right.

ZAKARIA: ... or that their lucky hand -- and what their point is, this should have been predictable because it's like coin tosses. If you get seven heads in a row, chances are, at some point, you're going to start getting tails.

LEWIS: Well, they -- but they would say that that's true, what you just said is true. What's going on there, people seeing patterns where the -- meaningful patterns where the patterns are not meaningful.

And every Wall Street con man knows this. I mean, there's a famous con where you're -- if you're giving stock market advice to individual investors, you tell half the people that IBM stock is going down and half that it's going up, and then if it goes up, you go back to that half and you tell them Hewlett Packard is going up -- half of 'em Hewlett Packard's going up and half that Hewlett Packard's going down. And after two or three turns, they go, "Wow, this guy -- you know, he's on a hot streak; this guy really knows what he's talking about."

And, yes, they were sensitive to the way people's, kind of, blindness to statistical truths led them astray.

ZAKARIA: You said that there are also stereotypes, that we make decisions on stereotypes rather than data. What are examples of that?

LEWIS: Well, I'll give you an example because "Moneyball" was a great example. You have the Oakland As looking for bargains in the market for baseball players. Why should there even be that, right, that you have -- you have all this data attached to baseball players when they're on the job. The experts supposedly know what they're doing in picking the baseball players. And the As quickly figured out that, if you could find players who -- if you focused on players who didn't look like baseball players, if they're fat, really fat, or if they were short or they had something -- something physically off about them, you were likely to find -- you were more likely to find a bargain because people had -- even the experts had a stereotype of what a baseball player looked like.

I mean, I think we do this with all jobs, that, you know, like 60 percent of the CEOs of Fortune 500 companies are, like, white men who are 6'1" or taller. What's the likelihood that -- I mean, that's the, you know, who should be the CEOs of Fortune 500 companies?

We have this idea in our head of what they look like.

ZAKARIA: Donald Trump says Mitt Romney looks like a secretary of state. LEWIS: Precisely. I mean, I think he's really -- he's really trapped

in the kind of --this. So they pointed -- they just -- one of the things they pointed out was just the power of stereotypes to deceive people in those judgments.

ZAKARIA: But what's depressing about this in some ways is you point out that this is really how the human mind works. They find that this is absolutely predictable, that we will be irrational and even irrational in predictable ways. What does that mean for those of us who believe in rationalism, who believe that you should study data and that you should make decisions on the basis of the best available information?

LEWIS: Well, their work and their ideas have infiltrated lots of spheres of human activity. So medical judgments are made differently because of them and financial judgments, in many cases, are made differently because of them. And the sporting world is changing. So there are signs of progress. It's not a depressing story. But they would have themselves said that correcting for these yourself -- it's virtually impossible, that we're talking about, kind of, cognitive illusions. And the analogy is with an optical illusion. And if you are on the -- if you are experiencing an optical illusion, even when someone points out that it's -- that's not water on the highway ahead as you're driving through the desert, you still see the -- you still see the mirage, right?

So they would say that you still, that even when your error is pointed out, you're still, kind of, a victim of it. So the way -- I mean, I think the general response that's hopeful is to understand that we've got to build decision-making environments to -- to account for these errors in human judgment.

ZAKARIA: One final thought. Does the friendship here strike you as remarkable, unusual? I mean, it seems like these two guys are almost thinking as one.

LEWIS: It's a love story. I mean, they're as passionate about each other as if they were lovers. And they weren't lovers, but they almost might as well have been. And I talked to other academics about their collaboration. They say this just doesn't happen, that, yeah, people come together and collaborate, but they don't fall in love; they don't break up. They don't have this arc that looks like a tragic love story. It's just -- it's very unusual. The emotions that their intellectual sparks generated was -- I mean, it's what attracted me to the story in the first place.

ZAKARIA: And it's, kind of, irrational in its own way.

LEWIS: Yes, it is.

(LAUGHTER)

ZAKARIA: Michael Lewis, pleasure to have you on.

(COMMERCIAL BREAK) ZAKARIA: Last week, President-elect Donald Trump accepted a phone call from Taiwanese President Tsai Ing-wen, raising questions about his plans for the future of U.S. relations with China. And it brings me to my question of the week. Who was the only sitting American president to actually visit Taiwan: FDR, Harry Truman, Dwight Eisenhower or Richard Nixon?

Stay tuned and we'll tell you the correct answer.

This week's book of the week is "Shoe Dog," by Phil Knight. I picked this up because Bill Gates recommended it on his blog and it was well worth it. The founder of Nike has written an extraordinary memoir, one of the best stories of entrepreneurship I've ever read. It's well written but, most strikingly, it's a deeply honest account of all the doubts, setbacks and trade-offs on the way to business super-success.

The correct answer to our challenge question was C. President Eisenhower traveled to Taipei in June 1960, where he met with the then-president of Taiwan, officially the Republic of China, Chiang Kai-shek. At the time, of course, the United States did not have diplomatic relations with mainland China. The Taiwanese haven't forgotten this presidential visit to the island. Last year they pledged a $1 million donation towards an Eisenhower memorial in Washington, D.C.

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