>> congratulations on your new book. . .

and i think the book tries to speak directly to that issue, and one of the most important is the success of the 1% is responsible for the growth of the wages. some of the commentators say the inequality that we experienced is to the great gatsby area of the 1920s and it wasn't just recently tha but as far as the 1970s historically high levels of inequality. >> guest: we can go to measuring nontaxable social security which i think have a bigger impact, smaller families, things like that, households not working whether they were retired or other reason those things i think go all the way back to where we were but do we pass through the era where

innovation has been strong like it was with electricity and cars and industrializing the economy and i think some fortunes have been made as a result and perhaps we are not at that lev level. an innovator had to share his success and in the economy today it was information-based and knowledge-based you could scale to the economic success, google, facebook, almost no investors at all so they can scale without having to share the value with investors so that allows them to get quite wealthy.

>> host: you talk about the reasons for the rise in equality and wage growth. it's been a tough time for a lot of workers. >> guest: if leads to the controversy in the book of the manufacturing engineer at ford motor company i grew up in the midwest and spent my whole life in manufacturing and we moved the planned and tell the workers don't worry, they are going to put you back to work and compete with each other. raise the productivity back to where it is and you will be back to where you were before but i think that the workers say they've moved to california and outsourced to china meanwhile the engineers are designing products and intellectual workers and i'm waiting for them to put me back to work but so are the adults and adult

children that a lot of people are looking for innovation and supervision and entrepreneurialism. i think those things can increase wages but they might slow the growth relative to the rest of the economy. >> host: with the slow wage growth it seems like a natural thing to do to redistribute more and give more to the people at the bottom of the economic ladder that's not what you want to do. >> guest: i recognize that as a possibility because i think if you are a 50-year-ol were a 50-r that spent your life working and you've are trained in your endeavor to get a job at the same level you were at we need to be thoughtful about that. but one of my chief concerns is the upside of inequality is the

combination of the pool of highly trained, highly motivated talent taking the risks that grow the economy and the talent is working inside of institutions like google in silicon valley that amplify the productivity. those institutions were built slowly over time through a risk-taking because they've been around for job trading. there is a synergistic value of the places like silicon valley in the way that it tickled for someone on the outside to make those investments successful, and all posting those things am, magnify the productivity, the most talented workers. it's been twice as fast than

japan and the median incomes that are 30 to 50% higher year. if you look at the alien dollar ipos that haven't gone public with yet we've created a 250 billion in europe over the same period created 25 billion of the value that is the tip of the iceberg with an indication that our economy is producing relative to theirs if they were not sharing disproportionately the benefits that we were creating, the growth will be slower. still, what amazes me is we are looking at this scores for example 25% of the test scores, 40% scandinavian. almost 50% of japan. we are doing it with a smaller group of people that are better trained, more motivated and having the productivity amplified in a way that the rest of the world hasn't been able to achieve. i worry that if you slow that

down you look at how much since the 1990s where those countries were growing faster than they were catching up to where we were but that stopped in the early 1990s and we've moved away from them quite dramatically. >> host: what is the evidence that the tax code would slow that down if we enacted the policies and raised the capital games, do you think bill gates wouldn't have created at microsoft? >> guest: it's pretty clear he didn't expect to be a multibillionaire when he was running the system. they clearly didn't need that kind of money to motivate them to do it. but it isn't for the individual you used the bigger picture which is really what is happening. it's more the failure randomly

this person might discover it but if you did in silicon valley and the people working for training that went in there which is to school, on-the-job training, risk-taking etc. you do see that there's been an enormous increase in the amount of high-tech risk-taking as risktakers have chased after those. where do we see people taking enormous risks, bc where they are much higher. it is two points to print and kansas. that's small in comparison to all the other things that are amplified in the payoff of the risk-taking. but on the other hand if i'm sitting in the café trying to

come up with the next ideas, what chance do i have to find working at google and i have a network of friends, of course i will be more prone because i have a higher probability of succeeding and i have a much better idea to begin with so naturally it would be more inclined because it seems like common sense. it won't have the institutional capabilities to grow fast in the economy. >> host: in silicon valley and not the higher tax rate, why not so we can help the middle class. >> guest: they were created gradually over time through successful risk-taking that bubbles up from a hail of

risk-taking so i think we always have the option of weekend tax and distribute it in the short run but in the long run, look at the difference between the growth rate and look at the difference between the income levels of the united states and japan. they get bigger and bigger and bigger and the ability for those catch up and not be fallen behind its unlikely unless they have a major shift in technology and biology or something else besides what i think we are headed towards in the consciousness with computers and the internet we have a big advantage we can sustain forever but we certainly have a big competitive advantage today. >> host: in the book you go through five different myths and i will let you explain why. one is the incentives don't matter. i think it is the payoffs are higher in silicon valley.

>> host: but they matter some where they matter a lot. i agree with you on this by the way but if he would have done it anyway, why not tax him a lot. he wants to be taxed more so how would you convince -- >> guest: i look at the u.s. and france and germany. we could also visit but i don't think we will get to definitive evidence that doesn't exist. we all know what is the elasticity of raising taxes over the long run i think everybody would have a consensus that we don't know. there isn't enough data to define so i think you have to decide for yourself what you believe. i look at the difference since

the early 1990s and it's shocking i believe. if you look at north korea and south korea and russia versus europe and taiwan and new china versus the old china. >> guest: i think that over time those differences compound to create institutional capabilities that have a huge magnifying effect and that's why i think in the states if you look at bill gates it's not really relevant you'd have to see what would happen if silicon valley that would have raised the tax rates significantly and that would have slowed the gradual accumulation and the creation of the capability that i think matter a lot. show me the example where the tax rate is high and somebody is

allowing the capabilities fast faster. you go back to the 1950s and you would find the networks and highways rebuilt this enormous mass market and we have people returning back from the war when you have two decades from the great depression where no innovation had been implemented. so we've fallen behind the natural rate of growth on the skeptical growth so there were numerous reasons and there was a huge migration out of the agriculture into manufacturing. so those things wind up in the e way that magnified the gains, but nobody paid 90%. taxes were lower than they are today the corporate taxes were lower than coming and they argue in the book that it's very circumstantial even though we try to have these generalized

truths. i think because the economy is capital intensive, what is the large corporation of doctors and gamblers and general motors, large corporations, very capital intensive. we then transition that it's not growing anymore and we have a transition to service, but ultimately that is competing with each other. it happens to be the information intensive area when risk-taking and talent are growing more of an investment. it's become much more entrepreneurial and it looks like they have a difficult time innovating and succeeding. but we may come to an area we stop global warming and the

whole thing will change to another dynamic than the one we are living in today. it just happens to be today it is entrepreneurs without capital who seem to be driving the growth. >> host: success is largely unearned, why is that? >> guest: the argument on the other side of 1% has gained their success by negotiating with their cronies that there has been a huge rise in crony capitalism. there is a misdemeanor level in order people willing to do felonies for. if we misallocated what they

would have to do to account for this we should have seen a slowdown in growth relative to the high wage economies we saw an acceleration in growth. >> host: maybe not as much as but relative to the other ones. >> host: if you are running in a marathon and hit the hill how are you doing relative to everyone else is a better way to gauge what is happening. you would turn over the status quo and if it is growing more entrenched, that would be the indication of success. what we see is the turnover in the fortune 500 if you look at the cutting edge in technology the 15 largest companies in 2000, the only one that is anythinevenheld onto the markett are down to 40% of the value and there is a whole new sense of competitors at that level.

if you look at the forbes 400 it's like 75 or 80% or so of me workers, business owners. if you look at the difference between the ceo pay and worker pay its largely driven by. it's a creation of new businesses that are more valuable in the dispersion of the returns and manufacturing shifting towards technology and we see less dispersion in the rest of the economy that is a case competitive and over here where the innovation is wide dispersion which again show shoe was youthe disruption of the sts quo. it's where the evidence on the other side other than rising

income equality. >> host: i'm willing to bypass most of the people have inherited this themselves and the harder question is what they are creating great social value. when you see robert downey junior make a great movie, when you see the social value, a lot of it is being made in the finance industry. we could occupy silicon valley or hollywood. we had occupied wall street and ththe big money there wasn't beg earned. how do you justify the big bucks being made by the hedge fund managers? >> guest: i think it is more complicated. we will probably get to this later, but i believe the trade deficit we have little risk for those in the economy. they would sit unused an and we

would get slow growth unemployment high wages. somebody had to innovate how we would put it back to work and get back to full employment. nobody was working on that problem except for wall street. i don't want to be a defender wall street, but they did a couple things. they figured out how to securitize mortgages and they charge them into different levels of risk and created a syndication make it so the pools to the entire world. they found a logical risk taker that at least does put the money to work and they went with a poor credit rating and said i don't know if you noticed, but your house has risen in value. you will never get that money again. you've basically won the lottery and we can facilitate that what they no money down no risk to you. it didn't work out so well

because thinking is an equilibrium that can be everybody has their money in the bank to everybody is rushing to get their money out of the bank. the trade deficit has destabilized the system and my point is only they came up with an innovation that in 2006 and 2007 we thought was a good idea and we paid a lot of money because we look back and think it wasn't so great and we are not going to pay that for you anymore and the volumes are down and they are earning a lot less. we woul would i complain if thes any inside information maybe it was occurring in a way that we couldn't see it but whatever we saw we took action and it's not even real inside information but people had information we thought was even close i think we have unique insights about what makes business successful and we employed them in the

public investing business and we made better returns on average as a result and i think one of those insights is if you have a lot of market share you will get a lot of return on investment and that's the value of the future investment opportunity is more valuable than the market recognizes and what you want too do is get the companies to invest more in those opportunities because the managers are over investing and you can pick that up and capture that value and that will have a big impact on the value of the company have used that publicly and privately to a great benef benefit. it's hard to account for everything we've seen. investment opportunities are in short supply. >> guest: this is the stagnation i look and say

silicon valley is on fire. they don't need a lot of capital because there's a difference between do we need risk adverse savings of the kind that comes in as a trade deficit i don't think this economy has much need for it. i don't look at it and say there's a shortage of investment opportunities but there's the kind that needed that savings and i also agree with ben bernanke not only is there a shortage of investment opportunities that need that savings because of the trade deficit but when you look at silicon valley, it is on tiger and they are scared to death of disruption and getting the talent they need to find alternative investments that will keep your business profitable in the long run and

the third thing i talk about is if you look at the intangible investment you see nothing but the rise through the recession slowing down but you don't see evidence of a big falloff in investment. >> host: do you think that productivity growth will start coming back? >> guest: it can be complicated for a number of reasons but one, you have a lottery that he will either get rich with little need for investors or you will fail. that is attractive to people that don't have money because it is the only way they will get rich. we took too much talent and we are now putting a lot of talent into these risky bet and it's very profitable and i say in the book we may be over investing in as a result there's a whole

source of supervision but to the extent they were not supervising and they were over here playing the lottery and they've overplayed they might come up with a consciousness that will all change because i think over here to the extent they are not doing this and if you say supervised all of this, too unless it is contributing proportionately to the resource that i would say is talent and risk-taking what you want to see is a slowdown in productivity. i think it is typical to see the slowdown in productivity because people are fearful and when you change all of the regulations people are confused. people were taking risks in banking like there's no tomorrow. today they would be scared to death to take the kind of risk

they were. that may be good or bad but it will certainly slow down the productivity regulations because people have a wait and see but later they will be looking for the edges to figure out where they can take the risk nobody else is taking and we are not doing that today. >> host: progress hollows out the middle class. the middle class is struggling. >> guest: i hired some who look record by record what's going on and we look at the income distribution for the full-time workers and what you see is there is no change in the distribution except out at the tail, .1% and you see an upward shift in the media and, so you look at the study fo for examplt is as there's been an 11% hollowing out in the middle

class. that is using the distribution as it shifts forward about seven of those 11 points came from income moving up into four of the planes were income moving down. if you look at the four points, three of them came from the low skilled immigrants at one point came from everybody else moving down. so seven points up and one point down. not such a trade-off when seven of the eight plates are from upward movement. this one is mobility has declined. >> guest: first we know the study that looked comprehensively at this at this point in time it shows no decline in mobility for the united states. i think the more interesting thing i find in the book is if you look at comparisons that have the best mobility and the most equally distributed income, it is virtual except for the 20%.

if you peel an onion on the bottom, it's almost identical to scandinavian and blacks are very different from scandinavia and if you look at african-american mobility, you find this mobility across all races and demographics, single motherhood, high school dropouts. when you look at the bottom 20% of the population or the u.s. population they track almost identically to the single motherhood and the effects. if you look at the other income levels, sa they look similar toe rest. so my point is i don't think there's an economic reason why we might see mobility slowing down at that rate. >> host: one of the books that influenced my thinking is the

race pin education and technology. education is on the other side of the ledger so the conclusion is that we need to push forward on increasing the years of schooling and that is the main thing we need to do. your book has some skeptical things to say about education. why is that? >> guest: one thing i would say, great book by the way, it doesn't segregate the 1% of the .1% and when you do that you see that it's in the .1. at the highest slice if you look at the effects of education more broadly, it isn't quite as dramatic as the book makes it out to be and that is most of

the inequality that we have seen eventually you can slice up so tightly it appears to have increased. but i look at can we find off the shelf technology that would make education more successful. people say the test scores are high here in europe for example so i look at the comparisons. if you look at white americans versus europeans they score virtually identical. if you look at the low social economic children the score is the same or better than europe. so there really isn't evidence that they have some secret sauce that we failed to implement. another place people feel to look at his massachusetts. they score highly from the first time they are tested across all demographics and they don't improve relative over the rest of the course. you would expect the opposite

and then they go through 12 years of school and gets better and better. if you look at charter schools, it is one area that we found the no excuse charter schools appear to work independent of the selection of the obviously the parents do want that for their children and will fight hard to get past just like any parent that's trying to send their kid to private school so the student population is going to be overrepresenteoverrepresented bd very hard at some people work hard to figure that out and it still appears they do seem to have an effect and the book calls for the expansion of that. i think if you look at some of the work it suggests about 85%

not that we are trying to blame teachers for the success or failure. most are hard-working people trying to do the best they can but we were not able to. one o of the things i call on in the book is a constitutional amendment banning the teachers tenure because parents should have the right to fire the bottom percentage. but i don't think that we say here's some off-the-shelf technology we haven't implemented all we need to do is spend more money to implement that and somehow our education system is going to get better. on the high end there's a lot of things we could be doing. there's a lot of students that are not subjec studying subjecto there is a surplus of talent but the shortage willing to put the less fortunate fellow man into jobs that are more productive and higher-paying.

you are interesteyou're interesr things and that is to satisfy the demand. that is a strenuous and painful job that yes it pays highly but also it gets you out of bed at 6 a.m. in the morning and keeps you in the office at 10:00 because you've taken on responsibilities and those way on your shoulders which is to say that the working man is and working hard to put food on his table and make ends meet but i think you find that there are a lot of talented people that have not accepted the moral responsibility and they say we should inculcate that group. also if you look at the talented families they don't graduate for as successfully. there may be reasons for that.

i think we can be a lot more thoughtful how to get them into the best possible schools and get them through the schools to feel the obligation of helping the community than the other kids. but i'm skeptical that we will have dramatic change in any reasonable time. a and b. are bumping into big problems like retiring baby boomers and i don't think that we will improve education in a in the short run of the matter. >> host: some argued for preschool for underprivileged kids and president obama has argued for that as well. you said you are skeptical. >> guest: if you look at all of the research, you don't see very many examples where it has truly been successful and it's not so simple that we just get

the kids to preschool and do whatever we want and somehow that will have a dramatic effect. what you find as they d is theyw effects in the fourth grade but after the 12 what you find in ththe studies and it is encouraging and does have an effect on civic responsibility though it might not improve test scores i worry about the whole foreign effect and i do all these things you more likely to feel special that if i give it to everybody, you may not feel so special anymore. so i said we should continue to run a lot of experiments because we all believe that it's highly classic the younger you are and there's things we might be able to do. we don't know much about it yet other than it's probably a real opportunity we don't know how to take advantage of it. i don't think the large-scale permits have proven successful.

>> host: earlier we had no definitive evidence on the impact and we believed lower tax rateover taxrates at the top ar. some how were you leaning to the direction that it's more difficult? >> guest: the tax is more ambiguous because -- there's very few definitive successes in the daycare area when you dig into the hard-core literature that has a lot of propaganda you have to sort of sort that out to figure out what's going on and i say it is not so mixed at that level but different people have different points. >> host: there was a book some years ago by thomas pick eddie.

talking about equality, very different points of view he argued a lot going forwar forwad implement the policy proposals was a tax on wealth. hillary clinton hasn't proposed a tax on wealth but an estate tax. how do you feel about that proposal? >> guest: on the proposal i would say there are two constraints to growth. one is the willingness and capacity to take risk and the other is talent. they are sort of two sides of the same coin if i have to talented but i don't so i don't take the risk. it's willing to take risks and putting money in the bank saying i will fund the investment as long as you are willing to write the risk. equity is precious and it comes from a kind of lottery process

competitive advantages. competition can water it back down to zero. so when it arrives we should treat it with the preciousness it deserves as opposed to taking it for granted to redistribute it and consume is when we are lucky to get it in the first place. everybody wanted to me that there's a lot of audit economics and the booin the book where soe generate higher returns on investment despite the fact nobody needs the investment anymore and we don't have any need for the investment. even paul krugman has been critical that there is no underpinning and i would also say if you look at the evidence he puts forward about the 1%, i think that he misstates the

evidence in the data points to the 70% of the self-made business not from the public company ceos negotiating with the cronies and the studies at the university of chicago as a private company ceo pay on the board of the private companies you are not negotiating with your cronies. they've been very similar which is an indication that it's not increasingly doing their job less and less effectively if anything we see faster turnover in ceo pay. >> host: so you're skeptical of education and the tax. what would you do? [laughter] >> guest: it existguest co. it a

reason. >> host: >> guest: we are in a much better world and we are willing to say so. >> host: that should read make america grateful again. >> guest: we should go recruit more and say there's 100 million full-time workers and the 5 million of the 7 billion people in the world half of those we don't know who they are. half are too young, too old and the top 5% who potentially would move to the united states people should fear our immigration strategy at that level as we bring it over here and use it to magnify the productivity and success of the risk-taking more

than the institutions in their home countries but that is driving growth and we could double it by bringing another 5 million. i don't know if it gives more than one plus one but that i think is the best shot for growth. there is no panel i know that argues against immigration. >> guest: if you look at the tax numbers it pays about what they get in government services so they are not contributing anything to the retirement and they are not helping the old people today or the poor. that is done by the top 20%. so why don't we do this euro tax rate and charge them the full cost of the government services instead of having a poor depression. >> host: how does that work i use the national defense.

>> guest: talking about federal -- i say that i do it proportionate to the amount of income. you can give vouchers for the healthcare subsidized but it's complicated. but ultimately i think if you did have a person say i'm not paying any taxes but if i want to buy government services here's what they cost. we can get it for half the price and i'm not so eager to have services that i have to pay for as opposed to free services so we put the pressure on the spending and remember the binding constraint if they spend the money and consume the resources and the private sector sends it is a more effective way to spend resources and it would

shift to the private sector. can you explain your view why we should be worried about the trade deficit. >> guest: ultimately you have germany, china, mexico but let's look at germany there's enormous saving levels. we buy goods from them rather than buying the goods that improve america they loan us the money and that pushes the risk to the banking system unused with the interest rate. i said that there is not a great investment opportunity to come back as equity and it's not as though people make the argument just because those that risk

averse don't start taking risks. they put the money in the banking system and say you find a person to put up the collateral and i'm willing to come the investment and i'm perfectly happy to stuff my mattress with corn rather than put it into the system and have risk-taking so i look at trade and its 13% export, 15% import. the first dollar of trade brings a lot of value from that. if you get 13 to 16.5 and wait for it to break even you are probably awfully close to breaking even but what happens at that level when we crossed the point is we start giving up jobs unless we take the risk of the risk adverse savings but my argument is we are constrained by the willingness to take risks and the interest rate is zero and they are sitting in the

bank. >> host: supposed that they were buying the equity with it. >> host: [inaudible] >> guest: there is a big equity premium in the stock market rate even though the margin is at recession levels and they are getting to the recession levels and beat liquidity premiums are high as well meaning you can get it out tomorrow. you have to get people to take the equity risk and liquidity risk so it's not so simple they just start buying equity in the stock market but it would be better because the risk adverse

savers when you talk about going off on a tangent here we would have been for the fearful people to lie and its unused. larry summers tried to sell the same idea for his idea of infrastructure and we all agree that it's better than just redistribution but what he doesn't tell you in the proposal is unless it increases government spending and it's not borrowing the money sitting on the sidelines so folks have to invest in infrastructure and increase government spending. it's a 36% of gdp state and local include included, projecto grow nine points over the next 30 years that's up to 45%. it is up to 35 and projected to go to 140 and those projections are low because they assume we will drive the spending to zero

which we are not going to do. so, the imbalance is even greater. do i think spending more money iand the government rather than the private sector will help us more in the long run it's hard to believe that if someone said what you rather spend it on infrastructure than an entitlement program i would say yes i would rather spend on infrastructure, it's my argument is whether the government spends over the private sector either way it consumes the resources. so if the government consumes it then they will dialback and that is not the clouding out of savings which is the traditional way they think about it. the interest rate is zero into the savingandthe savings are si. >> host: earlier in your life you were at gain capital. can you tell us how about influence your view of how the

economy works. >> guest: i was an engineer who spent a lot of time on the decision inside and then on the shop floor i worked out bain consulting. but i think this is an insight i described earlier which is if you truly have a competitive advantage, the easiest one to buy is he for the largest competitor in your state it works up opportunities that are more valuable than it would be if you were earning close to the cost of capital in the competition and can barely get out more than it costs. and those opportunities are undervalued by the market even including the investors and if f you buy them and invest them that can create an enormous amount of value. what held us back, the amount of talent we would hire the guys

and trained -- and first thing you do is go to the competitor. so the cost of training these talented guys is expensive because we get very few of them on the back end of the process it's hard to get them to stay and create value on our behalf. so i started to bump into things and the other thing i learned is you have to pay a lot of money to take the risk they take a lot less than you want to take because disrupting the status quo is a risky thing to do. the organization turns against me and i have a hard time surviving. what i want to do is be the ceo as long as i possibly can be and to minimize risks in my career as opposed to the investo what r wants them to do which is to take more risk in trying to improve the future and make those investments those are all

things that put their career in jeopardy and if you pay enough money they will take those risks but i believe they did is underpaid the management team and that is the performance they've been living for a long time. they have a huge stream of investment opportunities. that doesn'if that doesn't work. but that doesn't make sense. >> host: i'm guessing you benefited. can you define what that means and tell us your view whether it is a loophole as people suggested and if it should be fixed. >> guest: i don't think it is the answer but people can disagree. it's investing $100 some investors putting it up and then it comes to us as a general partner to say we will give you 5% or 20% or whatever the case

may be. that's your compensation for having managed the investment. why is it not taxed like others? >> guest: you are only going to earn it if the investment increases in value. so you are not getting 5% of its 5% of everything above that. so very often the average will be close to zero because you haven't created much value and there is a rates on how much you have to earn that the tax law is very simple and says somebody is going to pay this tax. if it was an investor who would have captured the capital gain bear with me for a second if they get 5 give 5% to you, you'e going to pay the 20% of the 5%. 20%, 5%. the reason and corporations

where the corporate managers don't get the capital gains treatment on their option is because of the double taxation they takbasic and ordinary incoe deduction and say that's fine but if you take the deduction somebody will pay the 50% tax and that deduction might reduce the tax revenue so they simply looked through it all to say what would my tax revenue have been coming u and i'm going to collect it. so what we could do and we do this all the time to sell to the family trust we have to get a valuation of what we think the options are and they use a traditional way to calculate the value and then they say okay that's the value they got. but that is in nickel.

almost all the money in my bank account didn't come from the options they gave me. it was the value that was created not only for me. >> host: it looks like you are being compensated for your time and paying a lower tax rate and that seems fundamentally unfair. >> guest: there is a piece of that and i agree that is the value of the option. you immediately look up the value of that option in "the wall street journal" and say that's what we get charged. what you really see is those options we were very clever about what we bought and invested i in and we've are able to make them worth a lot of money. maybe we can make an argument to lower the corporate tax and raise the capital gains because

part of the reason it is low is because of the double taxation of corporate taxes which maybe doesn't apply or it does apply because the corporations and profits are getting taxed. >> host: there's a lot of politics in the air. when you look around at the politicians running for national office or local office are there certain politicians that are saying the right things are certaiorcertain ones that are se wrong thing? i would never be able to vote for hillary clinton to increase spending $200 billion a year as the time when 36% of gdp total spending has no insight to the increase that we are going to see that seems like a prescription for very low growth

and the marginal tax rate 43% federal states. i don't think that is why his economic policy. i think in the case of donald trump we scratch our heads on behavior that is hard to understand and try to weigh that against d. want to take that risk versus what i view as slower growth. i think you are getting out of the realm of economics. so it's hard for me to make that call publicly. >> host: what do you think about the negotiation of trade agreements? >> guest: i think trade deficits are a problem and you can't make for $20 what you want for $2. it is a big mistake and i think on the fiscal policy we will blow the entitlements and cut

the taxes. with a dead at 75% of the gdp i can't support that. >> host: i read your book and success. you view the world and he views economic outcome is largely based on luck. you say that success is largely earn a. >> guest: 99% of my success was behind me the day i was born. i studied math and went to business school and i was a student council president counci thought a lot about leadership, went on to consulting and learned a lot about business and i did take risks along the way.

ultimately i lucked out and i told them i would work for free. if i get incredibly lucky, of course. it doesn't matter that the individual level. there's a pool of people trying to get lucky. you need a pool of people trying who aren't even trying but still get lucky. if you don't get the institution and the growth capabilities that ultimately drive the growth of the economy. what's happening at the individual level, you need 99 unlucky people to get one lucky person. i don't think that we can reward the unlucky because that will

lead us to history majors who are not trying to get reworded anyway. you have to say no you are a harvard student, you do have a moral obligation to put that talent to work you can do it through philanthropy but another way through is satisfying the demand and there's a reason they call it that. it's painful to satisfy them. you want people to get training to be motivated him to take thee risk and ultimately they will fail. but how do we go back and adjudicate you had a good idea but i'm sorry it didn't work. maybe you had a better team to implement it because you have to capability but you succeeded and he did and so we are going to divide it between the two of y you. it's nice in theory but it can't

work in practice in the way that it's worked for the united states. >> host: let me say i feel like i have been very lucky having had this opportunity to talk to you for the past hour, so thank you very much and congratulations on what is a really terrific book. i don't agree with all of it but i found all of its provocative and worth reading. thank you. >> guest: thank you.

.. >> book tvs live coverage of the 16th and you'll national book festival continues from the convention center here in washington, dc. the next author you'll hear from in the history and biography tent is another

presidential historian, doug, doug brinkley. he will talk about his book, rightful heritage. it's about fdr fdr and environmentalism. that's coming up a little later. as we continue our conversation with authors here we are pleased to be joined by ken burns, documentary filmmaker and author whose most recent book is more of a children's book. >> it is a children's book. >> so i am the very lucky father of four daughters ages 35 - 5. when they got to be five years old i would read them bedtime stories and then lay with them and recite the presidents and then they would gradually learn and i would prompt them. i would say george they would say washington, i was a john, they would say adams. when they got to the middle of the pack i would go grover they would say kleven, i would say benjamin david sadie harrison, and then