captioning funded by cbs and ford-- built for the road ahead. >> kroft: for 150 years, the floor of the new york stock exchange was the center of the financial world. but today, most trading in stocks is done elsewhere by robot computers that buy and sell in microseconds, faster than you can blink an eye. are humans ever involved in the trading? >> humans are not involved in the trading because humans are way too slow. >> kroft: and the computers have done so well that some institutional traders have come to believe that the game is rigged. >> how can you make money day after day?

there was even one firm that said they made money four years in a row every single day. well, you have to be getting information that other people don't have. otherwise, statistically, that's an impossibility. >> stahl: we were taken down excavated tunnels and shown one of the world's great archeological wonders-- the holy city built atop an ancient waterway carved into the stone... >> the whole beginning of life in ancient jerusalem happened from this little spring which is nestled in this little cave. >> stahl: ...where diggers are unearthing thousands of years of history, sandbag by sandbag. so why is this dig underground creating tension at street level, and sparking horrifying incidents like this one? >> cooper: but this is from the new album. >> yeah, this is from... yeah, "born this way," yeah. >> cooper: lady gaga is the most talked about entertainer in the world. >> cut those cameras. you can't have anymore. ♪ baby, there's no other...

>> cooper: in the past three years, she's had seven number one hit songs. and her latest album is topping the charts. tonight, find out why she calls herself a master of the art of fame. what are you wearing today? >> i just didn't want to wear clothes today for whatever reason. i just didn't. >> i'm steve kroft. >> i'm lesley stahl. >> i'm bob simon. >> i'm morley safer. >> i'm anderson cooper. >> i'm scott pelley. those stories tonight on "60 minutes." ♪ [ female announcer ] the gerber generation has discovered a scientific breakthrough. ♪ the immune supporting probiotics like those found in breastmilk... can be found in gerber good start protect formula. it's one brilliant formula for baby formula,

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>> kroft: most people don't know it, but the majority of the stock trades in the united states are no longer being made by human beings. they're being made by robot computers capable of buying and selling thousands of different securities in the time it takes you to blink an eye. these supercomputers, which actually decide which stocks to buy and sell, are operating on highly secret instructions programmed into them by math wizards, who may or may not know anything about the value of the companies that are being traded. it's known as high frequency trading, a phenomenon that's swept over much of wall street in the past few years, and played a supporting role in the mini market crash last spring that saw the dow jones industrial average plunge 600 points in 15 minutes. as we first reported last fall, the securities and exchange commission and members of congress have begun asking some

tough questions about its usefulness, potential dangers, and suspicions that some people may be using computers to manipulate the market. for 150 years, the floor of the new york stock exchange was the center of the financial world, the economic engine that helped american business raise capital and create jobs. today, it is still the public facade of wall street and a television backdrop for reporters relaying financial news, but less than 30% of the trading is conducted here now. and the specialists and the noise of the floor is being replaced by the speed and quiet efficiency of computers, and the action has moved elsewhere. there are now more than 80 alternative trading systems around the country, plus two brand new electronic stock exchanges which most of you have probably never heard of, b.a.t.s. and direct edge. they're owned by the big banks and by high frequency trading firms, and neither of them would give us an interview or let us

inside to film their operations. but they trade more than a billion shares a day at blinding speed, and most of those bets are being made by machines. the players range from firms like goldman sachs, barclays, credit-suisse and morgan stanley to hedge funds and smaller operations, like tradeworx, which is the only high frequency trading firm that would talk to us or let us in. it's run by manoj narang and a small group of mathematicians and scientists called "quants," which is short for quantitative analysts. and their high speed computers trade 40 million shares every day. are humans ever involved in the trading? >> manoj narang: humans are not involved in the trading, because humans are way too slow to trade on the kinds of opportunities that we're trying to capture. we're trying to capture opportunities that exist for only fractions of a second. this stock over here was down 1.8% for the past week. >> kroft: the tradeworx computers don't care where a stock is going to be trading next year, next month, next

week, or even tomorrow, because they are going to be in and out of it today in a matter of minutes. what's the point of buying and selling a stock that you hold for three minutes? >> narang: same objective that all other participants have in the market is to... to make money. you buy low, sell high-- that's how you make money. >> kroft: and the computer will know when to buy and when to sell? >> narang: sure, the computer is monitoring real-time data, and it knows what to do with that data and how to make decisions based on that. >> kroft: what narang and other high frequency traders tell their computers to do is to make a profit of a penny or less 40 million times day. they scan the different exchanges, trying to anticipate which direction individual stocks are likely to move in the next fraction of a second, based on current market conditions and statistical analysis of past performance. but the computers have no real understanding of who these companies are and what they do. so, it doesn't really know whether a company is well managed or whether... >> narang: not at all.

>> kroft: and it doesn't care? >> narang: it doesn't know who the c.e.o. is or what that c.e.o.'s background is. doesn't know the management team. >> kroft: whether he's... whether he's going through a divorce? >> narang: exactly. >> kroft: whether he's just been sued for sexual harassment? >> narang: right. it knows information that you can quantify about the company. >> kroft: it's all math? >> narang: it's all probability and statistics saying a procedure that you can define precisely. >> kroft: the trading instructions are programmed into the computers with complicated mathematical formulas called algorithms. narang showed us how it works with a simple hypothetical example he uses for demonstration purposes. >> narang: i'm going to test a strategy where if a stock went down 5% for the past week, i'm going to buy $5.00 of that stock. and if a different stock went up 10% last week, i'm going to sell $10.00 of that stock. and i'm going to do that for every stock that's in my tradable universe simultaneously. >> kroft: which is how many? >> narang: there's over 4,000 stocks... about 4,500 stocks. >> kroft: the strategy, which could only be successfully

executed with a high speed computer, would result in almost as many losing trades as winners, but over the past eight years would have produced a tidy profit, something that narang and other high frequency traders have gotten used to. and how successful have you been? >> narang: we've had two or three days in a row where we lose money. but we've never had a week, so far, where... where we lost. we've never had a month that... that was a loser for us. >> kroft: just five years ago, high frequency traders accounted for 30% of the stock trades in the u.s. recent estimates have ranged as high as 70%. and institutional traders like joe saluzzi of themis trading llc have come to believe that the game is rigged. >> joe saluzzi: how can you make money day after day? there was even one firm that said they made money four years in a row every single day. well, you have to be getting information that other people don't have. otherwise, statistically, that's an impossibility. >> kroft: actually, high frequency traders are getting the same market information that joe saluzzi gets. they are just getting it a

little bit sooner. it's only a few fractions of a second sooner, but if you are running supercomputers, saluzzi says, it can be an eternity. what you're saying is the people with the fastest computers have an advantage? they get the best deals? >> saluzzi: every time. absolutely. there's no doubt about it. i mean, if they're spending that kind of money, and they're using that type of infrastructure, they're doing it for a reason. and it is to get a speed advantage, in that respect. >> kroft: it's not just the speed of the super computers that's important, it's also their physical location. the closer they are to the stock exchange's server, the quicker they will be able to get critical market information. >> larry leibowitz: well, this has been in the works for at least four years. >> kroft: larry leibowitz, the chief operating officer of the new york stock exchange, believes its massive new data center in mahwah, new jersey, will help the exchange regain some of the market share it's lost to electronic trading platforms. and he is busy persuading traders to lease space in these stark black boxes for their super computers.

this is one of the pods? >> leibowitz: this is one of the pods. this is the nerve center. >> kroft: it's called "co- location," a service that high frequency traders will pay tens of thousands of dollars a month for, and includes access to raw data from the exchange that is almost instantaneous. >> leibowitz: we're getting down to, you know, how fast can the electrons travel at this point. >> saluzzi: they can predict the price of a stock before you can, because of the speed that they're using. >> kroft: so, they actually see the trades before you do? >> saluzzi: they can see order flow coming into the exchanges before a regular person off of say a bloomberg or somebody who doesn't have the co-location, the data feeds, and all the other sophisticated technology that they employ. which is not cheap, by the way. it's extremely expensive to set these things up. >> kroft: how much faster do they see it? >> saluzzi: it could be a few milliseconds. >> kroft: how much of an advantage is a couple of milliseconds? >> saluzzi: millions, if not billions, of dollars a year. >> kroft: that edge, joe saluzzi claims, has made high frequency traders the new insiders on wall street. and he says he spots signs of

predatory behavior every day. saluzzi, who trades large blocks of stock for institutional investors, says the supercomputers are programmed to place and then cancel thousands of orders a second, trying to sniff out which way a market is moving, in order to jump in ahead of big rallies and sell off before big declines. he calls them parasites who exploit a technological advantage to suck money out of the market and add no value. does it raise capital for companies? >> saluzzi: absolutely not. it... if anything, it's... it's distracting from the capital raising process. >> kroft: do these high- frequency trades have anything to do with market fundamentals? >> saluzzi: valuation is irrelevant. it's all about just moving the price up and down the ladder all day long. they don't... each day is new, each day starts fresh. so, you have to question the true valuation of the markets now. >> kroft: larry leibowitz of the new york stock exchange says there is absolutely no evidence that small investors are being hurt by high frequency trading. most of them, he says, don't care about pennies when they are buying and selling stocks, and

they're in it for the longer haul. >> leibowitz: look, there's always been charges for as long as trading has existed that people are front-running orders, manipulating stocks. this is nothing new. i think now you add to it the element of... the mysterious element of the computer, and it makes people even more mistrustful. >> kroft: leibowitz and other proponents of high-frequency, high-speed computer trading say it has performed a valuable function-- tripling volume, reducing stock spreads and transaction costs, and providing liquidity to the markets. >> narang: liquidity means that, if you want to buy or sell a stock, you could do it right away and you could do it at a fair price. that's what liquidity means, and without short-term traders, there is no liquidity. >> kroft: traders like manoj narang say their presence in the market is making it cheaper and easier for everyone to buy and sell stocks. but regulators and lawmakers like former senator ted kaufman of delaware have other concerns. >> senator ted kaufman: clearly, liquidity's way up. but what i say is, liquidity's

always trumped by transparency and fairness. you can't have fairness if you don't have transparency. >> kroft: senator kaufman, who has both business and engineering degrees, says he is a big fan of technology, but he thinks it's gotten way ahead of financial regulators' ability to monitor it. right now, it's not even possible to determine for sure who is making high frequency trades or what they are telling their computers to do. >> kaufman: we don't... not know what's going inside those boxes. there's all types of allegations about what's going on inside there. and basically, what can happen is you can have these... these meltdowns where you can have a... a computer just go crazy and... and cause all kinds of problems. >> kroft: which takes us back to the mini crash last year and one of the scariest rides in stock market history, when the dow industrials, at one point, plunged 600 points for no apparent reason. turns out, it was triggered when a mutual fund's computer dumped $4.1 billion of securities on the market in a 20-minute

period, which were then gobbled up by the computers of high- frequency traders and sold almost immediately, sending other computers and traders heading for the exits. >> mary schapiro: the events of may 6 scared people. they're... i don't think there's any question about that. >> kroft: s.e.c. chairman mary schapiro had already proposed rule changes before the crash that would allow regulators to track and identify high- frequency trades, and she is now considering further measures. >> kroft: are you comfortable with computers making, you know, 50% to 70% of the trades on... on wall street? >> schapiro: one of the concerns is, if one goes wrong, if it operates in an unexpected way, given market conditions, what's the impact of that algorithm that has... has behaved in an unexpected way on lots of other investors in the marketplace? >> kroft: and chairman schapiro says it's happened since the mini crash, even though circuit breakers were put in place that automatically halt trading in a stock that moves more than 10%

in a five-minute period. >> schapiro: a number of times that those circuit breakers have been triggered has been because an algorithm operated in a way nobody intended for it to, causing a stock price to go wildly out of range. >> kroft: the crash has contributed to a crisis in confidence on wall street. afterwards, people have pulled $70 billion out of mutual funds, and the biggest concern of chairman schapiro and senator kaufman is that average investors are losing faith in the integrity of the system. there are a lot of people out there who think that the stock market is rigged, rigged in the sense that there are people out there who have advantages, the insiders, the big companies? >> leibowitz: right. yep. and i think that we have to do a better job of, first, obviously, making sure it's not the case. but we can't be evasive about it. we have to make changes that make sense, that give people more confidence in the market, add more transparency, and make people feel like, "this is a place i can trust my retirement savings to."

>> kroft: since we first aired this story, the securities and exchange commission has proposed further reforms, and high frequency traders are now moving into currency and commodity markets. . >> cbs money watch update sponsored by: >> mitchell: good evening. apple c.e.o. steve jobs will return from medical leave tomorrow to address apple's annual conference. nintendo is the latest target of hackers, but it says no data was lost. gas is down a dime in a week to an average of $3.78 a gallon. and the "x-men" prequel won the weekend box office. i'm russ mitchell, cbs news. blueshirt: hey america,

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>> stahl: jerusalem is one of the holiest cities on earth for jews, muslims, and christians. it's also one of the most contentious issues between the palestinians and the israelis.

back in 2000, president clinton came up with a formula for dividing the city-- areas populated mostly by jews would remain israeli; those populated mostly by arabs would become the new palestinian capital. and that meant that, for the most part, east jerusalem would go to the arabs. but since then, more and more israeli settlers have moved into the arab-populated areas. as we first told you last october, one place where it's gotten volatile is the arab neighborhood called silwan, because of an israeli archeological dig called the city of david. go to jerusalem today, and you'll likely visit the city of david, one of the world's great archeological wonders, where diggers are sifting back through time. scores of workers, filling hundreds of buckets, unearthing thousands of years.

>> doron spielman: this tunnel is 3,850 years old. >> stahl: and this was the way it was? >> spielman: this is exactly original. look at these stones. you can even see the chisel marks on the walls. >> stahl: doron spielman is the site's international director of development. >> spielman: this is the original old flooring. these are more ritual baths or water cisterns. >> stahl: he led us down to an ancient waterway carved out of the hard stone. >> spielman: the whole beginning of life in ancient jerusalem happened from this little spring which is nestled in this little cave. >> stahl: we were taken down excavated tunnels no human eye has seen for two millennia and shown the process of removing the layers of history, sandbag by sandbag, from when the city was sacked by the romans, and before them, the babylonians. this was the first time i'd ever done an interview in a canaanite fortress. so this structure was here when abraham was here. >> spielman: that's right. he saw it with his own eyes. >> stahl: he saw this. >> spielman: he saw this. >> stahl: that's a bit of a stretch-- archeologists tell us

that no one has found any evidence that abraham was ever here. it's controversial that the city of david uses discoveries to try to confirm what's in the bible, particularly from the time of david, the king who made jerusalem his capital. >> spielman: people believe that when king david captured the city, he snuck underground through this tunnel, which led him underneath the city wall up into the city. >> stahl: half a million tourists visit the site every year with guides who try to bring king david to life. there's an implicit message that, because david conquered the city for the jews back then, jerusalem belongs to the jews today. today, i've seen scores and scores of soldiers coming through. >> spielman: it's part of their cultural day to try to learn about what they're fighting for. and when we bring them here, they understand that they're not just fighting for today; they actually represent the return of the jewish people to israel after thousands of years. >> stahl: so, archeology is being used as a political tool.

i mean, i hate to use the word, but "indoctrination" almost. >> spielman: i wouldn't call it indoctrination; i would call it giving meaning to life, giving meaning to why we're here. >> stahl: but for all the talk of king david, one thing is glaringly missing here at the city of david. there's actually no evidence of david, right? >> spielman: there's no doubt that this is the city of david from the bible. there's no doubt that the bible took place here. proof of david himself, until we find the actual name, we can't say. >> stahl: another problem is an inconvenient truth-- that biblical jerusalem is not located in the western half of the city. it's right under the densely populated arab neighborhood of silwan. and according to the clinton parameters, silwan should be part of a palestinian state. to remedy that, organizations that move jewish settlers into arab areas have infiltrated silwan. under heavy security, a group of settlers live in this seven-

story building. they've barricaded themselves in and refuse to leave. with some 450 jews living among tens of thousands of arabs, silwan is now at the center of the battle to keep all of jerusalem under israeli control. so how does the city of david tie into this? well, while a government agency oversees the excavations, the dig and the site are largely funded and run by something called el'ad. doron speilman works for el'ad, which claims they're not a settlers' organization, though people we spoke to say they are. >> spielman: i think that it would be correct to call us an organization who believes deeply in the history of jerusalem. >> stahl: so it's all archaeology? >> spielman: archaeology and rebuilding a jewish neighborhood. >> stahl: so el'ad is doing archaeology and settlements? >> spielman: we are doing archaeology, and we are buying homes and buying land. >> stahl: but is it el'ad's goal to ease the arabs away from

right... where we are right now? >> spielman: put it this way-- if there's a home that an arab wants to sell and i have the money to buy it, and i can move... enable a jewish family to live there, and i can dig archaeologically underneath it, then i think that's a wonderful thing to do. >> stahl: the arabs say it's a provocative thing to do. devout jews yonatan and devorah adler live in one of the houses el'ad bought. el'ad has raised tens of millions of dollars, half from the united states, and buys these homes on land the palestinians claim for a future state. the adlers raise their six kids here, on the actual dig. >> yonatan adler: the city of david is where jerusalem began. this is where prophets walked. this is where half of the bible was written. this is what we're talking about. >> stahl: and yet, when... when you see those maps, it's over in the palestinian side. >> yonatan adler: yeah. well, maps are written on paper; this is written on our hearts. >> stahl: but it is one of the proposals on the table.

>> yonatan adler: i'll tell you- - jerusalem cannot be divided. jews would never allow it. >> stahl: the adlers say they don't mind living behind gates and having guards on their roof. they would never consider leaving. but you're like a soldier on the front line. >> devorah adler: i don't think we see ourselves as soldiers at all. we see ourselves as very much as everyday regular people, living in a very, very special place. >> stahl: palestinian jawad siyam was born in this very, very special place, and says he can trace his roots here back 930 years. he's pessimistic about the palestinians ever having their own state. what will happen to this village if there's a two-state solution? >> jawad siyam: i don't think there will be a two-state solution. that's not possible to do it. today, they... the settler groups are much stronger than before. the settler groups in jerusalem, they are controlling. >> stahl: he's angry that el'ad bought his grandmother's house and moved a number of jewish families in, so he's become an

activist leader in silwan, where there has been a string of escalating confrontations. in this protest, at the city of david, jawad got into a shouting match with a site worker behind a gate. >> siyam: you will be the rubbish of the history. there is no proof that king david was here. you want to take our land. >> stahl: some of the incidents have become violent, like this one back in october. boys were throwing stones at passing cars. watch what happens next as two of the boys get hit by one of the cars. the driver was, of all people, the head of el'ad. he later went to the police and said he hadn't stopped because he felt his life was in danger. both boys survived, one with a broken leg. fighting often erupts here with israeli guards brought in to protect the settlers. >> siyam: clashes are daily inside silwan between the villagers and settlers and the gun guards for the security there. >> stahl: the government pays for the gun guards?

>> siyam: it's tax money. it's... i pay it. everyone who is paying taxes is paying it. >> stahl: you pay taxes and that money goes to pay for the guards to guard the settlers. >> siyam: yes, of course. >> stahl: so you're helping guard the settlers. >> siyam: yeah, i'm a fan of the settlers and the gun guards. >> stahl: jawad says that el'ad uses the dig's archeological prestige to hide its aim of moving the locals out. and he believes that the tunneling is a way for el'ad to extend its reach deeper into silwan. they think you're digging under their houses. >> spielman: it does, at points, go underneath homes, deep underneath the ground, which is why we have these metal supports around us. >> stahl: but it's under arab homes. >> spielman: it's under jewish homes, arab homes, and a road. what concerns these residents, lesley, is not the tunnel. it's where the tunnel's going. it's what the tunnel means that concerns them. >> stahl: well, where's the tunnel going? >> spielman: the tunnel, one day, will open into the western wall plaza. then, you will have undergone an experience that shows the jewish temple was important 600 years

before muhammad. >> stahl: to understand why this is so explosive, you have to understand the geography. silwan lies in the shadow of some of the holiest sites in the world-- judaism's western wall, and islam's dome of the rock and al-aqsa mosque. there's a feeling of encroachment. the arab's feel it. >> spielman: there's no other place in the world that jews want to live in more than here. the arabs have mecca, the have medina, and they may also be interested in jerusalem. but for the jews, this is our only home. >> stahl: that feeling of jewish encroachment has been heightened by the mayor of jerusalem, nir barkat, who is doing all he can to make sure east jerusalem remains under israeli sovereignty. >> nir barkat: we have to maintain a united jerusalem. >> stahl: the mayor brought us to a hilltop over silwan to show us his latest project, called king's garden. >> barkat: this is the most important area in the world. >> stahl: in the whole world? >> barkat: definitely. and in the valley right there below us is where king's garden

was. >> stahl: he wants to create a bible-themed garden and turn it into a tourist park adjacent to the city of david. but as with the dig, the local arabs see this as another attempt to gobble up their side of jerusalem. building the mayor's park requires demolishing 22 arab homes in silwan. if you began to demolish these houses, it would be explosive, wouldn't it? >> barkat: that's why you have to be very smart and sensitive dealing with an area so important in the city of jerusalem. >> stahl: he says that area is a slum in which the houses were built illegally, and his plan will fix that. but the locals want to stay in their homes. i heard you wanted to evict people. where are those houses? >> barkat: that's just not true. >> stahl: well, wait, but if you make a park, then those houses can't be there anymore. >> barkat: they mustn't have been there in the first place. >> stahl: yeah, but so... so you will evict. you will evict. >> barkat: not evict. when you improve their quality of life, the right word to say is that you're dealing with

improvement of quality of life. >> stahl: his park, he says, will upgrade the area, and he'll allow the people who'll be evicted to build new houses nearby. but locals tell us the only way to do that would be to build on top of other homes in silwan. the european union, the united nations has criticized this plan to get rid of these 22 homes. public opinion, especially while the peace talks are under way, is looking at this and saying you're trying to get rid... move arabs out of jerusalem. >> barkat: that's not true. >> stahl: but that's the way it looks. and my question is, why not wait until the peace talks are settled? >> barkat: lesley, the facts are wrong. those structures are illegal. they're sitting on an area that the world... the world wants to be part of a city that is flourishing, that is clean, that is beautiful. so what i'm saying here is get your facts right before you bash israel, before you bash jerusalem.

>> stahl: but my question was, why now? that's the question. >> barkat: what do you mean, why now? >> stahl: because it's on the table at the peace talks. that's why now. >> barkat: lesley, listen, i'm committed to bring more tourism to the city of jerusalem. now, this plan is a plan that i started a year and a half ago. >> barkat: you say that jerusalem must never be divided. but most of the rest of the world says that if you want peace, that may be the price that you have to pay. >> barkat: lesley, it's not going to work. you have to understand that, for a city to be functional, to increase tourism, to be able to see the sites that you've seen, it has to be a united city. >> stahl: meanwhile, in the city of david, the excavations are continuing in full force. you can say they're digging in. settlements have been a stumbling block in peace negotiations of the past. and what your organization is dedicated to doing could become the stumbling block again.

>> spielman: we are looking, lesley, to go down and uncover history. if coming back to my home after 3,000 years is a stumbling block to peace, then i think that that is not a very good peace. >> welcome to the cbs sports update presented by viagra. at the men's french open final, rafael nadal defeated roger federer in four sets for his tenth career grand slam title. in major league baseball, albert pujols hit his second consecutive walk-off home run as the cardinals beat the cubs in ten innings. texas defeated cleveland and the red sox sweep their three-game series against the a's. for more sports news and information, go to cbs spores.com. this is jim nantz reporting. ♪ [ male announcer ] you've reached the age where you don't back down from a challenge.

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>> kroft: now, cnn's anderson cooper on assignment for "60 minutes." >> cooper: even if you've never heard her music, chances are you've heard about lady gaga. she's the most talked about entertainer in the world. in the past three years, she's had seven number-one hit songs, and just two weeks ago, her latest album sold 1.1 million

copies in its first week on sale. her fans are devoted to her; millions more seem mystified by her. is she a real artist or a marketing expert? musically gifted or a flash in the pan? as we first reported in february, we were not sure what to expect when we caught up with her in the final months of her sold-out european tour. her real name is stefani germanotta, and she's just 25 years old. each time we met her, she surprised us, not just with her candor-- and her frank talk about drugs may concern some parents-- but she also surprised us by never appearing the same way twice. so, what should i call you? i mean, do i call you "lady"? do i call you "gaga," "lady gaga"? >> lady gaga: call me gaga. yeah. >> cooper: does anyone call you stefani? >> lady gaga: yeah, some people do, especially in bed. i prefer "stefani" in bed. >> cooper: really? >> lady gaga: yeah. >> cooper: you don't want somebody yelling out "lady gaga." >> lady gaga: no. that would freak me out.

>> cooper: when we first met lady gaga in london, we'd planned a quiet stroll down the river thames. but when she arrived, about a dozen paparazzi were following her. do you ever get used to this? >> lady gaga: no. >> cooper: no? >> lady gaga: no. >> cooper: make no mistake-- lady gaga uses the photographers as much as they use her. her over-the-top outfits are designed to grab headlines and get people talking. everywhere you go, are you always in full regalia? >> lady gaga: yeah. "regalia"--that's a fabulous word. can i steal that from you? >> cooper: absolutely. so, how tall are those? >> lady gaga: well, i... >> cooper: how do you... how do you even walk in those? >> lady gaga: i suppose they're above ten inches, 11 inches. i'm very talented. >> cooper: i have no doubt of that. >> lady gaga: multitalented. >> cooper: to get away from the paparazzi... you have three guys on motorcycles right now following you. >> lady gaga: yeah. >> cooper: ...she took us to the outskirts of london, to a small pub for a drink.

do you take days off? or do you feel like you're in this whirlwind and you have to keep it going? >> lady gaga: right now, we're in a bar, right? and there's a camera right there and a camera right there. but if i were to be sitting in this bar and we didn't have a scheduled interview, there would still be a camera over there and over there and over there. i'm always on camera. >> cooper: from what i understand, you're very... you study... you are a student of... of music. you're a student of... of fashion. but you're a student of fame, in a way. >> lady gaga: one of my greatest artworks is the art of fame. i'm a master of the art of fame. ♪ ♪ >> cooper: to understand how lady gaga got so famous, you have to start with her music. she's been on tour for much of the past three years. ♪ ♪ a tireless performer, in concert, she is constantly on the move-- singing, dancing, changing costumes.

her biggest hits are dance songs. some of the imagery may remind you of madonna, but lady gaga is more outrageous. ♪ ♪ she's studied the artistry of others, but is a creation all her own-- a classically trained pianist who writes or co-writes all her songs. >> lady gaga: ♪ going to listen to a song about rock 'n' roll... ♪ ♪ >> cooper: she insists she never lip-synchs and, alone onstage, her voice packs a powerful punch. >> lady gaga: ♪ whoa-ooooo >> cooper: it's not just the music her fans respond to, however.

it's also her message, an uplifting mantra of self- empowerment and self acceptance. >> lady gaga: tonight, i want you to let go of all of your insecurities. i want you to reject anyone or anything that ever made you feel like you don't belong. free yourself of these things tonight! yeah! >> cooper: you're hoping to speak to people who feel different, who feel disconnected? >> lady gaga: people who feel disconnected from society or disenfranchised, feel like a freak, feel like you don't belong, like you don't fit in, or you'll never be great. >> cooper: she sees herself in her fans. >> lady gaga: what's your name? >> cooper: "little monsters," she calls them. >> nicole: nicole! ( laughter ) >> cooper: and they are devoted to her. >> lady gaga: put your paws up! >> nicole: she's so inspirational. she teaches you never to give up on what you believe in. oh, i'm shaking so much. >> cooper: two months after seeing her in london, we met up

with lady gaga in milan. she had transformed herself once again-- new hair, new makeup, and hardly any clothes. what are you wearing today? >> lady gaga: i just didn't want to wear clothes today. for whatever reason, i just didn't. i just... i actually don't even have any foundation on my face. i just wanted eyeliner and... and my mcqueen boots. >> cooper: how... how... ( laughs ) >> lady gaga: that's it. >> cooper: lady gaga doesn't consider herself just a pop singer-- she sees herself as a performance artist, a living work of art onstage and off. the clothes and wigs are all part of the production. >> lady gaga: i'm a true academic when it comes to music, and when it comes to my style, my fashion. there's nothing that i've ever put on my body that i didn't understand where it came from, the reference of it, who inspired it. there's always some sort of a story or a concept that i'm... i'm telling. >> cooper: the concepts are not always obvious to most people. last year, she wore an outfit made of raw meat to an award

show, accompanied by several discharged gay service members. she says it was a commentary on "don't ask, don't tell." >> lady gaga: i never thought i'd be asking cher to hold my meat purse. >> cooper: spending time with lady gaga, we realized the outfits and transformations are not just attention-getting, they're also attention- directing-- a way for her to keep the public focused on her work as opposed to her personal life. >> lady gaga: part of my mastering of the art of fame, part of it is getting people to pay attention to what you want them to pay attention to, and not pay attention to the things you don't want them to pay attention to. >> cooper: you've studied the fame of other people, how they got it, how they kept it and... and how they lost it. >> lady gaga: the sociology of fame and how to maintain a certain privacy without feeling like you're withholding anything from your fans. my philosophy is that if i am open with them about everything, and yet i art-direct every...

every moment of my life, i can maintain a sort of privacy, in a way. i maintain a certain soulfulness that i have yet to give. ♪ ♪ >> cooper: the pressures of maintaining fame and the deadly price other superstars have paid for it are a frequent theme in lady gaga's performances. at the mtv video music awards, she shocked the audience by ending her song "paparazzi" drenched in blood, hanging above the stage-- a blond icon dying before our eyes. >> lady gaga: that's what everyone wants to know, right? what's she going to look like when she dies? what's she going to look like when she's overdosed on whatever they think i'm overdosing on? everybody wants to see the decay of the superstar. >> cooper: do you think people want to see your decay? >> lady gaga: what? of course, they do. they want to see me fail, they want to see me fall on stage, they want to see me vomiting out of a nightclub. i mean, isn't that the age that we live in?

that we want to see people who have it all lose it all? i mean, it's... it's dramatic, and it's... >> cooper: and then climb their way back. >> lady gaga: right. it's a movie. and... and yet, i just am not like that on... on my own time. i'm not a "vomit in the club" kind of girl. >> cooper: just five or six years ago, however, she could have become that kind of girl. she says she was using a lot of cocaine. her name was stefani germanotta, then. she had dropped out of new york university intent on becoming a star. >> this is the stefani germanotta band. >> cooper: this was her playing in a small club in 2006. ♪ ♪ in january, she took us back to the building in new york she lived in before hitting it big. she had transformed herself once again. >> lady gaga: we're going to do it the new york way. >> cooper: okay. ( laughs ) you're buzzing all of the buzzers? >> lady gaga: yeah. someone'll listen.

we did it. ( door bell buzzes ) hi, this is lady gaga. >> cooper: she wanted to show us her old studio apartment... >> lady gaga: i'm just wondering if i could say hi. >> cooper: ...but it turns out not everyone in new york is so enamored with fame. >> i'd rather not have any cameras. >> cooper: she grew up in a far more prosperous new york neighborhood with her parents and sister. she'd started piano and dance lessons at age four and went to a catholic girls' school. she was a good student but says she didn't feel like she ever fit in. >> lady gaga: i felt disenfranchised by my school and by the people in the school that would make fun of me and bully me and tease me and make me feel less cool. >> cooper: that feeling began to change, and her career took off after she adapted the name lady gaga from a queen song, "radio gaga." the new name freed her, she says, to become the superstar she was meant to be.

>> lady gaga: i was able to leave such a massive amount of insecurities behind me by getting rid of... that name, in a way. and i still am very insecure in so many ways, but i wish i could give that gift to all my fans. you have the freedom to pull the superstar out of yourself that you were born to be. we are all born superstars. >> cooper: lady gaga says she no longer uses cocaine, though she readily admits she still smokes pot. >> lady gaga: i smoke a lot of pot when i write music. so i'm not going to, like, sugarcoat it for "60 minutes" that, you know, i... i'm some, like, sober human being, because i'm not. i... >> cooper: you still smoke up? >> lady gaga: i drink a lot of whiskey and i smoke weed when i write. and i don't do it a lot because it's not good for my voice. i don't want to encourage kids to do drugs, but when you asked me about the sociology of fame and what artists do wrong, what artists do wrong is they lie. and i don't lie. i'm not a liar. i built goodwill with my fans. they know who i am, and i'm just

like them in so many ways. >> cooper: you actually have a recording studio with you on the road, wherever you go? >> lady gaga: yes, i do. >> cooper: the album that came from all that time spent in the recording studio was finally released two weeks ago. and you can be sure that, until then, those tunes were guarded like gold. a leak of a song can cost a record company millions. this is from the new album? >> lady gaga: yeah. this is from... yeah, "born this way," yeah. >> cooper: she let us listen to a half dozen of the new songs, but would only allow us to record a few seconds of the title song. it's called "born this way." ( song plays ) >> lady gaga: cut those cameras. you can't have anymore. get out of here. >> cooper: you know, when people heard that i did this interview, everybody asked me the same question-- "what is she really like?" >> lady gaga: photographers say this to me all the... "i want to photograph the real you." i'm, like, "what the hell are you looking for? i'm right here. you've seen me with no makeup. you've asked me about my drug

history, my parents, my f... my bank account." i mean, how much more real could i be? >> cooper: people obviously think that you're not being who you are because you are wearing a lot of makeup and always, you know, presenting yourself in a different way. >> lady gaga: this is what i'm really like. this is exactly what i'm really like. this... this is the cup i drink out of every day, this is the diamond that i put in my coffee when i get nervous. it's not a real diamond, it's fake. >> cooper: i mean, you have a sense of humor about yourself. do you think sometimes people take it... take you too seriously? i think about... there was that rumor that... sorry. are you... do you have the diamond in your mouth now? >> lady gaga: uh-huh. >> cooper: ( laughs ) >> lady gaga: yes, people take me both way too seriously and not seriously enough. >> lady gaga: ♪ don't come to me don't come to me... ♪ >> cooper: in the end, what lady gaga says she cares about most is her music. the clothes and the costumes, even the controversies, are all just a part of her artistry,

part of the performance her life has become. mastering the art of fame is one thing; maintaining that fame is another. the music is what lady gaga believes will allow her to do just that. >> lady gaga: ♪ ooh, la ooh, la, la ♪ bad romance... ( cheers and applause ) >> go to 60minutesovertime.com to go behind the scenes with anderson cooper on the lady gaga story. let's -- let's start over from the beginning. we were just driving along, comin' back from the lake, and all of a sudden, ka-plam. it blindsided us. what is it? our college savings account. how do you think it happened? not sure. i think something we bought a while ago turned out to be something else, annnnnd, i remember a lot of other stuff in there had the word "aggressive" in it. is everyone okay? well, now, yeah. who knows later. ♪

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>> kroft: i'm steve kroft. we'll be back next week with another edition of "60 minutes."

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