series for dc comics. watch in depth fiction edition live today from noon to 3:00 p.m. eastern. and be sure to watch in depth fiction edition next month when an author will be our guest. on book tv, on c-span 2. so gary smith, how often do economic professors talk about the role of luck and chance? >> used to be never. and so economists used to assume that the world was known a certainty. humans were perfectly rational. they made rational decisions with no regrets and obviously that's a bunch of malarkey. >> well economics is rational, isn't it? >> well the assumption is it's rational. we have these guys come along, who got nobel prizes in economics even though they were psychologists and they pointed out all the ways in which we're not completely rational. we do things like anchoring, so i buy a sock for 20 bucks so i think it's worth for 20 bucks.

it goes down to 10, i still think it's worth 20 bucks because that's what i paid for it. thinking about what it might actually be worth. the house across the street sold for 400,000. mine must be worth for 400,000. it's an anchoring there. there's other ones, regression, the topic of this book. >> let's go to that. let's go to regression of the mean. what exactly does that -- >> has to do with the role of luck in our lives. and so we like to think that we are in control. we are in charge. everything that happens is evidence of our traits, our abilities and so on. so i'm a professor. i've got a kid who takes the midterm, gets the highest course in the -- highest score in the class. i think she's best the student in the class. she takes the final. she gets the third highest score. what happened? she didn't study? maybe she got lucky on the first test. she guessed at some answers on the final. got them right on the midterm, not on the final. you take an athlete, somebody

who wins a tournament, you think they are the best golfer in the world. next year they don't win. what happened? they got lazy? they didn't practice? they got lucky the first time around. golf is the ultimate game of luck. famous store about phil mickelson, he's playing -- i think it was a masters tournament. he hit a ball. he's a leftie. the ball sliced off to the right, bounced off a spectator's head, went off the other side, landed in the rough on the other side, and he said if your head been a tad softer, i would have been on the fairway. golf balls land, they roll this way, that way. they hit tree branches, they don't. they roll into the water. there's luck. any given tournament, there's probably ten golfers who could win. and one of them gets lucky and wins. next tournament, another one wins. next tournament, another one. and they're just shifting the luck. so in the masters, i think it is two thirds of all people who have won the masters only win once. they don't win a second time. they got lucky. i mean, it's not their skills went away or anything like that,

they got lucky. >> so put that in -- give us an economic example. >> so in the stock market, you see a company's earnings are growing by 30% a year. everybody wants to buy the stock because they think 30% a year is going to continue forever. more often than not, it doesn't. because there's an element of luck in that 30%. in terms of what's competitors' products were, what the antitrust legislation were, who the ceo was and some of those things dissipate. and so next time around, their earnings only go up by 20%. now, regression is a mean is not at all like the law of averages. the guy who got the best score on masters one year doesn't get the worse score next year. he gets second, third or fourth. the student who got the highest score on midterm, she doesn't get the lowest score. she gets the second or third highest. company's growth rate at 30%, only grow at 20%, still a great company. specific example right now, dow

jones industrial average, one company is going out, one company is going in. which do you think is going to be a better investment? most people would say it must be the strong company that is doing great. and the other company is struggling. they must be the better investment. regression of the means says the company is probably not as bad as it seems. it's probably had some bad luck. the other company is probably not as good as it seems. probably has some good luck. in the future, the other company is probably the better investment. studies show, the stocks that go out of the dow, actually do better than the stocks that go into the dow. >> regression of the mean when it comes to politics? >> politics, every president ever elected including the current one, every president ever elected has lower popularity rating at the end of their first term than they had at the beginning. we go in, for some reason or another, we think this person is going to save us all.

we think this is the greatest politician ever been elected. that's how they win; right? we think they are great. they come in, well, we kind of misjudged them. and they're kind of lucky in their speeches, kind of lucky in the demographics, kind of lucky in whatever. four years later, we come to our senses and we say they are just human. they are just like us. and even our current president started out with a low rating got lower. true of every single president. >> what do we do with this information? >> the thing is not to be disappointed. one example i tell my students we're searching for soul mates; right? you meet somebody, they seem like the best person in the room. they've got a lot of pizazz. you think they are actually better than that or not quite as good as that. probably not quite as good, right, because they wouldn't have impressed you unless they happened to say just the right thing, just the right smile, just the right story or

whatever. they are probably above average. not as far above average as you think they are. so when you think about that is they probably feel the same way about you. >> so being aware of the regression of the mean, is it a logical thing? >> yeah. so it's been told one of the most fundamental sources of error in human judgment because we encounter it every day in our lives. we see things and we judge this one's the best. and they are probably good. but they're not as far from the mean as we think they are. and so it's one of the most fundamental sources of error in human judgment because it happens every day and no one understands it. >> gary smith, we're here at a libertarian convention. >> yep. >> how does this book fit into the libertarian mindset? >> well, i'm not sure. the talk i'm about to give, i think part of the thing with bitcoin, it has run, and i think it is going to regress to the mean. >> for bitcoin, what does that

mean? >> that means it is going down. >> but why? >> that's more of an investment thing than it was a luck thing. it's because there's no there there. when you buy a stock, you're buying a company that has earnings and dividends. you buy an apartment building, you've got apartments you can rent. you buy a business that generates profit. you buy a bitcoin, there's no cash whatsoever. you are just buying it in the hope that you can sell it to somebody else for a higher price than you paid, which is called the greater fool theory. you pay a foolish price hoping for a bigger fool to come along. >> in your book what the luck. >> yeah. >> you talk about power, lines -- >> yeah, yeah. >> what is that story? >> we see something and we draw conclusions which aren't necessarily there. this was this lady and her boyfriend, they looked at houses where there had been cancer victims. they drove around and looked for something they had in common. you can always find something in common. it might be a little league baseball field. it might be water towers.

they happened to focus on power lines. they concluded power lines caused cancer. there's a huge national thing about it. three stories in the new yorker. there were books. they want to tear down the power lines. and it turned out it was a bunch of bull. and every scientific study rebut them. even the new yorker ran an article saying cancer myth scare. it is because you see something and you attribute causation to it, when it's just random coincidence. it could have been a water tower. it could have been a little league field. it happened to be power lines. >> political pollsters, how can they avoid the regression to the mean? or incorporate it? >> i think pollsters to be honest have got to do their polls the best they can, ask honest questions, record the answers truthfully. up to us to interpret them. we interpret something. somebody has a blip in the polls, up or down, don't think that's the start of a long trend up or down. when a company's earnings goes

up, don't think that's the start of 30% forever. it goes down. it's not the start of 30% down forever. it is just a blip. part of it is random fluctuations, coincidence. >> you're a professor at pomona college of economics. how long have you been thinking about this book? >> i've written 13 books. >> right. but this particular book? >> i'd say probably 20 years. >> why did it take so long? >> it took me a year to write it, but it was 20 years of stories and anecdotes and examples. >> and they just -- >> all my books are just -- they accumulate these things and put it down on paper. this is like a lifetime of accumulate things. >> here is professor gary smith's newest book what the luck, the surprising role of chance in our lives. this is book tv on c-span 2. >> here's a look at some of the authors recently featured on our weekly author interview program

that includes best-selling nonfiction books and guest interviewers. new york magazine's looked at how women's anger has been used to create transformative political movements throughout history. trump 2020 campaign media advisor and fox news guest analyst offered her thoughts on the current political climate. and journalist reported on the opioid crisis in america. now, in the coming weeks on after words, republican senator of nebraska will argue that the country lacks unity and will offer his thoughts on how to repair it. pulitzer prize winning reporter will discuss his life as an undocumented immigrant. and this weekend vice president mike pence's daughter charlotte pence shares important lessons she's learned from her father. >> one of the things i talk about in the book about my dad encouraging me is that he tells a lot of people this, and has told me, this phrase speak your dreams, and he always tells

people that especially when kids come to him and on the campaign trail, this happened a couple times, where they would come to him and say i kind of want to go into politics one day maybe. you can tell they are always a little bit anxious about saying that. and he always says say that. you know, speak your dreams. that's the first step to tell people that you want to do something. and so i think that, you know, over the years, and growing up, my parents saw me as a storyteller, from a very young age. and so they always -- they always encouraged me to not only speak my dreams, but also they were kind of speaking them to me. >> after words airs saturdays at 10:00 p.m. and sundays at 9:00 p.m. eastern and pacific on book tv on c-span 2. all previous after words programs are available to watch on-line at book tv.org. for the past 20 years book tv has been covering book fairs and festivals around the country, more than 300 to date.

here's a look at some of the up coming book fairs and festivals. the national book awards will be presented on november 14th in new york city. we'll be live with author talks and call-in segments from the miami book fair on november 17th and 18th. and then at the end of january, it's the rancho mirage writers festival in california. and for more information about up coming book fairs and festivals, and to watch our previous festival coverage, click the book fairs tab on our website, book tv.org. ::