Let's start with how the presidency and the Texas governorship are different. Do they feel different to George W. Bush? Does he operate differently, Texas versus Washington?

… The president was a very effective governor, by all accounts. I think he's proving to be, for the same reasons, a very effective president.

He is very good at working with people. He's very good reaching out and trying to depersonalize issues, trying to focus on what's best for the country, trying to focus on why one party feels one way about an issue and another party feels another way about an issue.

One of things that's hard to do in Washington is -- there's a tendency here to personalize everything. If somebody has a different view than you, they tend to attribute it to personal differences. The president has made every effort to work against that, with moderate success, I think. …

How is he different today, as you see, from the person he was five, six years ago, when you were with him in Texas?

I think he's the same person. I have talked to other friends of ours that knew him at Andover and at Yale. I've talked to [those] that knew him at Harvard Business School, where I was not in school with him. I've asked them, "How do you think George W. Bush compares today as a person to George W. Bush 30, 40 years ago?" We have all agreed that he's the very same person.

He's very energetic. People like being around him. People tend to ask him to be in charge of the group or be captain of the touch football team. He just has those qualities. People enjoy being around him. He's very self-effacing, has a great sense of humor. He adds energy to everything he does. He's very charming. He's not vain at all. He is very interested in the people around him, and people sense that. I think people here in Washington have come to understand that. The people in Austin came to understand that very quickly, too.

But again, the growth that you mentioned before -- could you talk about what's the nature of it?

Well, the growth is mastery of the issues. I mean, the first time you're confronted with international relations issues is when you're president.

Much was made to do during the campaign because he did not know the names of a number of country leaders. But I think he has proven to be very effective at working with the heads of those very same countries. So again, he didn't need to know the heads of those countries when he was governor. He needs to know them now, just be able to work effectively with them, and [he] has done so.

I'm assuming you get to see a little of his life -- not only how he works, but when he's not at work. What's the life of the president and the Bush family like? Presidents often complain of feeling trapped, isolated and so on. Does he have friends? Does he see people? Does he go to the movies? Does he get out?

Well, you can't get out. He likes to see movies -- sees them at Camp David and he sees them here at the White House. He likes to read a lot. He's always got a book that he's just finished reading that he's recommending to friends of his.

He has many, many friends from years and years ago. … So he likes being around friends. It's a very active time whenever he's at Camp David or here relaxing. It's relaxing for him. It's energizing for everybody else, because he's always going for a run or going for a ride or on a bike, or swimming or lifting weights.

There's always something going on. He's got a little chipping contest going or a bowling contest. He likes competition. He likes sports. He likes interaction. He likes reading. So it's an active time.

You were always reading that President Clinton liked to stay up real late, pick up the phone, have long conversations with people. Does President Bush do that kind of thing?

No. No. President Bush likes going to bed at 9:00 or 9:30. Eevery morning gets up very early. He is in the office at about 6:45 every morning. So he's an early-to-bed, early-to-rise person.

He's also not one to engage people in long philosophical discussions about key issues. He likes his staff, his key advisers to study the options -- the different alternatives that he could consider -- and come to him frame the issues, present or make a recommendation. Then he responds to that recommendation.

He's not one to review a 200- or 300-page document on some key issue. That's not the best use of the president's time. The purpose of any White House is to maximize the value of the president's time and voice. The best use of the president's time, an hour or two, is not to digest large amounts of information about a key issue. That's what the staff's role is. So the president is not one to call up people in the middle of the night and ruminate about different options that exist.

He is a very disciplined person, and believes that if you apply discipline to the review of alternative ways of solving any of the many different issues that are brought before his desk, a lot of issues can be addressed in a very succinct, straightforward fashion.

One thing that has happened very noticeably in Washington, and not so much in Texas, is open disagreement among the advisers, particularly on foreign policy issues. Secretary Powell goes up and publicly on TV disagreed with Secretary Wolfowitz, which obviously was the tip of a very big iceberg. How does the president handle it when he's getting conflicting advice on very important issues?

As I understand the history of the United States, you always want your State Department and your Defense Department to have a different solution to propose. You want your State Department to have a diplomatic solution, and you want your Defense Department to have a more bellicose solution.

You want to be able to decide between those two alternatives. So it is perfectly natural that the secretary of state and the secretary of defense have different views about how to proceed on a matter. That's not new.

Where that can become dysfunctional is when there's disrespect between the secretary of defense and secretary of state. There is no disrespect between Secretary Powell and Secretary Rumsfeld.

The president wants different opinions. I've been in meetings when everybody was singing from the same hymnal, and he was saying, "Is this really the only alternative? We really don't have alternatives other than this to consider?" He wants different opinions, because understanding the different approaches helps him understand what the risks are and what the opportunities are.

The issues that get to his desk are complex issues. It is rare that an issue that comes before him for final resolution is one that has a simple answer. The simple answers are dealt with by people like me; we can carry the easy stuff. The hard stuff goes to his desk.

Do you feel like, knowing him as well as you do, you can sort of predict how he's going to come out on things, what are his core instincts when faced with a tough decision?

Yes. He has a tremendous ability to get at the essence of things. He used to say that he was an instinctive decision-maker. He based a lot of things on gut feel. I went and talked to him one day, and I said, "You know you describe yourself as being instinctive and have a gut feel. I don't think of it that way at all. I think of it as you have … some ability to get at essence of something. … Not the peripheral issue, but the key issue."

He did that in Texas, and he's doing that up here as well. Everybody [who] comes into his office for a meeting [knows] that he's going to ask, "What are we really trying to do here? What is the definition of success?"

When the proposal was made to create a Department of Homeland Security, everybody explained the logic of why there ought to be homeland security. There are 21 or 22 different departments that dealt with homeland security matters. Everybody felt like the logic was that these departments ought to be put together into one. He said, "Well, I understand the logic of it. But meanwhile, what's really going to happen different on the border? When the truck comes up to a border station, what's really going to happen differently that can only happen with the Department of Homeland Security?"

The same thing I know happened in the Middle East, where he asked, "What's the definition of success in the Middle East?" Not "Where do we want to be a year from now or two years from now?" [But] "Where would we like to be five or ten years?"

He gets everybody to focus on that. Then all the plans of the short term are those that maximize the probability of making that long-term solution come to be.

…When the president is given options, can you tell which option he's likelier to pick? Or is [it] just completely up in the air?

I know he's not inclined to pick easy options. He's not afraid to take on tough fights if there is a reasonable chance of winning. He's not going to take on a fight simply to take on a fight to make a point.

People complain that he has never vetoed a bill yet here. Well, to me, what that reflects is he's found ways to get his goals accomplished by working with the opposition to give them some of what they need and some of what he needs. Whenever he's threatened to veto, he's never had to follow through on that threat, because the threat of a veto has always caused the opposition to come in his direction.

So to me, the primary instinct that's being demonstrated here is his willingness to take on tough issues; his willingness to focus on results; his willingness to focus on what's good for America or, when he was governor, what's good for Texas.

Most of your time, you have been around here really working directly with the president and involved in the appointments process. Could you talk about that a little, and in particular, the staffing of this administration, which sort of started with a big bang four years ago with the announcement of Vice President Cheney's selection, which surprised everybody completely. How did he make that decision? More generally, how does the president pick the people around him?

The president picks his people here the same way he picked his people in Texas. He tries to figure out and decide for himself what he wants the person to do in the two, three, four, eight years -- whatever [length of time] that the person's going to be in that job.

So his selection of people is very much driven by what he wants that person to do. With the vice president, the vice president was the first person he asked to be his running mate. The vice president declined the option, but did agree to head up the search committee, and then came back some months later, and said that in fact he'd changed his mind and he would be willing to run, be the president's running mate.

I think the president understood that the vice president brought a lot of foreign affairs and military background and knowledge of Washington that he did not have. They made a very good complimentary team. The president has indicated by his selection of Cheney and Rumsfeld and Powell and others that he is not afraid to surround himself with people that know far more about Washington or far more about their particular subject matter than he does.

When was that decision on Cheney, and what brought the president to that decision and the earliness of it?

I don't remember when the president first asked the vice president, and I don't know what prompted that particular time. I think he was formulating his run for the presidency. But I don't remember the specific time.

But it would have to have been spring, right?

Again, I don't remember. I do have some idea about why the vice president changed his mind. Lynne Cheney told some mutual friends of ours that she and Dick decided that in fact they did want to join the Bush ticket, because they came to really like George and Laura.

Also, the vice president came to realize that the president wanted to come up here to really make a difference. He was not going to try to play it safe -- not try to extend a moderately successful four years into an easy, moderately successful eight years. He was going to try to come up here and make dramatic changes to the issues that he thought needed to be addressed. The vice president got very energized and excited about doing that.

Speaking of that, this leads to one of the central issues. Four years ago, the president was treated as the moderate governor of Texas, the guy everybody liked, who was coming to Washington to unify. Now most of the press coverage focuses on him as being quite conservative, the country as being quite polarized. Has he changed? Is it a Texas-Washington difference? Is it that the press didn't understand him four years ago? Explain the difference in perception of him, if you would.

I think the president, by almost all accounts, has been very successful the last three years. He's a very firm, determined person, and more so, I think, than people thought he would be. He's been very focused on many tough issues, like the situation in the Middle East, like the economy and how tax reductions ought to be used to stimulate our economy.

He is not inclined to shrink back when he faces opposition to those ideas, and I think people take offense at that, particularly the press. So he has been very steadfast in his opinion. He's taken a longer-term view.

This is going to sound academic, but we are in the middle of a large political system here. The mathematical nature of any system is that the actions required to maximize the quality of that system or the output of that system long term are almost detrimental to the quality or output of that system short term, and vice versa. The things that the are good for a system short term will invariably be detrimental to that system long term.

He's made some very tough decisions, particularly regarding the Middle East, that are proving to be very tough pills to swallow here in the short term. But his belief and bet is that it will be very good for the Middle East and be very good for the world, and most particularly, very good for the security of our homeland long term.

Do you subscribe to the view that Sept. 11 changed the president?

I think it changed everybody. … So yes, it changed him. It made him realize how opposed to America and our principles and our ideals certain factions in the Middle East are, and were, and how aggressively we needed to turn to address that matter. Nobody likes being at war, but we are at war.

War calls for the utmost from its leaders, and the president has had to focus on that. The kinds of issues he's had to deal with are now life-and-death issues. That calls for a certain seriousness that may not be called for when you're dealing with economic issues or education issues.

Any moments since coming to Washington where you didn't think, "This is the guy I've known for all these years?" Any sort of surprises from the president?

No. No. I asked him one time if he is able to relate personally to foreign leaders, or are there so many handlers around him and so many handlers around other leaders that they're never able to connect? And he said, "No. You're able to connect." My concern was that George W. Bush the person, the warm, energetic, likeable, straight-talking person, may not be able to physically and emotionally connect to these foreign leaders.

But he has been able to connect with them. He has had effects with them, and has been able to work effectively with many foreign leaders, I think they would all say -- just like he's been able to work with the people at Andover and Yale and his Texas Rangers and oil and gas business.

The 1978 congressional race. Why did the president want to do it? Were you surprised to see him run for office? How did he like campaigning and being a politician for a while? How'd he take the loss? What lesson did he draw from it and so on?

I was surprised that he ran for Congress. He had never talked to me about politics. He did mention that he was giving some thought for running for a statewide position when he was living in Houston, but thought about it only briefly; decided he really wasn't that interested in doing this. This was in the early 1970s.

So I was surprised when he called one day and said "I'm going to run for Congress." The long-time incumbent was retiring, so it was a rare opportunity for a Republican to run for office in a very strong Democratic area.

He liked it a lot. I went out there one time, the night of the first election when he knew he was going to make into the run-off in the Republican primary. My impression was, the part that he really liked the most was working with the people. He liked getting out and talking and mixing with small groups and large groups. He just really connected with the crowd. He liked that, and they connected with him. They connected with him, he with them, [as if] he'd been doing it all his life. So that was maybe the most energizing part.

Just to press on that a little. There's an anecdote floating around out there. It's a more specific version of that, where you say to him on that night, "Why are you doing this?"

Yes. That night the returns came in, and he learned that he was going to make into the run-off for the Republican primary, he stood up on a chair in a room full of young volunteers. They were very excited that their candidate had made it into the run-off. He was giving them a little pep talk, thanking them for their work, reminding them that their work was not over, things were looking up, they had a good chance, and they were moving forward. He stepped down off the chair, and we left the room.

I had asked him earlier in the day, "Why are you running? Why are you subjecting yourself to all these attacks by your opponents?" We talked about it in general. But then, as he stepped off that chair and we walked out of the room, he turned to me and said, "That energy -- that's what keeps me going. That's why I have stayed after that. That's what I really get fired up about."

So it's the energy from the crowd -- thinking, believing that he is there to do good things for his people -- that they appreciate it and understand it. He likes being the captain of the touch football team, so to speak. That's what an elected official really is for his or her constituents.

A couple of other political questions. How did he take the loss in 1978? Did you think he'd be back one day?

Yes. I think the polling information suggested he was going to lose, so it was not a surprise to him. He is not a fretter. He didn't think back and think about the things he could have done differently. He went on with his life. He's not one to languish over defeat. He's a move-forward kind of person. So he was not down at all. He moved forward.

Did you think he'd be back in politics?

I did not. I was surprised he ran. He just never really talked about it. He had never really defined himself in terms of politics. He had never defined himself in terms of his father's or his grandfather's political involvement. He had never been involved actively in their campaigns. … It was just George W. Bush from Houston, Texas. He'd never defined himself in terms of his family's political involvement.

But I was surprised. Maybe it's just something that the Bush men do.

Does the president still have his fun-loving side that he was famous for in all those school years?

Yes. He's got a great sense of humor, and he's very self-deprecating. There are dinners -- the Gridiron Dinner, the Alfalfa Club Dinner, the Washington Correspondents' Dinner here -- where politicians and particularly the president are expected to get up and make light of their presidency and make light of what's going on in Washington.

He's really, really good at that. He's really, really good at making fun of himself. He told me once about a speech he was giving at one of those dinners, where they had put together a tape of all of his abuses of the English language during the campaign. He said, "Clay, you have to see this tape. I cannot believe that an adult American male could butcher the English language as badly as I did during this campaign. It's the funniest thing you've ever seen."

This is the president of the United States talking about himself. So he takes himself just seriously enough. He's the first one who's going to make fun of himself, and it's a very disarming quality.

I think it's something that manifested itself in a little bit more ribald fashion when he was at Andover and at Yale; [it's] a little bit more mature fashion now. But that sense of humor is a great magnet. It helps bring people together, and is one of his real sources of charm.

What are his core beliefs, his core principles, the things that are his overriding goals for this country? This gets back to earlier part of the discussion about his decision making. Would you be able to predict, having known him so long, as he's getting various options set before him, which he would be most likely to pick?

He's not necessarily going to pick the short-term easy answer. I can predict that, and I think accurately 100 percent of the time, he's going to ask, "what's the right thing to do here?" Then after he understands what's the right thing to do, ask what the political implications of that are, and how they might deal with the political implications of the right decision.

Going back to youth and college days. What are your memories of the fun-loving kinds of activities he was engaged in?

OK, all the times that the president has violated the law -- no.

As I would say, the president engaged in what I'd call typical fun-loving kind of activities when he was in college. We had a big football game against Princeton in the fall of 1967. Princeton had beaten Yale five years straight, and Yale was victorious that day 29-7. It was raining. A number of us ran out in the field and decided it'd be a good idea to tear down the Princeton goalpost, which the Princeton fans didn't like and did not appreciate, to the point where the campus police escorted this very talented, energetic group of Yale students. They escorted us to the campus police [station], and told us we had ten minutes to leave the Princeton township and we should never come back. The president has been described as the leader of this group.

I personally remember leading this group out -- fielding, organizing it, leading it on the field. So I take great offense at the suggestion the president might have actually come up with the idea. I remember it being my idea. But anyway, it was a really good time, and we all remember it like it was yesterday.

There was another time in New Haven, where it was a particularly chilly Christmas season. We were feeling quite seasonal, and we thought that our fraternity house needed to have as pretty a Christmas wreath as we could find.

The president and a number of other students found a Christmas wreath that happened to belong to somebody else, but they thought it would look really good on our fraternity door. So they moved it from its owner's door to our door. The New Haven police thought that was not a good idea, and told him so in so many words.

The president was asked to be the so-called high commissioner of the Andover Informal Stickball League. It called for George Bush to wear this big top hat and a long coat that I remember. He would strut out onto the stickball field and opine about various umpire rulings and the quality of play. It was all very fun. He was a perfect guy to do it, because he looked ridiculous, but he didn't care.

Everybody had a great time, and were terribly energized by it. Again, it's something that took place every year in the spring, when everybody's getting a little antsy getting ready to get out of school. A crazy stickball league like Andover had was just the right thing for a school of 740 students.

Let me ask you one last thing. In biographies of the president, this famous 40th birthday weekend in Colorado Springs is usually presented as a very decisive breakpoint in his life. I don't know if you were there or not. But I'm curious -- do you buy into that theory or not?

When I heard that the president had stopped drinking that weekend -- I didn't remember that he was a particularly big drinker before. I hadn't noticed that he had stopped drinking afterwards. So it's really when I started reading some of the accounts in the early-1990s of him giving up drinking in the mid-1980s that I knew anything about it. So I really don't know anything about that.

So therefore, you don't think it was the moment when his life--

I just don't know. To me, the one time when the president's life changed dramatically was when he had twin daughters. I know having children changed my life, and I know it changed his. Parenthood is an awesome responsibility. It's the most challenging and the most fun thing that anybody has to do, and he has taken it very, very seriously. It changed him and grounded him, just like it has every other father.