CLAY JOHNSON: My name is Clay Johnson, I'm the head of Presidential personnel for now. [LAUGHTER]

One of the things that the President asked us to was not only help him pick very good people to come in here to lead his administration, but also to help his people be successful.

And, so, we've spent a lot of time the last year and a half working on that, working with the Council for Excellence in Government, Pat McGinnis' group, on things like Results.Gov and orientation sessions for the President's management agenda.

And we hope a series of monthly or every six-week luncheons like this where we get people like George Shultz, if there are many people like George Shultz, to come and talk to us about what their experiences were like. What they found to be particularly successful, unsuccessful, to take advantage of their perspective from the time when they were here.

Why should we have to reinvent this. About half the people in the leadership group have never been in -- worked in Washington before -- about half has.

So, let's try to take advantage of the wisdom of all the people, the wise people that have gone before us. The first person we've asked to come and speak today is George Shultz.

Three and a half years ago, when then Governor Bush asked me to start putting together a plan for a transition -- his charge to me was figure out what we do when we win. He said one of the first people you need to go talk to is George Shultz. You'll find him out in Northern California somewhere.

So, I found his phone number and I called him up and he said, great, I'd love to talk to you. You need to come out here and Charlotte and I will put you up and we'll have dinner and we'll talk and he would introduce me to a lot of his Hoover friends.

It was the most fascinating conversation. We spent about a day, day and a half out there. And I learned so much. So, I have every reason to believe that you all are going to learn so much from George's comments today.

George has been involved in just about everything that moves in the federal government. He has been the Secretary of Labor, he has been the head of OMB, he has been the Secretary of the Treasury, he has been the Secretary of State. He's been the head of various advisory panels, he.s been in academia, he has a PhD in this and a masters in that. This man is very well credentialed.

I don't want to go line by line, because I'd like to have the bulk of the time devoted to George.s comments. He is joined here today by his wife, Charlotte, and by his granddaughter, Kristen Jorgenson who is a freshman at George Washington.

Let me turn this over to George Shultz to make some comments. And one of the beauties about a group this size is it lends itself to a lot of questions and George has been kind enough to open himself up to questions after he makes his comments. So think about what it is you.d like to pick his brain about. George Shultz.

SEC. SHULTZ: First of all, I want to say thank you for what you're doing. And I say that from the heart, as somebody who's been where you are and hardly ever does anybody say thank you, like you deserve it. So, I say thank you and at the same time I say I envy you.

I just wish I was about four decades younger and I could join you and work along side you, because you're working in government at a time of tremendous importance. The world is shifting gears. There's no doubt about it.

And you have a chance to work in an administration with a President who is principled, has tremendous drive and is on the right track, an important track and, so, it's a privilege. I thank you, but I also envy you.

Now, some old sayings kept getting said because they have a ring of truth to them. And one of them is the days are long, but the years are short. Now, why are the days so long. Well, they are long, you're working long hours. But it isn't just the long hours, it's the intensity. You're involved; you're really working at it. Not just sitting at a desk turning a crank.

So, the intensity comes from the fact that you're working on issues that matter. Even some of the smaller issues you're dealing with -- if you put them along side something you might be doing somewhere else in private work -- they're very large.

So, you have this sense that what you're doing is important and it makes you intense in your work and at the same time the years are short. It probably seems like an instant since you started. For the same reason that it goes fast because you're working so hard and what you're working on is really worth doing.

So, just to repeat, I think for all those reasons, public service is an opportunity and a it.s a privilege -- you're working on these public issues and you are dealing interest with the taxpayers money. You're dealing with interest -- you're a fiduciary for the money the taxpayers who are in here -- and which you use.

In thinking about what I might say here before we have a discussion, I thought I would tell you four experiences that I had and what conclusions I drew from them about work in government, governance type things.

When I was nominated to be Secretary of Labor back in 1968, probably before most of you were born -- a long time ago -- I was told that if I wanted to make an appointment with President Eisenhower, he would see me. He was then in Walter Reed hospital, he died about four or five months later.

And when I was told that, immediately I made an appointment and went over there. And I go in and here's this man, he's propped up in bed, very genial, fun. So, we had this animated conversation. His Secretary of Labor had been a guy named Jim Mitchell who was friend of mine, I knew Jim well, so we talked about Jim Mitchell and we talked about the Labor Department.

And I was astonished at how much President Eisenhower knew about the Labor Department. And it gave me a sense -- Presidents know more than you think they know about what's going on around here. [LAUGHTER] They're smart people. And he knew all kinds of stuff about the Labor Department.

Then we got to talking about other things and we talked about golf. Ike loved golf. As a matter of fact, I remember a Gridiron Club skit. When he first took office, they were saying he didn't know very much about anything and nobody knew what his position was on this and that and the other.

So, the Gridiron Club skit has the reporters interviewing Ike's caddy. They asked, well, how does he stand on antitrust and the caddy says, .There ain't no anti in that man, he trusts everybody.. [LAUGHTER] There's a little magic in that and I think there is a sense in which the current President trusts people and they trust him. Of course, if you violate that trust, it's over. But you start out trusting people.

Anyway, we talked about golf and we had a great time and then the doctor walked in and said it's time to go. And all of a sudden, this genial man got very stern, his expression changed and he shook his finger in my face and he moved up close and says to me, young man, you're going to come down here and you're going to work 14 hours a day, seven days a week. And you're going to think you're doing your job.

Let me tell you if that's what you do, there's no way you can do your job. He said, I can see you like golf as much as I do. If you don't get out on that golf course a couple of times a week and let your mind relax a little bit, do something else every once in a while, there's no way you're going to do your job.

And I thought it was pretty good advice. And I look around -- I know my friend, Condoleeza Rice works pretty hard. She plays the piano. If you're trying to play the piano and you have any kind of standards -- you know, it's an intellectual exercise. You can't be thinking about anything else. You do that. And it's relaxing.

I see the President jogs and works out, and so on, but I thought that was pretty wise advice. And President Eisenhower, you know the press will get on you if you do anything other than -- don't pay any attention to them. You've got to do your job and can.t do your job unless you bring a certain freshness to it. And you get a freshness by occasionally doing something that gets your mind off of it.

Here's another experience I had. Just before I was invited into the cabinet, I scoured a place called the Center for Advanced Studies on the Stanford Campus -- it is a separate entity from Stanford. Some people refer to it as the Center for the Leisure of the Theory Class. [LAUGHTER]

I was pretty engaged. I was working on President Nixon's campaign a little bit and I was on a couple of corporate boards. I was a Dean at the University of Chicago. And I had this year and it was a year off, but yet I was engaged.

And the director of the center takes me into my little cubicle -- study he called it -- it was a desk and a chair and a big window that looked out on San Francisco Bay -- not bad. And I looked around and I said, .Where is the telephone?. He said, .There isn't any telephone..

I said, .I'd be glad to pay for installing a telephone.. [LAUGHTER] He smiled at me and he said, .If you get a call, there's a buzzer. Down the hall is a place where you can take a phone call.. Then he laughed and said, .Try it. You'll like it..

So, I didn't have any alternative and I tried it. And after a couple of weeks, it suddenly dawned on me for the first time in a long while I'm working entirely from the inside out. I am doing what I decide I want to do.

So, all of a sudden I find myself Secretary of Labor and then budget and all these things that Clay mentioned, all intense jobs. And I said to myself maybe I got a lesson from that experience at the center.

And I developed a pattern of once or twice a week of taking some time when I'm alert -- prime time -- not toward the end of the day when you're dog tired -- and saying, shut off the phone, if the President calls you put that through, if my wife calls, you put that through. Other than that, no calls.

And I say to myself I am not going to look into my in box, I sit in the chair, get a pad and pencil and say to myself what am I doing here. Why am I here? What am I trying to accomplish. Where are the things that I could do if I can get myself a little bit away from the hurly burly of what's going on, where I can improve what I'm doing.

I just think about it a little bit, quietly, to myself and maybe make a few notes. And say to myself, I'm going to call some other people up and get them to do what I want them to do rather than the other way around all the time.

So, I think doing something like that -- at least it helped me to keep my perspective straight and to do a little bit better job.

Third experience, I played football in college. And when I came into my senior year, I was in wonderful physical condition and I was ready to -- this is going to be my year. But in the pre-season practice, I got clipped, blocked across the back of my knees, and it tore my knee. I can tell you today whenever it's going to rain.

And I was knocked out, I couldn't play. And, of course, I was really disappointed. But I knew enough about the system there -- in those days you had a freshman team and then there was a varsity team, it was different.

They asked me to be the coach of the freshman back field. So, suddenly it was my first, you could say, teaching job. It was my first management job in a sense. And that was a special kind of an atmosphere, because you don't give people lectures in that kind of an atmosphere.

It's a bunch of guys and they're about the same age you are. And you know a little bit more about it than they do, because you know the plays, the moves and you've been through a little of the experiences. So, you wind up almost instinctively creating an environment where everybody's learning, including yourself.

And I took that lesson first into my work as a college teacher, university professor. Obviously the classroom is a little different but not that different. And then I found myself adapting the same idea to all my managerial jobs.

When I was Secretary of State, I said to myself, if I can create an atmosphere around me, where everybody here feels they're learning something, I'm going to have a hot group. I'm going to have to send them home at night. Because when you're learning something you're excited, it's fun. You're not turning a crank; you're realizing things you didn't quite realize before.

And, so, I always felt that if I could do that, it would be a big plus for me in what I was trying to imagine, what I was trying to get done. Because I'd have people who were participating with me and who were giving me their best and giving me their thoughts.

And people who are involved are willing to take direction better than those who aren't. And I think it's a -- it's a way of going about things that -- at least it helped me.

Final experience. When I was nominated to be Secretary of Labor -- actually it was a fortunate position for me to come to, because I knew the subject matter and I knew the Department of Labor very well. But I didn't know anything about Washington, the press, politics. I worked on the campaign, but I didn't really understand very deeply. Congress was a mystery.

But there was a guy in the White House named Bryce Harlow, who -- he's a mythical figure around. He was -- I always thought of him as probably the best Congressional relations, political strategist that ever -- was very savvy. And he was about 5'2".

And there was also coming into the cabinet a man named Rogers Morton, a gigantic person. He stood about 6'7". So, Bryce gets us together and he's going to give us a little instruction on how to deal with the Congress.

And he gets up and he says, Rogers Morton, would you please stand up. Well, Morton unfurls himself. And Bryce says, when I started dealing with Congress 25 years ago, I was as tall as Rogers Morton. [LAUGHTER] It gave you an idea what it was like, hand to hand combat all the way.

But then he went and he said a couple of things that stuck with me that I think are important. He said never make a commitment to do something unless you can carry it out. And if you make a commitment to do something, even if it turns out to be more difficult than you thought, knock yourself out to get it done. Because that's your word. And in this town that's the currency, as he put it. Trust it the coin of the realm.

So, that really stuck with me as something fundamental and it's not only in dealing with Congress, but dealing with your colleagues, conducting diplomacy. If you undertake to do something with another government and you don't do it, you're down the drain.

I had that connection with President Reagan -- a very interesting and revealing experience. Chancellor Kohl of Germany came to call. And he said to the President -- I was sitting there with him in the Oval Office -- it was a great thing for German reconciliation. The President of France and I went to a cemetery where Germany soldiers were buried and we had a handshake [Inaudible] over Europe. It was a great thing.

So you're going to make a state visit to Germany and how about we go to a cemetery and have a handshake. So, the President said, fine, I would be glad to do that. So, then we get word of the cemetery. It's a place called Bitburg.

And Mike Deaver, who was our chief guy to know everything, went over and he looked at the cemetery, it seemed to be okay and the President agreed. So then the press comes. And they dust the snow off all the grave stones and they look into everything and it turns out in this cemetery there were buried German SS soldiers.

So, from the standpoint of the American Jewish community, let alone others, that is an anathema. And this became one of the most gigantic issues that you can image. The President's going to visit Bitburg.

And I remember Eli Weasel coming and saying in the White House to the President, with the press there, Mr. President your place is not of Bitburg, your place is with the victims of Bitburg. We asked Chancellor Kohl to change cemeteries and he said, no. He said, Mr. President, if you renege on this, my government may fall. I thought that was an extravagant statement for him to make, but that's what he said.

The President finally did go to Bitburg. We went to the holocaust site. We did everything we could. We were only in Bitburg for 12 minutes, but he went. And all over the world you saw other leaders shaking their heads saying, I can't imagine that he would do that, it cost him so much, politically at home.

And even Margaret Thatcher who is not a wobbly woman shook her head and said I would never have gone. But then they also said, the Russians, the Chinese, everybody we were -- they said, you know, the man keeps his word, even under the most difficult circumstances. So, trust is the coin of the realm. And Bryce Harlow told me that and I think it's a very important thing.

Now I just want to say one further thing a little bit. Clay, when he asked me to come, said now I don't want to talk about anything substantive. [LAUGHTER] So, Iraq is out, South Korea is out, dividends are out, terrorism, judicial nominees, nothing.

But I want to say word about something that is substantive at least in a generic sense. And it reflects at least what I have observed in the contacts I've had with President Bush, first as Governor Bush, then as candidate Bush and as President Bush.

It seems to me that he is a person who puts tremendous importance on the idea of accountability. It's a theme. And there's a good reason for that, because in personal behavior if you aren't accountable, things go off the rails.

In the economic system, if there isn't accountability built into it then it goes off the rails. In the security system, the same thing is true. After all, as the President says, if a state harbors terrorists, the state is as responsible as the terrorists. In other words, is going to be held accountable. So, accountability is a very important concept.

And I think it's a value that goes way back in our history and it's a reason why the -- the mythical story of George Washington cutting down the cherry tree, and saying to his father, .I can not tell a lie,. why that has such staying power in America.

Because it's giving us a lesson that is very important to us. And you can see it -- look at problems of corporate governance, as I said with the terrorist business and many other aspects. So, the President has this theme of accountability.

Now let me step back a minute and let me tell you about an article that a faculty member at the university Chicago wrote when I was dean there. He sent it in and it was printed in the Harvard Business Review. Hard to swallow as a Chicago person. [LAUGHTER]

The article was entitled, "Good Managers Don't Make Policy Decisions." That was a catchy title. And he wasn't arguing that there aren't big decisions that people have to make. But he was saying that quite often you're here, you're at A and you look the situation over and you know you'd like to get to B.

And if you announce that, it seems so far out of place that it doesn't do you any good. But still you know that you want to get to B. So, he says, a good manager doesn't do that.

What does he or she do? Well, what do you spend your life doing? What do you spend your day doing? Most of the time during the day, you're coping with some problem or some opportunity that comes across your desk and it's a fire you've got to put out or it's a problem that's arisen or you see a little opportunity here.

And the so-so manager just puts out the fire. The good manager -- this was the point of the article -- the good manager knows he trying to get from A to B. And, so, for every little thing you're doing, you can slant it a little bit.

And all of a sudden, you're at B. How did we get here? We got here by coping -- is what he called it. So my message here is it seems to me the President has basically laid down a strategic idea, accountability. Test it according to this idea a little bit. And as you're coping, keep slanting things in the direction of making the system more accountable. And in doing that I think you will be furthering the President's objectives and be true to the kind of thing that he's trying to bring about in his Presidency.

I hark back often to Ronald Reagan and you know he talked about America as a shining city on the hill. That used to bother Gorbachev. He'd say, what does that mean. It wasn't just an image or an ideal or something, it meant it's on the hill, so you can see it. And it's shining so it's transparent and you can see what's going on inside that city on the hill, inside that White House.

And I think what you can see these days with President and Mrs. Bush can make you proud of what's there in that shining city and White House on the hill. Thank you. [APPLAUSE]

Thank you. So let.s have a little conversation. I would be glad to hear your comments or take questions, have a little conversation here. If somebody doesn't raise their hand, I'll call on somebody. [LAUGHTER]

Tell me who you are.

QUESTION: [Inaudible] USAID. I used to work with you [Inaudible] [Asking about upcoming State of the Union speech]

SEC. SHULTZ: Well, I'm sure he'll tell it like it is. And I think of some speeches that he's made -- last year's State of the Union message was riveting and it had a huge impact on the way people saw things.

His speech last September, I think it was, to the United Nations was a seminal speech. It laid out his national security statement. It's the first time in a long while that any President has tried to say something that's significant that says here are some -- here are the ideas that are evolving here.

And the process of moving things along is partly doing things. But then a company with ideas -- so people can see as you're doing -- here's where you're trying to go.

So, I think that that's what he will be trying to do. You always have a problem with the State of the Union -- having struggled with that problem, trying to help Presidents in the past.

You have one or two things that are of preeminent importance at the moment. And you want to put them into context. But there are lots of things out there and you don't want to give people the impression that you're so preoccupied with this that you're not paying attention to all these things that are a part of people's lives.

So, you've got to have some sort of balance without, I think, succumbing to the laundry list temptation that -- and making it long and laborious and being sure you touch every button, reach every constituency.

But the President has been masterful in these big important speeches, in speaking to the best of America. And in speaking in a way that people all over the world have to listen to him.

So, I'm sure he's going to talk about the war on terrorism and Iraq, North Korea and these things, but put them in context. But we are at a very important moment and, so, I think the State of the Union speech -- it comes -- I think the day before is the Hans Blix report. We sort of know what that's going to say.

And as I understand it, each country's ambassador will make some comments. But then refer the report back to home governments and then on Wednesday or Thursday, as I understand it, the responses from the home governments will come.

So, the State of the Union comes right in between those things and he will be speaking to those other governments as well as to the American people and on behalf of the American people.

So, he's got a big task. Personally I think the world is shifting gears rather dramatically. And the President and his policies are right at the center of that. And it's very conceivable that when we look back four, five, six years from now, we can be looking back from a safer better world at a time of tremendous change where how well that is managed -- managed is not quite the right word.

How well it's worked with, the kind of statecraft, will make a big difference. And the President has this special ability to speak plainly but with an inspirational lift to it that people need. Both that sense of contact with reality, but also the inspiration to see the Promised Land.