"I graduated with honors, and I graduated right at the 10 percent mark," James A. Baker III is saying, in response to a general question about his performance as a law student at the University of Texas. He is just warming up. "I'll tell you what I think is a true story. They have something called Order of the Coif, which is the top 10 percent. And of course having had a good but not spectacular first year, my second and third years had to be really good if I was going to make Order of the Coif.

"I had good second and third years," he goes on, but these other guys, two or three of them, flunked the final semester. Which reduced the size of the class just enough to reduce by one the number of students who could be counted in the top 10 percent. As a result, says Baker, "I missed it by one." This is where the chilly smile comes up, as he raises a hand, his thumb and index finger an inch apart. "I missed it by that much. And that was sort of a disappointment at the time."

It is the smile of a man who has never lived down a defeat. Never mind that he made law review, and won the law prize his last semester, and assumed his destined place at the top of the Houston legal establishment. That he went on to a meteoric second career in government, became chief of staff to the most popular president in decades, stepped up to the Cabinet as secretary of the treasury. Never mind that, at 58, on the threshold of four years as secretary of state, and as an old friend and longtime adviser to the president of the United States, he is perhaps the most powerful unelected man in America.