Few business owners would make the claim that "fear, uncertainty and change are our three major food groups," but then again there are even fewer that would consider setting up shop in Washington, D.C., and staking their claim monitoring the anti-do-it-yourself world of national politics. Charlie Cook started the Cook Political Report in 1984 as a non-partisan newsletter handicapping every presidential, senatorial, congressional and gubernatorial race in the country with state-by-state and national trend analysis. The company has steadily grown to the point where 2004 will be its best year so far with over a million dollars in revenue, in part because of a diverse revenue stream, in part because of their renowned expertise, and in part because of Cook's old friends, "fear, uncertainty and change."

Over crabcakes, shrimp étouffée and Key Lime pie, Cook and managing editor/Senate expert Jennifer Duffy sat down with Patrick J. Sauer in Washington, D.C., at politico favorite The Palms to discuss the business of politics and what to expect come November 2nd.

Q: Was the Cook Political Report a natural outgrowth of a political junkie?

CC: Absolutely, as a freshman at Georgetown I used to go sit in on the Watergate hearings. The first paid job I ever had was as the Senate elevator operator. I met all the heavyweights, Bob Dole, Barry Goldwater, Hubert Humphrey, and got hooked. I've worked in a number of arenas including campaigns, committees, as a pollster and writing for Roll Call . It's all politics all the time around here; I read five or six newspapers a day. You have to love politics to do what we do with this much intensity.

JD: Politics is our sports. We can talk about it all day, and the season runs on a 24-month cycle.

Q: Tell me about the evolution of the Cook Political Report.

CC: I started it because there wasn't a single insiders view of elections, but since I had worked for J. Bennett Johnston (D-LA) I had to prove the newsletter would be non-partisan and not just a Democratic tip sheet. It was a struggle in the early days, a bare bones operation, at one point my sole contract was canceled right around when my first child was born. A governmental research company wanted to hire me and I agreed as long as I could continue the newsletter, so they bought it for a very low six-figure, much more than it was worth. Eventually, an international PR conglomerate acquired that company and it was a bad fit. I took to printing sketches that would say "Day 38 of Cook Behind Bars" and leaving them on the desk and under the windshield wipers of my boss, pleading to sell the company back to me. In 1991, the company wasn't meeting their earnings, so I was able to buy the Cook Political Group for a fraction. I've owned it outright ever sense. I was an entrepreneur, an acquisition an LBO and now a strategic alliance. I was the 1980s.

Q: Is the newsletter the bread and butter?

CC: It gives us credibility and establishes our expertise, but we have four revenue streams: the Cook Political Report with 800 paid subscribers at $295 a year; a contract to provide articles and appearances for National Journal ; a contract to provide analysis for NBC, and tons of speeches, which is where we make the bulk of our money. Our readers are primarily in the private sector, PACs, lobbyists, media outlets, trade associations, etc., who pay between $6-12,000 per speech. I've been in 30 states since January speaking to groups like the International Housewares Association or the Association of Metropolitan Sewerage Agencies. I'm a ham so I like it, but by December every year I am tired of politics.

Q: Has it been smooth ever since you bought it back?

CC: Our business is interesting because even-numbered years are always going to be better, presidential years are the best, followed by mid-term elections and so on. The transition years in 1991-92 were great and so were the Clinton screw-ups in 1993-94 and then the tsunami wave with Newt & the Boys, which we called, although nobody could've predicted the magnitude. By 1996, we were rolling and I thought we would never have to look back again. I was appearing on Meet the Press and David Brinkley's show, and then in 1997 the phones stopped ringing. Around that time, though, Congress raised their pay but banned honoraria for speeches, so we started getting a lot more requests. It's been a boon for our business.

Q: Has it become a rite of passage for candidates to visit the Cook Political Report?

JD: We see just about everybody for at least an hour session, some come in comfortable, others are desperate. There was actually a memo from the DNC with the do's and don'ts when visiting us, but we want to help candidates put their best foot forward. If they can't tell me their life story quickly and concisely how are they going to be able to let the public know who they are?

CC: We don't care who wins and loses, we just want to be right.

JD: I know I've done my job when both sides are a little happy and a little pissy.

Q: Have you had candidates come in early on that you knew were meant for bigger things?

CC: In fifteen minutes it was apparent why trial lawyers would drive across North Carolina to watch John Edwards try a case.

JD: Barack Obama came in September of 2002 and he had a lot of talent, smarts and charisma. And from the first day I met Chuck Hegel I thought, "there's something about that guy." It's fun to see them hit the big time.

CC: You learn quickly that both Democrats and Republicans have people with good ideas and intentions and rarely is a party wholly on the side of truth, justice and the American way. For instance, years ago, Jessie Helms saw me, a stranger, walking out of the Capitol with my tie undone and coat over my shoulders and said "tough day?" He walked me out. Helms was a nice old man, a lightning rod I might not have agreed with on a lot of issues, but he was well-liked in the Chamber.

Q: Has technology changed the way Cook Political Group conducts business?

CC: We hadn't done any marketing in years, but we recently went all-electronic, so I think we will try to get wider distribution. In the old days, we were in the know, but now it's a lot easier for armchair analysts to keep tabs.

JD: Lots of people let us know that they could do our jobs better than we do. The Internet can be tough because it basically allows people to continually reinforce their own point-of-view.

Q: Do you see yourself as an entrepreneur

CC: Only when I look at our health care costs, then I know I'm a business owner.

JD: Health care costs are our fifth employee.

CC: The other time was when I had to let go of the newsletter. I used to write every word of it, and now 90% is written by Jennifer and Amy Walter who covers the House. I take a pass at it, tweaking, editing and plugging in history, but by now I'm confident that they know my style. Still, at first, turning over the newsletter was like sending my child off to first grade.

Q: Are entrepreneurs truly an important constituency to candidates?

CC: If I'm a Republican I would rather have the NFIB backing than the Fortune 500 because the NFIB has tentacles that reach into every district and corporations play both sides, so they've lost their seats at the table. High-tech entrepreneurs are important to Democrats because they tend to be socially liberal.

Q: How do kitchen table economic issues drive elections?

CC: It used to be that income was the single biggest determinate in party affiliation, not anymore. In the South and states that border the region, rural, downscale white voters who ought to be Democrats vote on guns, abortion and other cultural issues and upscale white Northeastern voters in the older suburbs with six-figure incomes who ought to be Republicans vote the opposite. It's a fundamental shift in American politics.

Q: Why is it that almost everyone I know is more or less a centrist but the country seems so polarized?

CC: There are members of Congress who have never met a swing voter. The system doesn't reward centrist politicians, even though the vast majority of Americans are between the 30-yard lines. Redistricting is to blame, but also because there isn't a lot of relationship building across the aisles. It's a Tuesday-Thursday club where they go to five fundraising receptions a night.

When I started, this town was civil and they all used to play poker and golf, live on the same block and watch their kids grow up together. Now it's a badge of honor to campaign on "my heart and family is back home" and sleep on a couch even though I can tell you divorce rates have gone up enormously.

Another thing that happened in the 1990s was journalists and political adversaries started attacking candidates whenever they traveled abroad, for either using taxpayer dollars or accepting free trips. Most of them stopped traveling and the days when five, 10, 20 members of Congress with varied backgrounds got to know one another on a trip and created a bond are gone. There was abuse, sure, too many of them went to the Paris air show, but the thing about it is these people are voting on enormously important issues on foreign policy, trade, economics and so on, and they need to understand the world, which they don't get going back and forth to Pocatello. It hurts their knowledge base and their relationships.

JD: Everybody knows this place is dysfunctional and it's going to get worse because the moderates are getting winnowed out. It used to be more fun when there were more fish out of water. To fix it, though, will take members of Congress throwing themselves in front of a train, doing something for the greater good with the firm understanding that it's the last thing they will ever do in politics.

CC: You had a brief Kumbaya period after 9/11 but then it went right back to business as usual. Ads have gotten meaner and nastier, and its tit for tat where the bar is raised every year. This is not good for the country--it really isn't. One encouraging thing about our system though, is that this country has gone through tough times before and historically, whenever it gets really bad something happens to pull the pendulum back. It's unsustainable where it is.

Q: What has been interesting this election cycle?

JD: It's the Restoration Hardware election, new technology makes old things work better. Knocking on doors is back, but with a Palm Pilot that shows you an 18 second video on an issue like healthcare that you said was important to a telephone canvas. And yes, handlers did tests to determine that 18 seconds was as much attention as people were going to have.

CC: The sophistication both sides have had in this election is absolutely mind-boggling. They know if you subscribe to Cosmo or Nascar Today and will send you messages accordingly. And since there is a universal belief that this will be very close, I think we are going to have one hell of a turnout.

Q: How does it look for President Bush?

CC: A year ago, the Bush administration could have made four assumptions: the economy would be cooking, Iraq was a success and they would soon find WMDs, they would have a much bigger war chest than any presumptive nominee, and the Democrats would be their typically fractured selves. None of those things came true. Iraq is a liability. Imagine where President Bush would be if he hadn't invaded Iraq, I bet he'd be sitting at 60%.

Q: What can we expect in the Senate races

JD: Arlen Specter losing would be the biggest realistic surprise, but I wouldn't be shocked if the Senate looked exactly the same.

Q: The trillion-dollar question: Kerry or Bush in the White House?

CC: Functionally speaking, the race is equal, but among undecided voters, President Bush only has a 25% approval rating nationally, so I think it'll be uphill for him. Unless there is a major shake-up in the country, it will be hard for George W. Bush to get re-elected.

Read the full interview with Charlie Cook in the November 2004 issue of Inc. magazine.