The Art of the Deal

This is the second best book ever, after the Bible of course, according to Mr. Trump.  So I decided to take a look.  Here's what I found.

It as published in 1987, almost thirty years ago.  Based on the Donald Trump I found there, he hasn't changed much during that period.  He still seems to be pretty much the same guy now as he is portrayed in the book by himself and co-author Tony Schwartz.  And the way he operates hasn't changed much either.  All in all, it is a remarkably candid self portrait.

It is also an easy read with a smooth, breezy style.  I was able to knock the whole thing off in one long day.  I would definitely recommend it to friend and foe alike.  But if you don't want to make the investment you can go with my summary and analysis below.  It relies heavily on direct quotes from the source so you can check my conclusions.

One caveat, it is not a deep dive into deal making.  It is mostly war stories about this deal or that.  And you should not be surprised to learn that Mr. Trump comes off as the smartest and most talented player in each story.  Why write a book if you are not going to make yourself look good?  I am going to begin where Mr. Trump began, with his philosophy.

[I am going to provide the page number for each quotation, should you wish to look any or all of them up.  They are from the edition I read.  Page numbering may differ slightly from edition to edition.  But this should tell you approximately where to look regardless of the edition you use.  As a further assist, I can tell you that in my edition the main body of the text ran to a total of 367 pages and started on page 1.]

Page 1 - "Most people are surprised by the way I work.  I play it very loose.  I don't carry a brief case.  I try not to schedule too many meetings.  I leave my door open.  You can't be imaginative or entrepreneurial if you've got too much structure.  I prefer to come to work each day and just see what develops."

Page 2 - "I try to learn from the past.  But I plan for the future by focusing exclusively on the present.  That's where the fun is.  And if it can't be fun, what's the point."

Page 50 - "I never get attached to one deal or one approach."

See what I mean.  I think this is pretty much the guy we see on the campaign trail.  Then there's this:

Page 51 - "I like to think I have that instinct.  That's why I don't have a lot of number cruncher's, and I don't trust fancy marketing surveys.  I do my own surveys and draw my own conclusions."

That's what he wrote thirty years ago.  But it could also be lifted from innumerable recent stump speeches and interviews.

If you want someone who goes with his gut, does not spend much time doing his homework, changes direction frequently, and does not put much value in stability or long term relationships, he's your guy.  Next, let's see what he has to say about the press:

Page 56 - "One thing I have learned about the press is that they're always hungry for a good story, and the more sensational the better.  It's in the nature of the job and I understand that."

Page 58 - "I play to people's fantasies."

Page 176 - "Good publicity is preferable to bad, but from a bottom line perspective, bad publicity is better than no publicity at all.  Controversy, in short, sells."

It would be nice if commentators and editorial page writers understood the situation as well as Mr. Trump does.  And, given that they write for a living, it would be nice if they put things as clearly, directly, and concisely as Mr. Trump does here.  And this is how he saw things thirty years ago.  He hasn't had to change his strategy because it still works.  Every day in every way he proves that his understanding of the situation is still spot on.  Consider:

Page 133 - "I worried about growing opposition, but publicly my posture was to take the offensive and concede nothing to my critics."

He continues to make this approach from thirty years ago work for him today.

I wish things were better now than they were thirty years ago.  I wish that the press did a better job of telling us what we need to know and why we need to know it.  I wish the press didn't spend all of its time chasing the shiny object of the moment.  But, if anything the situation has gotten worse in the intervening period.  That's not his doing.  That's the press's doing.  They richly deserve the low esteem they are currently held in by the public.

And speaking of old approaches that still work, here's what he had to say about Ed Koch, then Mayor of New York City.  Mr. Koch was, shall we say "unhelpful" when it came to a number of projects Mr. Trump was trying to move forward at the time.

Page 306 - "What you have to understand about Ed Koch is that he is a bully, pure and simple.  Bullies may act tough, but they're really closet cowards."

Page 343 - "Koch has achieved something that is quite miraculous.  He has presided over an administration that is both pervasively corrupt and [italics in original] totally incompetent."

Ouch!  Mr. Trump seems to have evolved (or perhaps devolved is a better word) here.  Now he often resorts to the personal.  "He's low energy."  "Would you look at that face."  But he often goes back to charges like "crooked".  And thirty years ago he actually provided credible evidence.   In his book he lists a number of Koch Administration officials who were put in jail, or at least lost their jobs, due to legal and ethical lapses.  Now he relies on at best questionable sources like The National Enquirer, blog posts, conspiracy-theory web sites, and the like.  And that's when he bothers to cite any source at all.

The book contains very little about the actual art of the deal.  And what it does have to say is not particularly insightful or original.  If you are interested in what little he does have to say on the subject you'll have to read the book.  But I do want to point out two business practices I found very troubling.

He spends a lot of time on gambling casino deals he did in Atlantic City, New Jersey.  The first of these involved what eventually became the Trump Plaza Hotel and Casino.  He started out in a 50 - 50 partnership but eventually bought Holiday Inn out.  He sold bonds to the public to finance this.  This increased costs by $7 million per year.  So why did he do it?

Page 220 - "To me it was money well spent.  By relieving me of personal financial liability, it assured I'd sleep better at night."

This was how he always operated.  Make sure that if things went wrong, someone else would be left holding the bag.  In fact, with respect to a second casino deal he admitted that:

Page 238 - "In return, I did something I'd never done before:  I personally guaranteed the loan."

Both of these deals eventually went south.  But less than six months after Mr. Trump made his personal guarantee he again floated a bond issue in order to be relieved of personal responsibility.  So when these two deals went south bond holders lost hundreds of millions of dollars.  Mr. Trump suffered minor losses at most.  And then there's Chapter 4.

Chapter 4 concerns Mr. Trump's first deal as an adult.  It took place in Cincinnati, Ohio. Again, if you want all the details you'll have to read the book.  I want to focus on "a fabulous man I'll call Irving" (page 85).  "He was one of the greatest bullshit artists I've ever met" (page 85).  So what's the problem?  "[H]e wasn't the most trustworthy guy in the world" (page 85).  In fact, "Irving had done all sorts of con jobs and swindles" (page 86).  In Donald's book "[s]tealing is the worst" (page 86).  And "I figure he managed to steal at least another $50,000 a year" (page 86).  So why didn't Trump ever fire him?  "Irving had it running well" (page 89).  As long as Mr. Trump was doing ok employing crooks wasn't a problem.  And another thing:

Page 60 - "You can't con people, at least not for long."

Page 60 - "If you can't deliver the goods, people will catch on."

But:

Page 60 - "Ronald Reagan is another example.  He is so smooth and effective a performer that he completely won over the American people.  Only now, nearly seven years later [remember, this was written in 1987], are people beginning to question whether there's anything beneath the smile."

So according to Trump Ronald Reagan was a con man that people saw through starting in 1987.  That statement is manifestly untrue within the ranks of the GOP.  Reagan was elevated to sainthood shortly after he left office a year or so after the above statement was made.  He has stayed there ever since.

And how has Mr. Trump done with respect to delivering the goods?  Let's look at the deals he discusses in the book.

Trump Tower was built with massive tax breaks and involved taking advantage of numerous loopholes.  The book notes that "the city amended its zoning laws to prevent others from doing the same thing in the future" (page 172).  Some of the breaks have yet to expire.  At least one has another ten years to run from when I write this in 2016.  So with lots of government help Trump Tower continues to be a success.  Okay, what else?

The book talks about two major casino deals Mr. Trump has done in Atlantic City and mentions a third.  The first one was the Trump Plaza Hotel and Casino.  This was originally a 50 - 50 deal with Holiday Inn.  But Trump bought them out using a bond issue to finance the transaction.  It went through bankruptcy in 1992 and thereafter staggered along under various management regimes before eventually closing for good in 2014.  Needless to say, the original bond holders lost a bundle.

His second deal was for Trump Castle.  He bought it from Hilton for $320 million just before it opened.  This was the "personally guaranteed" deal.  And, as I indicated above, he quickly floated a bond issue that allowed him to get out of his personal guarantee.  The bonds went into default in '91.  Bondholders again lost their shirts.  Various reorganizations followed, some involving Trump.  It eventually went completely bankrupt in 2009 and was sold for $38 million.

Mr. Trump was also involved with the Trump Taj Mahal.  It merits a brief mention, "I hope to have the Taj open by October 1988" (page 357) because at the time of the book's writing it was only a deal he hoped to do.  But he did the deal and it opened in '88.  It went bankrupt in '91.

Several other real estate deals were discussed.  The only one for which I have been able to determine how things eventually turned out was "Television City".  This was a large piece of prime real estate that featured, among other things, spectacular views of the Hudson River.  Mr. Trump took a couple of runs at this piece of property.  The first one petered out with no result.  He discusses the second one in some detail in the book.  At the time of writing it was still in progress.

His main idea was to erect the "world's tallest building" (page 339) as a centerpiece.   Architect Helmut Jahn was put in charge.  There would also be "seven other buildings" (page 339).  The project ran into trouble so Trump dumped Jahn and replaced him with Alex Cooper.  Other changes were made like moving the world's tallest building from the center to one end.  At the end of the book Mr. Trump is still optimistic the project would be built.

We all know that this particular world's tallest building was never built.  Things have since dragged on for years.  The project has slowly evolved into something called "Riverside South" and Mr. Trump is no longer involved.

Finally, let me mention the US Football League.  Never heard of it?  That's because it was only around for a short time.  But it was around long enough for Mr. Trump to buy the New Jersey Generals, pour a lot of money into them, and watch that team and the whole league fold around him.  If you want the details, they are found in "Chapter 11 - Long Shot:  The Spring and Fall of the USFL".

So based on the track records of Ronald Reagan, a man who Mr. Trump characterized in 1987 as a con man, and Mr. Trump himself, a self-described "great business man" who actually has a spotty record of business success, you can con people over a long period of time and they don't ever seem to catch on.

Now let me turn to Mr. Trump's personal life.  He was the second son of Fred Trump, a very successful real estate developer.  He grew up in the business.  That's why he could say "when I graduated from college, I had a net worth of perhaps $200,000, and most of it was tied up in buildings in Brooklyn and Queens" (page 93).  $200,000 was a whole lot of money in 1968.  His dad also provided the reputation necessary to be considered, most of the financing for, and a lot of hands on help with his first deal, the "Cincinnati" project discussed at great length in chapter 4.

At the time the book was written he was married to Ivana.  He lavished praise on her throughout the book but that didn't stop him from divorcing her in '91.  He then married and divorced Marla Maples.  He has been married to Melania since 2005.

So from the perspective of 1987 what did the future hold?  "The biggest challenge I see over the next twenty years is to figure out some creative ways to give back what I've gotten."  He has not much to show for himself on this, unless of course you count "The Apprentice".  And, as the summary of how his deals turned out above indicates, it has not been smooth sailing in the business arena.

There is an aphorism about banking that goes:  "If you owe $10,000 the bank owns you.  If you owe $10,000,000 you own the bank".  Mr. Trump has gotten into serious financial trouble several times.  But each time he as been able to convince the banks that they would be better off if they did not force him into personal bankruptcy.  But this has caused him to evolve his business strategy from one based on real estate deals to one based on licensing deals.  He has rented his name to a wide variety for products and projects.  He has been very successful doing this in spite of the fact that many of the projects he has licensed his name to have failed.  But the licensing fees he has collected have made him a quite wealthy man.

So what's the bottom line?  Mr. Trump is an opportunist.  In the context of real estate development this is a good thing.  The idea is to find deals where you can buy low and sell high, to find an opportunity.  He has had very mixed success at this, however.  He personally has done well.  But he has left a trail of investors and customers who have done badly, often very badly.  They have suffered losses, sometimes losses running to hundreds of millions of dollars.  For these people a bet on Trump has been a bad bet.

Mr. Trump now aspires to the highest office in the land.  We have a "representative" form of government.  Elected officials are supposed to represent our interests even when they conflict with the office holder's personal interests.  This is called "altruism".  There is precious little altruism on display in "The Art of the Deal".  Mr. Trump does discuss charitable activities.  But for the most part they are small bore and self serving.  They are designed to result in good publicity.  He does discuss one larger project, Wollman Rink.  In fact, he devotes an entire chapter (Chapter 12 - Ice Capades:  Rebuilding Wollman Rink) to it.  And this project was of genuine benefit to the community.  He deserves to be commended for it.

But that's pretty much it.  Instead we see not altruism but narcissism on display.  The bulk of the book is devoted to chronicling his "pursuit of gratification from vanity or egotistic admiration of one's own attributes".  And that's the dictionary definition of narcissism.

Mr. Trump could make a positive contribution because he actually is good at the art of the deal.  One way we know this is by observing how successful he has been at minimizing his personal losses when a deal goes bad.  But the job he aspires to involves much more than just deal making.  And on nearly every other measure of suitability he falls far short.  And he is the same man he was thirty years ago.  Expecting him to now change his spots, to put the good of the country or his supporters ahead of his own good, is like expecting a leopard to become a vegetarian.