The Art of the Deal
Thanks to his self-promotion, extravagant lifestyle and big deals, Donald J Trump was already famous when The Art of the Deal was published, a symbol of capitalism, New York City and the flashy 1980s all rolled into one.
Yet the book had lucky timing, coming out just ahead of the troubles that beset Trump in the late 1980s and early 1990s which brought him dangerously close to ruin. Much to his enemies’ chagrin, he sorted himself out and came back bigger than ever. When F Scott Fitzgerald said, “there are no second chances in American life” he did not count on the power of a brand, and like the great showman PT Barnum a century before, a large part of Trump’s fortune comes down to his name.
When producers approached Trump to be the focus of a new reality television series based on entrepreneurship, he saw an opportunity to cement his fame with a new generation. Yet despite the array of Trump books that have been published to capitalize on the success of The Apprentice, The Art of the Deal (written with Tony Schwartz) is still the best insight into the man. Though now 20 years old, it contains the essential philosophies and ways of working that have sustained The Donald’s success for several decades. The only difference is that then he was the brash upstart willing to take on anything and anyone, and now he is the wise, if still very showy, business master. The scale of his operations may have grown, but the Trump of the 1980s is largely the same one of today. Here we look at some of the deals, beliefs and strategies that have seen him thrive and prosper even in tough times.
Trump’s father, Fred, was a developer of rent-controlled housing in the New York boroughs. Despite it being a low-margin and unglamorous form of developing, his tenacity ensured his success. Though the young Donald spent a lot of his boyhood following his Dad around on sites, he always dreamed of Manhattan - creating landmark projects that made a statement.
His first project in Manhattan was the Commodore, a huge, run down hotel in a low rent district. At the time, he notes, “I was only twenty-seven years old, and I’d hardly slept in a hotel”, but he embarked on building a 1400 room monster, the biggest in New York for 25 years.
It’s a myth, Trump observes, that location is everything in real estate. It is important, but to make the most of any property (particularly apartments) what you need is to create a sense of worth or mystique that will make people want to buy. He remarks:
“People may not always think big themselves, but they can still get very excited by those who do. That’s why a little hyperbole never hurts. People want to believe that something is the biggest and the greatest and the most spectacular.”
To get your project noticed you must be different, even outrageous, and being so increases your chances of becoming a story in the media. He does not court publicity for publicity’s sake (in fact, he claims to be a very private person), however a small article in the New York Times, he notes, will be worth many times more than a full-page advertisement costing $100,000 – even if the slant is negative.
Have patience, then be ready to swoop
Despite his flashy image, a major element in Trump’s success is being prepared to wait. For example, for years he prized the Bonwit Teller site that would become Trump Tower, repeatedly writing to its owners to state his interest. He kept up his efforts, he notes, “…because much more often than you’d think, sheer persistence is the difference between success and failure.” When the site fell into the hands of new owners who were in a poor financial position, it was to Trump they turned to sell.
On another occasion, he read about a company in dire straits, whose executives had been living high flying around in a corporate Boeing 727. At the time this plane cost $30 million new. Trump offered a measly $5 million, and in the end paid $8 million - still a hefty discount. If you can make seemingly outrageous demands while keeping a straight face, he notes, you will get bargains.
Many of his successes came from offering to buy assets before they were on the market. To many sellers, a bird in the hand is worth two in the bush. “The worst thing you can possibly do in a deal”, he writes, “is seem desperate to make it”.
You need leverage; find out what the seller needs or wants and give them this something extra in addition to the purchase price.
Secrets of the deal maker
In New York City, big time real estate development is a complex matter. The city has strict and Byzantine planning and zoning laws which mean that most development proposals, particularly larger ones, are knocked back. Trump’s building of the famous Trump Tower on 5th Avenue and 57th Street (with its marble waterfall lobby, luxury stores and apartments owned by stars and billionaires) turned out to be a great success, but to get it built he had to wrangle with the city authorities about its height, its aesthetics (given its landmark position) and how much public amenity it would provide. Long and often fragile negotiations were required to buy the lease for the existing building (then housing Bonwit Teller), for the land that the building sat on, for the air rights above the Tiffany store next door, and for a small pocket of land required to have a rear yard (another city requirement). He had to raise the money for the project, yet the banks were not willing to provide it until everything was settled. It was only the success of his previous project, the Commodore/Hyatt hotel, that enabled him to finally get a mortgage.
A key to understanding Trump’s success is that he actually likes handling complexity. What to others look like big problems, to him appear as massive opportunities that draw on his creative powers. All his deals are a case of juggling many balls in the air at once, and this is even before the first bricks are laid. The more complex the deal, he notes, the fewer developers will be interested in the first place – but this means greater potential rewards if it does come off. While most people do not have a stomach for such uncertainties, Trump has thrived.
Though one of his trademarks is hubristic confidence, in fact he always goes into any deal looking at what could possibly go wrong. ‘Protect the downside”, he notes, “and upside will take care of itself” – every deal must have a fallback position. If he buys a site or a building, for instance, he has to be ready for his plans to be rejected. An intended tower block of apartments can be changed into office accommodation or a hotel if necessary. The deal-maker must be willing to let go of personal preferences to ensure a profitable outcome.
The way of The Donald
Other things we learn about Trump in the book include:
Who is the real Donald Trump? Though famously fond of exaggeration and self-promotion, underneath there is a real businessman who loves his work. In his biography No Such Thing As Over-Exposure, Robert Slater notes that (despite the famous ‘You’re fired’ line from The Apprentice), few people are ever let go in the Trump organization, and generally he is more forgiving and generous than his image suggests. He is also loyal, with trusted financial and legal people who have been advising him for years. As Trump himself notes, “In my life, there are two things I’ve found I’m very good at: overcoming obstacles and motivating good people to do their best work.”
In its current renaissance, it is easy to forget that for much of the 1970s and 1980s New York City was in a mess, close to bankruptcy and ridden with crime. But Trump clearly loved his city and thought it the center of the universe, and as a reward for that confidence was able to pick up valuable properties for low prices. He is often painted as vainglorious, but the other side of the coin is strong self-belief. Without it, he would have been no more than small to medium property developer.
Towards the end of the book, Trump gets philosophical, wondering what, ultimately, is the meaning of all his empire-building. His honest answer: he doesn’t know, except that he loves doing the deals themselves, irrespective of how much money he now has. Life is fragile, he notes, so whatever you do you must have fun doing it.
Littered with interesting mentions of the great and the good of New York in the 1980s, including novelist Judith Krantz, TV personality David Letterman, financiers Michael Milken and Ivan Boesky, Ian Schrager of Studio 54 fame, Mayor Ed Koch, Calvin Klein, and the Cardinal of St Patrick’s Cathedral, The Art of the Deal is an enjoyable read along with its valuable lessons. It is also very well put together, thanks in part to the writing assistance of Tony Schwartz, author of the bestseller The Power of Full Engagement. Trump fans should also get the sequel, The Art of the Comeback, written ten years later, and Think Big: Make It Happen in Business and Life (2008).
Source: 50 Prosperity Classics: Attract It, Create It, Manage It, Share It by Tom Butler-Bowdon (London & Boston: Nicholas Brealey).
Born in Queens, New York, in 1946, Trump was the fourth of five children. His mother Mary was a Scottish immigrant from the Isle of Lewis, and his father the son of German immigrants (originally named ‘Drumpf’) who ran a hotel in British Columbia.
As a boy, he was assertive and aggressive. At 13 he went to New York Military Academy in upstate New York, where he stayed until his senior year. After graduating, he considered going to film school in California, but instead enrolled in Fordham University in the Bronx because he preferred to stay close to home. He attended the University of Pennsylvania’s Wharton School of Finance (arguably America’s best business school for entrepreneurs), graduating in 1968. In 1971 he began working for his father’s company, the Trump Organization, before starting out on his own.
In 1977 Trump married Czech model and skier Ivana Zelnickova, who for several years worked as a manager in Trump hotels. It was Ivana who coined the nickname ‘The Donald’. They had three children, Donald Jr, Ivanka and Eric, but divorced in 1992 after Donald’s affair with model Marla Maples, whom he married in 1993, producing a daughter, Tiffany. In 2004, Trump married Slovenian model Melania Knauss. With their son Barron (named after Barron Hilton) they live in Trump Tower in a penthouse valued at over $30 million.
The Forbes Rich List of 2006 estimated Trump’s fortune at $2.9 billion, making him America’s 94th richest person. Current estimates vary from this figure to $4 billion. In 2016 he put himself forward as the Republican nominee for the election of President of the United States.