In November 1964, an 18-year-old Donald Trump, home in New York on a break from college, went with his father to attend the opening of the Verrazano Narrows Bridge. Recalling that cold, wet day many years later, he told a reporter that the event gave him an insight that has since helped drive his successes.
“The rain was coming down for hours while all these jerks were being introduced and praised,” he said. “But all I’m thinking about is that all these politicians who opposed the bridge are being applauded. Yet, in a corner, just standing there in the rain, is this man, this 85-year-old engineer who came from Sweden and designed this bridge, who poured his heart into it, and nobody even mentioned his name.
“I realized then and there that if you let people treat you how they want, you’ll be made a fool. I realized then and there something I would never forget: I don’t want to be made anybody’s sucker.”
In his intervening 40 years as a real estate magnate, casino operator, best-selling author and perennial tabloid headliner, Trump has been called plenty of names, but never “sucker.” In amassing an empire estimated (by Trump himself, so allow for significant overage) at somewhere between $2 and $6 billion, much of which was built with the assiduous application of other people’s money, Trump has demonstrated an uncanny ability to identify and exploit opportunities, combined with an unusual gift for deal making. Say what they will about his outsize ego, unrelenting self-promotion and tacky nouveau-riche lifestyle, few critics would argue that Trump ever lets anyone get the better of him.
Nowadays Trump’s critics are vastly outnumbered by his adoring fans, anyway, and all thanks to the success of his hit reality TV series, The Apprentice. Currently in its second season, The Apprentice has launched the man who was once known primarily as the world’s most (and only) famous real-estate developer into the celebrity stratosphere as one of the nation’s top TV stars. In any public venue where he appears, Trump is immediately mobbed by admirers who, almost in unison, happily shout out his now iconic tag line “You’re fired!”
The Apprentice, with Trump as king-maker, doling out gold-plated pearls of wisdom to a gaggle of aspiring Donalds and Donaldettes, is predicated on the idea of Trump as a sort of über-businessman – a premise accepted by the contestants, audience and, naturally, the host himself. But to what extent does the reality measure up to the reality show? Under scrutiny, does Trump’s background justify this public coronation as this generation’s greatest business executive?
Trump unquestionably embodies many of the qualities shared by top sales professionals, including vision, tenacity, charisma and tough negotiating chops. He also has a knack for being able to grease the wheels to get things done, whether that means bullying, cajoling or tackling a problem personally by getting his own hands dirty (metaphorically, that is – Trump is a notorious germophobe who loathes shaking hands and keeps plenty of sanitary wipes on hand for immediately afterward).
Learning the Art
From a selling perspective, Trump certainly got an early start in the deal-making business. While in college at the University of Pennsylvania’s Wharton School, he demonstrated that he’d picked up a few tricks from his father, a millionaire developer of Brooklyn, Queens and Staten Island apartment buildings, by buying up and renovating small pieces of Philadelphia real estate. For the five years following graduation he steadily upped the ante, investing in larger and larger properties stretching from Virginia and Ohio to Nevada and California.
By the mid-’70s, the young developer was ready to take Manhattan. On the limited strength of his name, an admittedly meager resume and sheer force of personality, Trump talked his way into bank loans, tax deals from the city and lowball prices from property owners. As a result he laid groundwork for the city’s new convention center, bought up a variety of buildings around town and a rebuilt a hotel over Grand Central Station.
It was this latter deal that first made heads in the Manhattan development scene turn Trump’s way. Sensing an opportunity in the dilapidated and failing Commodore Hotel around the crumbling 42nd Street area, he constructed the deal brick-by-brick, one sale at a time. He first secured an option for the property from the bankrupt Penn Central Railroad for $10 million, then persuaded the city to give him a 40-year tax abatement – something no commercial property owner had ever done. Next he brought in as a partner the Hyatt Corporation, which then just happened to be looking to add a New York location. With these commitments in hand he secured a $70 million construction loan from Manufacturers Hanover.
“I said to the city,” he told The New York Times, “‘I will build you this incredible, gorgeous, gleaming hotel. I will put people to work in the construction trades and save hotel jobs, and the Grand Central area will come around.’ So the city made the deal.”
Had the project run aground, it would have likely spelled the end to Trump’s short career. But as construction progressed through 1979, the city’s economy began to pick up, hotel rates jumped and the glittering new Grand Hyatt that opened the next year happily furnished accommodations for the growing influx of Manhattan visitors. Even Trump admits that luck played a key role in the hotel’s success.
“It was timing,” he said. “In another year I wouldn’t have gotten the abatement, and no one ever will again.”
Much Bravado about Nothing
Fortune, of course, tends to favor the well-prepared. In Trump’s case, audacity goes a long way as well. One of the best examples of this truism lies in the story behind the young Donald’s negotiations over Manhattan’s new convention center. Peter Solomon, the city’s former Deputy Mayor for Economic Development, recalled that during the negotiations, Trump offered to forego the $4.4 million commission his option contract stipulated if the city agreed to name the building complex after his father, Fred C. Trump.
“We thought about it and we came to the conclusion that it might be worth the $4.4 million,” Solomon said. “But after about a month of knocking the idea around, someone finally read the terms of the original contract with Trump. He wasn’t entitled to anywhere near the money he was claiming. Based on the sales price we had negotiated, his fee was only about $500,000.
“But what really got me was his bravado. I think it was fantastic. It was unbelievable. He almost got us to name the convention center after his father in return for something he never really had to give away. I guess he just thought we would never read the fine print or, by the time we did, the deal to name the building after his father would have been set.”
Here a Trump, There a Trump…
Despite this “nominal” setback, Donald persevered and has managed to splash the Trump name on the occasional project or piece of real estate. Perhaps you’ve noticed. The Trump Tower, Trump Casino, Trump Plaza, Trump National Golf Club, Trump Shuttle, Trump Visa, Trump Ice bottled water – the list just keeps on growing. But as he maintains, in his position only a fool wouldn’t capitalize on such a powerful brand.
“The first time I did it, with Trump Tower, maybe it was ego,” he admitted to Time magazine. “But now it’s economics. If somebody tells you you’ll do a hundred million dollars more business if you call a building Trump Parc than if you call it Tower on the Park or some other name, you’d have to be some kind of masochist not to do it.”
His predilection for seeing his own name in lights reflects just one of the radical departures Trump brought to the staid real-estate development business. As he is fond of pointing out, he was the first developer to place an emphasis on the kind of showmanship that would have made P.T. Barnum proud. To the public the Trump lifestyle, epitomized by the showplace penthouse apartments, Palm Beach mansion, yacht, helicopter and a succession of beauties on his arm, all became indistinguishable from the marble waterfalls, gold fixtures and other luxurious appointments in the properties he was selling.
“I play to people’s fantasies,” he once said. “People want to believe that something is the biggest and greatest and the most spectacular.”
The acquisitive 1980s provided the perfect backdrop for the fantasy world Trump created as he simultaneously rode the booming real-estate wave while feeding the media’s insatiable hunger for celebrity gossip. And crow as they would about Trump’s love of the spotlight, even his harshest critics couldn’t deny that all the media attention translated into more business for nearly everything with the Trump name attached.
All Debts Are Off
But then came the early 1990s, when The Donald’s high-profile successes turned into an even higher profile come-uppance. Having largely built his empire on steadily climbing property prices and a ready stream of credit, when both quickly evaporated, Trump rapidly found himself saddled with a level of debt typically associated with third world countries. Though he never conceded specific figures, at the time BusinessWeek estimated that Trump’s company was $8.8 billion in the red, while his personal debt stood at $1.5 billion.
You wouldn’t have known it to look at him, though. With soon-to-be second wife Marla Maples on his arm, Trump continued to blithely strut through the lobby and gaming rooms of his Taj Mahal casino in Atlantic City as if the creditors weren’t clawing at the doors outside. Haggling with his many lenders in private, he affected the same, unflappable attitude. True, he was forced to give up many holdings, including the yacht, the Trump Shuttle, one Atlantic City hotel, two mid-Manhattan apartment complexes and 49 percent of the Trump Plaza, but hey – you can’t erase billions in red ink by just trimming fat.
Most important, unlike many of his contemporaries caught in the same crunch, Trump was able to avoid personal bankruptcy. Having invested so much time in building up the Trump name and brand, he brazenly used the threat of his own collapse as a lever to gain what many observers considered favorable terms. Sure, a prolonged bankruptcy struggle would have hurt Trump, but it would have hurt his lenders too. As Ralph Kramden might have observed, he knew it, they knew it and he knew they knew it.
In fact, at the time Donald commented that rather than marking him and the Trump name as damaged goods, his financial troubles actually served to bolster his reputation.
“I think it has greatly enhanced it,” he said of his name’s mystique. “There was a media stampede, but when you come through adversity, I think people respect that.”
Back in Black
Rapidly shifting gears, Trump set about preparing for the next market surge. In essence, he merely returned to the standard Trump playbook, which is defined by only pursuing the top-notch or, in real estate terms, “Tiffany” locations and thinking big. While other developers were nursing their wounds and bemoaning the tough economic times, Trump forged ahead with such epic, trophy-style business ventures as the luxury Trump Parc condominium on the southwest corner of Central Park, the Trump National Golf Club and housing development on 250 choice acres in Westchester, NY, and the massive $5 billion undertaking on Manhattan’s west side known as Trump Place, the largest single piece of real estate on the island, which will one day consist of 18 buildings comprising 8,700 units and 5 million square feet of commercial space. In case anyone had missed the news of all these and other deals, Trump reminded the public that the world had returned to its proper order with the best-selling book Trump: The Art of the Comeback.
To the general public, the Donald Trump they watch firing young hopefuls each week on The Apprentice is the living embodiment of the American success story. Unquestionably, Trump has made a great deal of money, but financial success is often also defined by how much money you’ve made for other people. Bill Gates, for example, while acquiring billions for himself also created hundreds of millionaires among Microsoft’s employees and investors.
Trump’s investors haven’t seen anything like these kinds of returns. In a piece of uncharacteristic (for him) bad timing, in August, just prior to the airing of the first episode of The Apprentice’s second season, Trump’s publicly traded hotel and casino company revealed that it was entering Chapter 11 bankruptcy. Although Trump Hotels & Casinos represents just 1 to 2 percent of Trump’s net holdings, announcement of the company’s reorganization of $2 billion of debt represented a serious public rebuke to the self-styled “Master of the Deal.”
But the truth behind Trump’s glitzy casino operations is that they have never been particularly profitable. Share prices that traded at $35.50 in 1996 are now worth less than 40 cents apiece. Analysts say Trump overreached by building multiple high-end locations, which, rather than attracting new business and visitors to Atlantic City, merely leached customers from one another. Much as he is revered by the public for his legendary business acumen, within the community of stock and bond traders Trump and his related investment opportunities are viewed with a much more jaundiced eye.
Fired Up Again
Predictably, Trump has shrugged off this latest stumbling block, preferring to focus attention on his many other interests and the return of The Apprentice. An unexpected ratings smash in its first season on NBC (one wonders whether the ABC executives who originally passed on the show have a newfound appreciation for the show’s tag line), The Apprentice earned a choice spot in the peacock network’s Thursday night lineup, which was formerly anchored by Friends. Plus, Trump received a big pay increase, bumped from an estimated $50,000 an episode to $180,000 per. And that doesn’t include his producer’s fee, percentage of merchandise sales or the spike the show will give to sales of his most recent book, Trump: How to Get Rich.
NBC was willing to give Trump such a generous deal not only because of The Apprentice’s large viewership, but also because of the makeup of the show’s audience. The Apprentice draws particularly good numbers among the acquisitive and upwardly mobile 18-to49-year-old demographic that is highly coveted by advertisers. Not surprisingly, these are the same folks who buy Trump’s books, stay in his hotels, live in his buildings, play on his golf courses and collectively fund his lavish lifestyle.
But anyone who hopes to gain any insight into Trump’s business wizardry by tuning in to The Apprentice needs a wake-up call. Watching a group of suit-clad twenty-somethings trying to hawk lemonade on Wall Street and then tear into each other in an artificially constructed “boardroom” session is all about entertainment, not education. Trump admits that even the pointed “You’re fired” is pure artifice.
“It’s both a horrible and beautiful phrase,” he recently told The Washington Post. “In real life if I were firing you, I’d tell you what a great job you did, how fantastic you are and how you can do better somewhere else. Generally speaking, you want to let people down as lightly as possible. It’s not a very pleasant thing. I don’t like firing people.”
But that’s what makes Trump’s ongoing success such a marvel – it’s constructed on a thin foundation of fantasy that his growing base of fans continues to buy into, blithely ignoring all evidence to the contrary. We’re told that his casinos are bankrupt, but that’s beside the point because on our TVs he’s still the cock of the walk, traveling everywhere by helicopter and limousine, living in lavish luxury and engaged to an exotic Eastern European beauty.
This is why it ultimately doesn’t matter whether Trump truly is the business world’s answer to Hercules. What matters is that he believes it, and that he will work tirelessly to make sure we keep believing it as well.