I completely understand the longing on the part of some voters for greater competence in our federal government and their instinct that it might be a good idea to turn the whole mess over to a successful businessman. And for the 20.7 million weekly viewers of The Apprentice, Donald Trump was portrayed as the epitome of a successful businessman. So is it true?
There is no doubt that Trump is “successful” in the way that “reality” TV celebrities like Kim Kardashian are successful. And Trump does appear to have managed to turn that celebrity into a fair bit of cash. So he is clearly good at marketing himself, and this skill has translated into his success as a political candidate. But skill at marketing the Trump brand is not the skill required to make the federal government run in a more business-like fashion.
For that, we need to consider Trump’s record forming and running an actual business. His business empire is famously opaque, and without his personal tax returns we cannot say how much he has grown the company and wealth he inherited from his father (who also co-signed his early contracts, lent him money to get started in Atlantic City, and helped him when he needed bailing out). Today, the Trump Organization itself is small. It develops, owns, and manages a collection of commercial, residential, and golf course properties and, most distinctively, conducts an active licensing operation that seeks to exploit the Trump brand. A Bloomberg report estimated that the business has no more than a dozen “key staffers.” Surprised by the modest size of the enterprise? I was.
Without a window into the Trump Organization’s financial results (it is closely held), what can we glean from the public record? Let’s start with bankruptcy. Any single bankruptcy can be explained by specific circumstances, and even a string of them can be explained by market conditions affecting an entire industry (like casinos). In addition, failure is mother’s milk to an entrepreneur, and a few bankruptcies along the way can be forgiven. But six spread over 25 years?
Bankruptcy #1: Trump Taj Mahal (1991)
Bankruptcy #2: Trump Castle (1992)
Bankruptcy #3: Trump Plaza and Casino (1992)
Bankruptcy #4: Plaza Hotel (1992)
Bankruptcy #5: Trump Hotels and Casino Resorts (2004)
Bankruptcy #6: Trump Entertainment Resorts (2009, emerging in 2016 with Trump having lost the entirety of his interest)
Whatever you make of Trump’s string of bankruptcies, these turn out to be only the tip of an iceberg of business failure. Consider the following:
Trump Shuttle. Trump purchased the DC-NY-Boston shuttle in June 1989, with a loan from banks. The aging fleet of 727s was redone with faux luxury interiors, including chromed seatbelt buckles bearing the letter “T” and faux marble sinks with fake gold fixtures in the lavatories. Despite Mr. Trump’s purported business acumen, he failed to realize that chromed Trump seat-belt buckles were not the main things customers wanted from a shuttle airline. The man hired to run Trump Shuttle said in an interview last year that Trump “didn’t understand the business” and “I cringed every time he opened his mouth.” Among other things, Trump accused his competitor, Pan Am, of being unsafe, which was not only untrue, but broke one of the fundamental unwritten rules of the aviation business. The Trump Shuttle never turned a profit. In September 1990 the loans were defaulted and ownership of the airline passed to its creditor banks. Three years after his purchase, in April 1992, the Trump Shuttle ceased to exist.
Trump Vodka. Trump chose Drinks America as his partner, a penny-stock company that was not in compliance with SEC requirements, and lent his name in exchange for about half the profits. Branded “the world’s finest super premium vodka,” ads for the garish gold-colored bottle, bearing the tag line, “Success Distilled,” claimed that the spirit would “demand the same respect and inspire the same awe as the international legacy and brand of Donald Trump himself.” Trump promised in 2006 that the T&T (Trump and Tonic) would become the #1 drink in America. Two years later, when the failure of Trump Vodka already was imminent, Trump doubled down: “Everything we’ve touched has been a big success . . . We launched a vodka that became tremendously successful. My book just went to number one and we think the vodka, likewise, will be number one. It’s been one of the most successful launches ever in the history of this business.” In April 2009, when sales had plummeted, the bottle maker had sued over unpaid invoices, and the company was in financial distress, Trump was still speaking publicly about “how well Trump Vodka is doing.” Two years later, in 2011, production of Trump Vodka ceased.
Other failed ventures:
Trump Mortgage (founded in 2006 with a business plan apparently consisting mainly of the idea “Who knows more about financing than me?” (Trump to CNBC), run by a man hired by Trump who was reported to have been a registered broker for only six days, and shut down within 18 months)
GoTrump.com (an on-line travel service, which he called his “biggest venture to date,” launched 2006, shut down one year later)
Trump University (opened 2005 as a non-accredited for-profit “university;” little more than a “get rich quick” scam, it morphed into “The Trump Entrepreneur Initiative” before ending operations one year later. In 2013, the New York Attorney General sued Trump and the “university” for $40 million alleging "persistent fraudulent, illegal and deceptive conduct")
Trump Magazine (launched 2007, failed 18 months later)
Trump Steaks (launched 2007 as the “world’s greatest,” subsequently discontinued (a similar venture involving bottled water, “Trump Ice” also appears to have been abandoned))
Trump: The Game (launched 1989, discontinued one year later; launched an Apprentice-based version in 2005, also failed)
New Jersey Generals/U.S. Football League (acquired team in 1983 and later acquired Houston Gamblers and merged them into the Generals, almost immediately thereafter the league folded, with ESPN reporting “it was Trump’s strategy for the league that is widely considered to have led to its demise.” (See interesting January 2016 article in Esquire, “How Donald Trump Destroyed a Football League.”))
Perhaps you see a trend. Most of these ventures seem to have been based on the conviction (even after repeated evidence that it was untrue) that attaching the Trump name to virtually any product would assure success, without much attention to the substance of the product or other aspects of conventional business planning. Many failed an extraordinarily short time after launch, as if the launch and attendant publicity were the point, with the entrepreneur lacking the attention span to make a sustained effort (as a Trump associate involved in the U.S. Football League stated, "It's all about him and the brand and moving on to the next thing if it doesn't work out.") Too often, the core business idea was to sell the illusion of luxury, not the reality of luxury, in many cases to those who could least afford it. Some ventures, such as Trump University, whether or not adjudicated to be outright frauds, were at the least morally abhorrent, cynically preying on the most vulnerable.
And then there is the question of how Mr. Trump does business. One of the Wall Street Journal’s columnists reports “more than 4,000 lawsuits” and that Trump “routinely shortchange[s] his suppliers.” When I asked a New York real estate insider about Trump’s business reputation, he said that he was regarded as “a joke,” and that “we wouldn’t do business with him.” His Art of the Deal ghostwriter concluded that “almost everything” about Trump’s Hyatt Hotel deal had “an immoral cast.” Hank Paulsen, a Republican who ran both Goldman Sachs and the U.S. Treasury (under President Bush), was pretty clear in his assessment: “Trump is a phony . . . When Trump assures us he’ll do for the United States what he’s done for his businesses, that’s not a promise — it’s a threat . . . In essence, he takes imprudent risks and, when his businesses fail, disavows his debts.” The pattern seems long-standing. In a 1985 profile (before Trump was in politics), a New York magazine cover story on his real estate business revealed what the author called “a fugue of failure, a farce of fumbling and bumbling.”
Before Mr. Trump gets to run the Federal government, he has to run his own campaign. In an echo of that 1985 assessment of his competence in business, one GOP insider called the convention run by the Trump team “the most shambolically mis-run convention in memory.” GOP columnist David Brooks, noting that Trump’s business career leaves him “epically unprepared” to be president, also notes that, consistent with the lack of follow-through on his business ventures, he is running for office “with less preparation than most of us would undertake to buy a sofa.” The business-savvy Economist calls a Trump presidency “an appalling prospect.”
The moral of this short story: if you are longing for a competent hand to take the tiller of government and apply a dose of business discipline to our federal bureaucracy, you might need to look elsewhere than Mr. Trump.