Evaluating Donald Trump’s Business Career

by Ivan Light

Donald Trump’s electoral college victory for the presidency was deeply influenced by the idea that he is rich far beyond normal American hope and that he acquired that wealth by being a successful businessman.  The record shows that it was not in business that he became rich.

Donald Trump came from a rich family. The Trumps had a 22 room mansion in Queens, NY, a chauffeur-driven limousine, and a house full of servants. As a youth, Donald J. Trump apprenticed in the thriving real estate and construction business that his father, Fred Trump, had founded during the Great Depression then strengthened during the 1940s and 1950s with contracts from the Federal Housing Authority.  Although Fred Trump had built middle-income residential real estate in Brooklyn, an outlying borough, Donald Trump’s first independent projects, undertaken at age 30, were in prime commercial real estate in Manhattan.  His first construction project, and probably his most successful, was the rehabilitation of the Commodore Hotel into what became the Grand Hyatt Hotel.  Fred Trump guaranteed the loan for this building project. 

A decade later, Donald Trump began to build and buy gambling casinos in Atlantic City, NJ, negotiating with bankers, public planning authorities, and the New Jersey state gambling commission. About the same time, he bought a football team, the Plaza Hotel, and an airline, none of which worked out to his commercial advantage. 

As is well known, Trump’s hotel and casino businesses filed for chapter 11 bankruptcy six times between 1991 and 2009. These bankruptcies resulted from his inability to meet loan payments, to renegotiate loans with banks and stock holders, and to pay contractors. When he failed to pay the illegal immigrants he hired to build it, they threatened to throw his foreman off the Trump Tower.  However, Trump did not experience personal bankruptcy from these failures because he had previously sold the casinos to Wall Street investors as Trump Hotels and Casinos. Trump paid himself a generous salary as CEO of this corporation, and when it bankrupted, his investors lost their shirt and the contractors were unpaid but Trump kept his paychecks. 

Nonetheless, in the early 1990s, Donald Trump’s wealth had been much reduced, and, thanks to his multiple bankruptcies, he was unable to obtain new bank loans. He has acknowledged that his net worth was minus 900 million dollars in 1991.    At this point, Trump received tide-over loans from his siblings and from his father. He may also have received bail-out money from Russian gangsters and oligarchs whom he helped to launder money in American real estate.  If Donald Trump would release his tax returns, these speculations could be resolved, but he refuses.

Donald Trump’s last construction project was completed in 2001.  Since that time, he earned income mainly as an author and television personality but also by licensing his name to hotels and golf courses. He also created Trump products (suits, water, steaks, bathrobes, etc.) that are for sale at hotels and golf courses that bear his name.  Promoting himself as a celebrity entrepreneur, he opened Trump University in 2005, offering courses in how to become rich in real estate. Trump University closed in 2010 as a result of lawsuits brought by dissatisfied customers.

At 56 years of age Donald Trump became a popular television personality in 2004.   Trump surrendered that television program only after he was elected President of the United States in November, 2016. Therefore, one can accurately categorize Donald Trump’s entire career as transition from business to television and from television to the acme of political success, the presidency of the United States.
 
Evaluating Trump’s Business Achievement
Donald Trump says that he is very wealthy. That is quite true. However, strictly as an entrepreneur and businessman, Donald Trump’s record of achievement is lackluster and mediocre. At age 21, he received a gift of 1.1 million dollars from his father. If we calculate compound interest on 1.1 million dollars over 50 years (1966 to 2016) at 4 percent annual interest compounded quarterly, the result is 8.1 million dollars. [i] When his father, Fred Trump, died in 1999, he left an estate of $300 million from which Donald Trump received an estimated 40 million dollars after tax. When to the prior sum, we add the expected earnings at 4 percent per year compounded quarterly from 40 million dollars invested over 16 years, we obtain, 78.7 million dollars. Adding these two sums, we get 86.8 million dollars. This total represents the expected wealth Donald Trump would have enjoyed at age 69 simply by saving both his inheritances in an insured bank account.

In 2016 Forbes estimated Donald Trump’s net worth at two billion dollars. This is half of what Trump claimed, but, taking into account Trump’s record of exaggeration, Forbes preferred the lower number. Two billion dollars is 22.5 times greater than the 86.8 million dollars Trump received as inheritances, and that multiple (22.5) may be taken as a measure of what Trump’s entire business career added to what Trump simply inherited. The bigger the multiple, the more Trump himself achieved relative to his inheritance. In 50 years of work, Donald Trump multiplied his inheritance 22.5 times. How great is that?

To put that achievement into perspective, consider the business career of Jose Lopez, who received one thousand dollars from his parents at age 21, and then opened a taco stand in Brooklyn.  Invested in the bank at 4 percent, Jose’s one thousand dollars would be worth 7.9 thousand dollars after 50 years. After 50 years of work, at age 70, Jose’s aggregate net worth is $180,000, which is 22.5 times his inheritance with interest compounded over 50 years, and serves as a measure of his business success.  With $180,000, at age 70, Jose Lopez could put a down payment on a two bedroom house but he could not buy it outright.  As a business owner, Jose Lopez earned a living for which he deserves credit, but he has not been, most people would agree, spectacularly successful in business.  Yet that is exactly how successful Donald Trump was in business. Jose Lopez and Donald Trump were equally successful if we measure success by how many times they increased the wealth they were given, the very measure of business success Jesus himself proposed (Matthew, 25: 21). Summing it up, Donald Trump’s lifetime success in business was lackluster and mediocre.

Donald Trump’s Real Achievement

Although actually a mediocre businessman whose many spectacular failures were public knowledge, Donald Trump had by 2016 convinced millions of Americans that by mastering “the art of the deal” he had achieved spectacular success in business and vast wealth derived from that business.   His political campaign ran on that erroneous perception.  His 1987 autobiography, The Art of the Deal, brought Trump more in royalties than he earned in the next decade from construction. Trump was wildly successful as an author who bragged about his business success; he was unsuccessful as a real estate developer.  No matter.

His next big step forward in self-promotion came in 2004 when he was offered a reality television show, “The Apprentice” in which he would play the role of boss evaluating the performance of subordinates and firing the less competent contestants.  He was offered this role because he had already achieved celebrity as a successful business tycoon without actually being one. “The Apprentice” ran for 14 seasons, and, to be fair, Donald Trump’s skill as an actor, entertainer, and salesman surprised even his sponsors. The viewers loved him and his program.  Donald Trump earned a great deal of money from starring in “The Apprentice,” and doing so, he posed weekly as a wildly successful businessman, persuading millions of viewers that he was just that.

During the political campaign, Trump assured voters that his negotiating skill would enable him to drive hard bargains with foreign countries and NATO allies, thus restoring the United States to storied greatness.  The proof of that skill was his self-proclaimed business success, a lie the public had swallowed. Trump’s culminating achievement, the presidency, rested entirely upon public acceptance of Trump’s counter-factual claim to vast business success. That claim rested on his undisputable success as an author and television entertainer. Strictly as a business owner, Donald Trump was at best a lackluster and mediocre success.  Jeff  Bezos of Amazon really is the business mega star that  Donald Trump claimed to be, but Jeff Bezos does not enjoy the celebrity name recognition that Trump built for himself through his publications and his television career.  Trump was a successful author, yes; he was a successful television entertainer, yes. But he was not a successful property developer.

Donald Trump’s real success was in sales. He convinced the American public that he had been a hugely successful property developer when he had not really been one. His ability to do that required salesmanship.  Donald Trump is a terrific salesman. But his vaunted negotiating skill was not successful in the business world and regrettably there is no sign that his negotiating skill will enable President Trump to keep his promises to the American people.  Despite that alleged negotiating skill and repeated pledges, President Trump has failed to induce Mexico to pay for his wall and, on July 28, 2017, on a party line vote, Republicans in the House of Representatives voted to fund Trump’s wall with U.S. taxpayer dollars.

Endnote 1.




The formula for compound interest over time