Trump’s numerous character flaws, such as his grandiosity, his lack of interest in the truth, his impulsiveness, his habitual lashing out at critics, have elicited boatloads of disapproving commentary. It’s disturbing to see someone so emotional and undisciplined in charge of anything, let alone the United States.
Rather than offer yet more armchair analysis, it might be productive to ask a different question: why hasn’t Trump been an abject failure? There are plenty of rich heirs who blow their inheritance or run the family business into the ground pretty quickly and have to knuckle down to a much more modest lifestyle.
Trump’s lack of discipline has arguably cost him. The noise regularly made about his business bankruptcies is wildly exaggerated. Most of Trump’s bankruptcies were of casinos, and most of those took place in the nasty 1991-1992 recession. He was one of only two major New York City developers not to have to give meaningful equity in some of their properties in that downturn. He even managed to keep Mar-a-Lago and persuaded his lenders to let him keep enough cash to preserve a pretty flashy lifestyle because he was able to persuade them that preserving his brand name was key to the performance of Trump-branded assets.
The idea that Trump couldn’t borrow after his early 1990s casino bankruptcies is also false. As Francine McKenna pointed out in 2017 in Donald Trump has had no trouble getting big loans at competitive rates:
The MarketWatch analysis shows a variety of lenders, all big banks or listed specialized finance companies like Ladder Capital, that have provided lots of money to Trump over the years in the forms of short-, medium- and long-term loans and at competitive rates, whether fixed or variable.
“The Treasury yield that matches the term of the loan is the closest starting benchmark for Trump-sized commercial real estate loans,” said Robert Thesman, a certified public accountant in Washington state who specializes in real estate tax issues. The 10-year Treasury swap rate is also used and tracks the bonds closely, according to one expert.
Trump’s outstanding loans were granted at rates between 2 points over and under the matching Treasury-yield benchmark at inception. That’s despite the well-documented record of bankruptcy filings that dot Trump’s history of casino investment.
The flip side is that it’s not hard to make the case that Trump’s self-indulgent style has cost him in monetary terms. His contemporary Steve Ross of The Related Companies who started out in real estate as a tax lawyer putting together Section 8 housing deals, didn’t have a big stake like Trump did to start his empire. Ross did have industrialist and philanthropist Max Fisher as his uncle and role model, but there is no evidence that Fisher staked Ross beyond paying for his education. Ross has an estimated net worth of $7.6 billion versus Trump’s $3.1 billion.
Despite Trump’s heat-seeking-missile affinity for the limelight, we only get snippets of how he has managed his business, like his litigiousness and breaking of labor laws. Yet he’s kept his team together and is pretty underleveraged for a real estate owner.
The area where we have a better view of how Trump operates is via his negotiating, where is astonishingly transgressive. He goes out of his way to be inconsistent, unpredictable, and will even trash prior commitments, which is usually toxic, since it telegraphs bad faith. How does this make any sense?
One way to think of it is that Trump is effectively screening for weak negotiating counterparties. Think of his approach as analogous to the Nigerian scam letters and the many variants you get in your inbox. They are so patently fake that one wonders why the fraudsters bother sending them.
But investigators figured that mystery out. From the Atlantic in 2012:
Everyone knows that Nigerian scam e-mails, with their exaggerated stories of moneys tied up in foreign accounts and collapsed national economies, sound totally absurd, but according to research from Microsoft, that’s on purpose….
As a savvy Internet user you probably think you’d never fall for the obvious trickery, but that’s the point. Savvy users are not the scammers’ target audience, [Cormac] Herley notes. Rather, the creators of these e-mails are targeting people who would believe the sort of tales these scams involve….:
Our analysis suggests that is an advantage to the attacker, not a disadvantage. Since his attack has a low density of victims the Nigerian scammer has an over-riding need to reduce false positives. By sending an email that repels all but the most gullible the scammer gets the most promising marks to self-select, and tilts the true to false positive ratio in his favor.
Who would want to get in a business relationship with a guy who makes clear early on that he might pull the rug out from under you? Most people would steer clear. So Trump’s style, even if he adopted it out of deep-seated emotional needs, has the effect of pre-selecting for weak, desperate counterparties. It can also pull in people who think they can out-smart Trump and shysters who identify with him, as well as those who are prepared to deal with the headaches (for instance, the the business relationship is circumscribed and a decent contract will limit the downside).
Mind you, it is more common than you think for businesses to seek out needy business “partners”. For instance, back in the day when General Electric was a significant player in venture capital, it would draw out its investment commitment process. The point was to ascertain if the entrepreneurs had any other prospects; they wouldn’t tolerate GE’s leisurely process if they did. By the time GE was sure it was the only game in town, it would cram down the principals on price and other terms. There are many variants of this playbook, such as how Walmart treats suppliers.
Trump has become so habituated to this mode of operating that he often launches into negotiations determined to establish that he had the dominant position when that is far from clear, witness the ongoing China trade row. Trump did in theory hold a powerful weapon in his ability to impose tariffs on China. But they are a blunt weapon, with significant blowback to the US. Even though China had a glass jaw in terms of damage to its economy (there were signs of stress, such as companies greatly stretching out when they paid their bills), Trump could not tolerate much of a stock market downdraft, nor could he play a long-term game.
Another aspect of Trump’s erraticness is making sudden shifts, or what we have called gaslighting. He’ll suddenly and radically change his rhetoric, even praise someone he demonized. That if nothing else again is a power play, to try to maintain his position as driving the pacing and content of the negotiations, which again is meant to position his counterparty as in a weaker position, of having to react to his moves, even if that amounts to identifying them as noise. It is a watered-down form of a cult strategy called love bombing (remember that Trump has been described as often being very charming in first meetings, only to cut down the person he met in a matter of days).
Voters have seen another face of Trump’s imperative to find or create weakness: that of his uncanny ability to hit opponents’ weak spots in ways that get them off balance, such as the way he was able to rope a dope Warren over her Cherokee ancestry claims.
The foregoing isn’t to suggest that Trump’s approach is optimal. Far from it. But it does “work” in the sense of achieving certain results that are important to Trump, of having him appear to be in charge of the action, getting his business counterparts on the back foot. That means Trump is implicitly seeing these encounters primarily in win-lose terms, rather than win-win. No wonder he has little appetite for international organizations. You have to give in order to get.