An Ethicist Reads The Art of the Deal

Donald Trump succumbs to the age-old temptation to see capitalism not as an economic system but a morality play.

Mary Schwalm / AP / Ballantine Books / Zak Bickel / The Atlantic

Published in 1987, The Art of the Deal is a fairly recent addition to a long line of books by business titans that double as memoir and modus operandi. From Ben Franklin’s Autobiography to John D. Rockefeller’s Random Reminiscences to Jack Welch’s Straight from the Gut, these books aim, by battle scar and bromide, effrontery and object lesson, to present “the very definition of the American success story.”

That, at least, is how the dust jacket of the The Art of the Deal recommends its author, Donald Trump. Trump was just 41 when the book was published, but he had already enjoyed a decade as a real-estate wunderkind whose big mouth and brash deal-making saw his reputation waver between Elon Musk and Martin Shkreli. Trump was still a few years from fully embracing the anti-hero persona that has commandeered this election cycle—in a 1985 profile for 60 Minutes, Mike Wallace incredulously notes that he presents himself as full of “Boy Scout principles”—but the young tycoon had already suffered enough unpleasant encounters with the Fourth Estate that one imagines he was eager to take his case directly to the public.

The Art of the Deal tells the story of Donald Trump largely by way of the deals he has brokered, they being his “art form,” and he, it seems, being the artist. Such a generous self-conception might explain an occupational aversion to critics. They are typically “phonies and hypocrites,” Trump says, and he assures readers that he doesn’t pay attention to them, a tendency which would be consistent with his habit of not paying attention to anyone. Anticipating his recent claim to chiefly consult himself on matters of foreign policy because “I have a very good brain,” Trump provides a list of groups whose advice he proudly scorns. They include:

  1. Academics: “My father could run circles around most academics.”
  2. The Academically Inclined: “It didn’t take me long to realize that there was nothing particularly awesome or exceptional about my classmates.”
  3. Quants: “I don’t hire a lot of number-crunchers.”
  4. Analysts: “I don’t trust fancy marketing surveys.”
  5. Committees:  “Committees are what insecure people create in order to put off making hard decisions.”
  6. Consultants: “I like consultants even less than I like committees.”
  7. Public-Relations Experts: “That’s like hiring outside consultants.”
  8. Lawyers: “I don’t like lawyers.”
  9. Stockbrokers: “It’s ridiculous, when you think about it.”

What’s left? Your gut, of course. “Listen to your gut,” Trump intones, “no matter how good something sounds on paper.”

If you’re a few dozen deep on the waitlist at the local library for The Art of the Deal and don’t have $11.95 to shell out for the Kindle edition, I can save you some trouble: The answer to all of your deal-making questions lies in your gut.

But, you might say, what if I don’t have the brains in my gut to be a deal-maker?

Good question, but The Donald is way ahead of you. “More than anything else, I think deal-making is an ability you’re born with,” he tells his readers in a revelation many of them might have longed for before they plonked down $11.95. “It’s in the genes,” he continues. “It’s not about being brilliant. It does take a certain intelligence, but mostly it’s about the instincts.”

So, just to review, it’s not just the genes of your gut that count, but the instincts of your genes, though they alone won’t make you a deal-maker: “[M]ost people who do have the instincts will never recognize that they do, because they don’t have the courage or the good fortune to discover their potential.”

In other words, you need vision in your genes and guts in your instincts, otherwise, your gut may be spineless and where would that leave you?

Not a deal-maker.

* * *

If not with Trump’s 24-carat bravado, many people have a propensity to talk about capitalism in terms less befitting a complex economic system than a sequel to Rambo. Rather than an elaborate phenomenon characterized by collective action, analytical diligence, and bouts of serendipity, commercial success is presented as a stirring tribute to self-reliance, individual will, and superhuman feats of strength overcoming the dark forces of smug complacency and conventional thinking.

This isn’t surprising. No matter how far we have evolved from the days of trading bearskins for beads, commerce remains a human activity, and the temptation to turn its patterns into a morality play persists as a seductive heuristic and an invitation to self-flattery. What is surprising, though, is the contemporary turn away from the belief—once held by both scholars and successful businessmen—that business success was not some mystical achievement but the result of diligence and organization.

A century ago, advances in science and technology augured a new understanding of capitalism that would bring it more firmly in line with the expectations of an age that seemed increasingly shaped by logic and reason. In a 1927 address at Harvard Business School, Owen D. Young, the president of General Electric, said that the very idea of a proper business school affirmed that the future of commerce was a process by which companies drew strength and direction from the “new explorers at work” in the pure and applied sciences.

In a similar vein, Alfred Sloan, the man who made General Motors the nonpareil of mid-century American companies, argued on behalf of “a highly rational and objective mode of operation” that eschewed the Great Man theory of industry. As Sloan chronicled in My Years at General Motors, his own company had been brought to the brink of bankruptcy by William Durant, his charismatic predecessor and the co-founder of GM whose on-the-fly management style included impulsive purchases, careless accounting practices, and other habits that made him (in Sloan’s polite formulation) “too casual in his ways for an administrator.”

Nearly 50 years separate Sloan’s takeover of GM and the dawn of Donald Trump, but during that time, a radical reconception of capitalism helped pave the way for the latter’s warm reception. More than anyone else, the Austrian economist Joseph Schumpeter anticipated the change when he famously ventured in 1942 that “Creative Destruction is the essential fact about capitalism.” As he described it, such activity was the doing of a peculiar person who thumbed his or her nose at commercial custom and administrative esprit de corps in service of a private destiny, the successful pursuit of which illustrated Schumpeter’s dictum: “Economic progress, in capitalist society, means turmoil.”

Whatever its merits as a matter of economic analysis, Schumpeter’s vision of capitalism tended to marginalize the very orderliness that Sloan, Young, and so many others had celebrated. Yes, org charts, supply chains, and careful book-keeping were all important, but the embodiment of commercial advancement was not the sober-minded middle-manager.

Instead, it was an “exceptional minority who lift the whole of a free society to the level of their own achievements.” This encapsulation is Ayn Rand’s, whose diagnosis of how capitalism works often reads like an unacknowledged footnote to Schumpeter’s masterpiece, Capitalism, Socialism and Democracy. Rand’s work tended to allegorize Creative Destruction by describing a never-ending contest between good and evil at every stage of commercial development. “The first motor was considered foolish. The airplane was considered impossible. The powerloom was considered vicious,” her avatar, Howard Roark, proclaims at the end of The Fountainhead. “But the men of unborrowed vision went ahead. They fought, they suffered and they paid. But they won.”

If the word “unborrowed” underscores Rand’s assumption that all advances in society are the product of misfit prime movers, the determination of others to stop them ensures that the story of economic progress has an evolving cast of heroes and villains. With characteristic restraint that Rand might have admired, Donald Trump calls the latter batch “life’s losers,” a squalid suite of individuals “who get their sense of accomplishment and achievement from trying to stop others.” Whether or not by design, his self-described struggle in The Art of the Deal is a microcosm of the story told today about how capitalism works. In the face of resistance whose ignorance is only matched by its ferocity, a visionary stands alone, sustained by his credo: “I wanted to build something monumental.”

* * *

If the preceding sentiment makes you want to don your Make America Great Again hat and cue “The Ride of the Valkyries,” it should be noted that The Art of the Deal mentions a few of Trump’s monuments, and they bear something of a second look. There are nine all together, each one warranting its own individual chapter. Three of the deals—the construction of Trump Tower, the rehabilitation of Central Park’s skating rink, and a makeover of a Midtown Manhattan hotel—might fairly rank as enduring accomplishments, if not exactly monumental. However the other six, with the benefit of hindsight, fall somewhere along a continuum between “a draw, at best” and “an outright debacle.”

Two of these deals are far closer to the first pole. One of them was a no-money-down option that Trump secured in 1974 to purchase two substantial waterfront sites owned by Penn Central Railroad. After nearly four years of failed efforts to secure financing for either site, one of them was sold to the city for a convention center. Trump helped broker the deal, but his offer to develop the site was swiftly rejected. In The Art of the Deal, he maintains that “there wouldn’t be a new convention center in New York today if it hadn’t been for the Trumps,” an implausible claim given that the city had discussed building a new convention center long before Trump got involved. The boast may have been a salve to his ego, however, for he admits that the fee he received for helping to broker the agreement was “nowhere near enough to justify the effort financially.”

The second deal involves Trump’s purchase of two adjacent buildings on Central Park South. Given that he aimed to tear them down in order to make way for essentially another Trump Tower, he admits that he “barely looked at what the two buildings were earning” before buying them. Unfortunately, he “didn’t fully understand” the laws covering rent-controlled apartments, so his plans were thwarted when a group of tenants refused to make way for the demolition crew. He afforded the holdouts a little encouragement, most infamously by making a public offer to house the city’s homeless in the newly vacated apartments. The tenants, in turn, filed a lawsuit. Trump claims in The Art of the Deal that their efforts to block him ultimately benefited his bottom line, as the luxury complex he planned to build would have been adversely affected by a downturn in the housing market. Still, when the dust settled nearly a decade after the book was published, more than half of the original occupants remained in their rent-controlled apartments.

Now the debacles.

Did you know that Donald Trump owned a football team? There is a reason. In September of 1983, he bought a franchise in the upstart United States Football League. A month later, he launched an effort to get the USFL to change its spring schedule to go head-to-head with the NFL in the fall. A team of experts was hired to evaluate the possibility. They strongly warned against it. Trump, however, prevailed. When the major networks showed no interest in broadcasting the new schedule, he spearheaded a $1.32 billion antitrust lawsuit against the NFL. After a 42-day trial, the jury found in favor of the USFL, a pyrrhic victory for the league, which was awarded $1 in damages, a reflection of the jury’s belief that, while the NFL represented a de facto monopoly, the USFL’s problems were largely of its own making. A week later, the league folded.

Another debacle involves the second of the Penn Central sites. Six years after Trump let his option lapse, he triumphantly returned and bought the land outright for $115 million. Now the proud owner of 77 unbroken acres along the Hudson River, Trump proposed creating Television City, a “self-contained” community with NBC as a marquee tenant and the world’s tallest building. Then he unwisely picked a fight with the mayor of New York, the irascible Ed Koch, over Koch’s unwillingness to provide him a $700 million tax abatement. In a very public battle that was a boon to the city tabloids, Koch accused Trump of “squealing like a stuck pig.” Trump responded that Koch had “no talent.” Unsurprisingly, the project stalled. Trump was undeterred. “My time—and Television City’s—will come,” he avers in The Art of the Deal. It wouldn’t. After turning down an offer of $550 million for the site in 1989, Trump sold it for just $82 million in 1994, limited profit-sharing on the eventual development, and the assumption of $250 million in debt.

That debt involves two final deals that may be summed up in three words: Atlantic City casinos. The first of them was Trump Plaza, which opened in May of 1984. Initially a joint venture with Holiday Inn, after feuding with the company brass, Trump bought out his partner’s share in the winter of 1986. In the meantime, however, he had already opened a competing establishment just down the street, Trump’s Castle. This second deal came about when Trump took over a casino complex Hilton Hotels had already begun building before it went to the trouble of securing a gambling license. When the application was denied less than 12 weeks before the casino was supposed to open, Trump offered to take the hotel off Hilton’s hands for $320 million, an offer he says he made without ever setting foot on the property. “If I’d told my father the story,” Trump confesses, “he would have said I lost my mind.” Then again, there was no need to bother Fred Trump, for his associates said pretty much the same thing. “Nearly everyone I talked to opposed the deal,” Trump notes, though, of course, they were not his preferred counsel. “It was deal based almost entirely on my gut.”

Unfortunately, your gut cannot personally guarantee a loan, so, in this instance, Trump did. According to The Art of the Deal, it was the first time he had ever personally guaranteed a loan, but it wouldn’t be the last. By the time the U.S. economy slid into recession in 1991, The New York Times reported, he had amassed nearly $900 million in personal liabilities. A wave of bankruptcies followed, sweeping in Trump Plaza and Trump’s Castle, in addition to the real estate magnate’s third and largest Atlantic City casino, Trump Taj Majal.

In 1997’s The Art of the Comeback, Trump tried to make sense of what had happened for bewildered readers. The explanation was simple. “I had relied on other people,” he said,

many of them “highly trained and educated executives.” Sure, success in business takes education and training. But it all comes down to feel and touch. I’ve got the instincts. That’s how I’d gotten on top in the first place. I wasn’t using my instincts anymore.

Maybe so, but in light of the fact that there were still two bankruptcies yet to come, the explanation seems, to put it politely, incomplete.

Now, of course, Donald Trump has set his sights on a new type of deal entirely, one whose possibility becomes more preposterous by the day, and by the day less implausible. For almost nine months now, the national negotiation for 1600 Pennsylvania Avenue has been underway, and it bears the signal traits of so many of Trump’s commercial endeavors: It is long on instincts, short on details, and subject to a remarkable amount of turmoil.

Whether he can seal this deal remains to be seen, but watching his efforts, I am reminded of a passing remark from The Art of the Deal that captures, by entendre, the essence of his catechism and the secret of his success. Noting that it might seem “a little ridiculous” that newspapers liked to cover ceremonies at construction sites where well-dressed men fumbled over wet concrete, Trump was philosophical. “As long as they want to shoot,” he wrote, “I’ll shovel.”