Let’s get back to some positive news — actually, let’s connect the positive news I’m about to give, to the drear of domestic U.S. political news that consumes us all.
In today’s NYT Magazine, Adam Davidson has an excellent and fresh analysis of the way Donald Trump talks about both business and international affairs. For Trump it’s all win or lose, smart or dumb, they’re screwing us and we have to start screwing them. The underlying reason, Davidson points out, is that Trump comes from a part of the business world that is abnormally “rent-seeking” (in the economist’s sense) and zero-sum: the world of Manhattan real estate.
There is only so much space to build in Manhattan, there are only so many permits to be had, only so many ways you can “be disruptive” or “change the world” through a real estate deal. What you can do, as Davidson points out, is get a little bigger slice of the pie for yourself, which leaves a little less for the other guy — making you the winner and the other guy the loser. This view underlies the way Trump talks about everything. Davidson says:
Manhattan real estate development is about as far as it is possible to get, within the United States, from that Econ 101 notion of mutually beneficial transactions.
This is not a marketplace characterized by competition and dynamism; instead, Manhattan real estate looks an awful lot more like a Middle Eastern rentier economy. It is a hereditary system. We talk about families, not entrepreneurs. A handful of families have dominated the city’s real estate development for decades: Speyer, Tishman, Durst, Fisher, Malkin, Milstein, Resnick, LeFrak, Rose, Zeckendorf. Having grown up in Manhattan myself, I think of these names the way I heard Middle Easterners speak of the great sheikhs who ran big families in Jordan, Iraq and Syria. These are people of immense power and influence, but their actual skills and abilities are opaque. They do, however, make ‘‘deals.’’
Of course deals matter at every level, from haggling at a bazaar to striking a nuclear arms-control agreement. But in the parts of economic and social life where new things are being created, the deal is the means, not the end itself. The founders of Apple and of Google, of Disney and of WalMart, of Tesla and of Nike and whatever example you’d choose, are aware of deals. But none of them began with the deal centrally in mind. The business, the product, the disruption, the creation were what originally fascinated and motivated them. The deals protected what they’d figured out. But figuring it out, and then making it happen, was the attraction and challenge.
Understanding the impulses behind entrepreneurship and creativity, and the practical circumstances that make these efforts more or less attainable, really matters for a society. It matters much more than “making good deals.” It matters because of the reality underscored in the Kauffman Foundation research that I mention in my March issue cover story, and the updated report that Kauffman put out last month.