Trump: The Art of the Deal

by Donald J. Trump

I hate lawsuits and depositions, but the fact is that if you’re right, you’ve got to take a stand, or people will walk all over you.

That experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you’re generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don’t make.

“Donald, I just wanted to let you know that my wife and I are getting divorced.” So I said, “Oh, I’m sorry to hear that, Steve.” He said, “Oh, don’t be sorry, it’s great, we’re still in love, it’s just that we don’t want to be married anymore. In fact, she’s right here with me. Do you want to say hello?” I politely declined.

few months back he invited me to come to his studio. We were standing around talking, when all of a sudden he said to me, “Do you want to see me earn twenty-five thousand dollars before lunch?” “Sure,” I said, having no idea what he meant. He picked up a large open bucket of paint and splashed some on a piece of canvas stretched on the floor. Then he picked up another bucket, containing a different color, and splashed some of that on the canvas. He did this four times, and it took him perhaps two minutes. When he was done, he turned to me and said, “Well, that’s it. I’ve just earned twenty-five thousand dollars. Let’s go to lunch.” He was smiling, but he was also absolutely serious. His point was that plenty of collectors wouldn’t know the difference between his two-minute art and the paintings he really cares about. They were just interested in buying his name. I’ve always felt that a lot of modern art is a con, and that the most successful painters are often better salesmen and promoters than they are artists. I sometimes wonder what would happen if collectors knew what I knew about my friend’s work that afternoon. The art world is so ridiculous that the revelation might even make his paintings more valuable! Not that my friend is about to risk finding out.

MY STYLE of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after. Sometimes I settle for less than I sought, but in most cases I still end up with what I want.

I like to think I have that instinct. That’s why I don’t hire a lot of number-crunchers, and I don’t trust fancy marketing surveys. I do my own surveys and draw my own conclusions. I’m a great believer in asking everyone for an opinion before I make a decision. It’s a natural reflex. If I’m thinking of buying a piece of property, I’ll ask the people who live nearby about the area—what they think of the schools and the crime and the shops. When I’m in another city and I take a cab, I’ll always make it a point to ask the cabdriver questions. I ask and I ask and I ask, until I begin to get a gut feeling about something. And that’s when I make a decision.

I have learned much more from conducting my own random surveys than I could ever have learned from the greatest of consulting firms. They send a crew of people down from Boston, rent a room in New York, and charge you $100,000 for a lengthy study. In the end, it has no conclusion and takes so long to complete that if the deal you were considering was a good one, it will be long gone.

The worst thing you can possibly do in a deal is seem desperate to make it. That makes the other guy smell blood, and then you’re dead. The best thing you can do is deal from strength, and leverage is the biggest strength you can have. Leverage is having something the other guy wants. Or better yet, needs. Or best of all, simply can’t do without.

real money isn’t made in real estate by spending the top dollar to buy the best location. You can get killed doing that, just as you can get killed buying a bad location, even for a low price. What you should never do is pay too much, even if that means walking away from a very good site.

You can have the most wonderful product in the world, but if people don’t know about it, it’s not going to be worth much.

One thing I’ve learned about the press is that they’re always hungry for a good story, and the more sensational the better. It’s in the nature of the job, and I understand that. The point is that if you are a little different, or a little outrageous, or if you do things that are bold or controversial, the press is going to write about you. I’ve always done things a little differently, I don’t mind controversy, and my deals tend to be somewhat ambitious.

For example, if someone asks me what negative effects the world’s tallest building might have on the West Side, I turn the tables and talk about how New Yorkers deserve the world’s tallest building, and what a boost it will give the city to have that honor again.

When a reporter asks why I build only for the rich, I note that the rich aren’t the only ones who benefit from my buildings. I explain that I put thousands of people to work who might otherwise be collecting unemployment, and that I add to the city’s tax base every time I build a new project.

The final key to the way I promote is bravado. I play to people’s fantasies. People may not always think big themselves, but they can still get very excited by those who do. That’s why a little hyperbole never hurts. People want to believe that something is the biggest and the greatest and the most spectacular. I call it truthful hyperbole. It’s an innocent form of exaggeration—and a very effective form of promotion.

my general attitude, all my life, has been to fight back very hard.

Perhaps I was just too young to realize that it was irrelevant what my father or I thought about what Freddy was doing. What mattered was that he enjoyed it. Along the way, I think Freddy became discouraged, and he started to drink, and that led to a downward spiral. At the age of forty-three, he died.

Perhaps the most important thing I learned at Wharton was not to be overly impressed by academic credentials. It didn’t take me long to realize that there was nothing particularly awesome or exceptional about my classmates, and that I could compete with them just fine. The other important thing I got from Wharton was a Wharton degree. In my opinion, that degree doesn’t prove very much, but a lot of people I do business with take it very seriously, and it’s considered very prestigious.

You can’t be scared. You do your thing, you hold your ground, you stand up tall, and whatever happens, happens.

We put a clause in the contract of sale saying that all representations contained in it were as of the signing of the contract—not as of the closing, which is what’s typically required. In other words, we were willing to represent that the project was 100 percent rented at the time of the contract signing, but we didn’t want to make the same promise at the time of closing, three or four months down the line.

I don’t drink, and I’m not very big on sitting around.

We had no formal name for the company when I met Victor, so I began to call it the Trump Organization. Somehow the word “organization” made it sound much bigger. Few people knew that the Trump Organization operated out of a couple of tiny offices on Avenue Z in Brooklyn.

I discovered, for the first time but not the last, that politicians don’t care too much what things cost. It’s not their money.

To me, that was classic shortsightedness. For example, in the face of a sales drop, most companies cut back on their advertising budgets. But in fact, you need advertising the most when people aren’t buying.

probably had to be one of the large chains, and I wasn’t totally wrong. The chains may not be very exciting, but they do give you access to a national reservations system, good referral business, and basic management expertise.

It comes down to the fact that everyone underneath the top guy in a company is just an employee. An employee isn’t going to fight for your deal. He’s fighting for his salary increase, or his Christmas bonus, and the last thing he wants to do is upset his boss. So he’ll present your case with no real opinion. To you, he might be very enthusiastic, but to his boss he’ll say, “Listen, a guy named Trump from New York wants to make such and such a deal, and here are the pros and cons, and what do you want to do?”

Several months earlier, a city official had requested that I send along a copy of my option agreement with the Penn Central. I did—but it was signed only by me, and not the railroad, because I had yet to put down my $250,000. No one even noticed that until almost two years later, when a reporter doing a story on the deal called the city and asked to see the original agreement.

Sure enough, Pat made the switch, and then his new manager did something brilliant. He began to bombard us with trivia. He’d call up several times a week, and he’d say, “Donald, we want your approval to change the wallpaper on the fourteenth floor” or “We want to introduce a new menu in one of the restaurants” or “We are thinking of switching to a new laundry service.” They’d also invite us to all of their management meetings. The guy went so far out of his way to solicit our opinions and involve us in the hotel that finally I said, “Leave me alone, do whatever you want, just don’t bother me.” What he did was the perfect ploy, because he got what he wanted not by fighting but by being positive and friendly and solicitous.

first tried to get the covenant from Jay Pritzker at the time we made our deal, but he refused. Jay is a smart guy, and he wasn’t about to foreclose the future expansion of his hotel chain in one of the biggest cities in the world. We finally got to the closing, and just before we all sat down, I was alone with an executive from the bank. I pointed out that this was a rather big and risky investment the bank was making, and that one way to further protect the loan might be to insist on a restrictive covenant, so that Hyatt couldn’t throw up a second hotel two years later, right down the street. The banker saw the implications immediately. He stormed into the room where the Hyatt people were sitting, and he said, “Hey, fellas, we’re putting up tens of millions of dollars, which is a lot of money, and we’re not going to make this loan unless we get a covenant from Hyatt saying you won’t open up any other hotels in New York.”

But as soon as Hoving left, a dozen street peddlers immediately set up shop in front of Tiffany, and they haven’t moved since. However, I learned a lesson from Walter Hoving. I now employ some very large security people who make absolutely sure that the street in front of Trump Tower is kept clean, pristine, and free of peddlers.

But I’m a businessman, and I learned a lesson from that experience: good publicity is preferable to bad, but from a bottom-line perspective, bad publicity is sometimes better than no publicity at all. Controversy, in short, sells.

I would have made the windows all the way from floor to ceiling, but I was told that unless there is at least some base below a window, some people get vertigo.

have great respect for what the Japanese have done with their economy, but for my money they are often very difficult to do business with. For starters, they come in to see you in groups of six or eight or even twelve, and so you’ve got to convince all of them to make any given deal. You may succeed with one or two or three, but it’s far harder to convince all twelve. In addition, they rarely smile and they are so serious that they don’t make doing business fun.

Fortunately, they have a lot of money to spend, and they seem to like real estate. What’s unfortunate is that for decades now they have become wealthier in large measure by screwing the United States with a self-serving trade policy that our political leaders have never been able to fully understand or counteract.

Hilton, it turned out, owned more than 150 hotels worldwide, but its two casino hotels in Las Vegas accounted for nearly 40 percent of the company’s net profits. By comparison, a hotel such as the New York Hilton—one of the biggest in Manhattan and one I’d always assumed was a huge success—accounted for less than 1 percent of overall Hilton profits.

The New York Stock Exchange happens to be the biggest casino in the world. The only thing that makes it different from the average casino is that the players dress in blue pinstripe suits and carry leather briefcases.

Secondly, I have an almost perverse attraction to complicated deals, partly because they tend to be more interesting, but also because it is more likely you can get a good price on a difficult deal.

A few minutes later, another board member walked over to me. His question was very simple. “How come,” he said, “that guy over there is filling up that hole, which he just dug?” This was difficult for me to answer,

When you have incomplete drawings, a smart contractor will often come in and underbid the job just to get it, knowing he’ll be able to more than cover his costs through the change orders that inevitably occur as plans become more complete.

have a very simple rule when it comes to management: hire the best people from your competitors, pay them more than they were earning, and give them bonuses and incentives based on their performance.

I just think there ought to be a means test for anyone living in a rent-controlled apartment. People below a certain income would be permitted to keep their apartments at their current rent. People with incomes above a certain sum would be given a choice between paying a proportionally higher rent for their apartments or moving somewhere else.

It happens to be very easy to vacate a building if, like so many landlords, you don’t mind being a bad guy. When these landlords buy buildings they intend to vacate, they use corporate names that are difficult to trace. Then they hire thugs to come in with sledgehammers and smash up the boiler, rip out the stairways, and create floods by cutting holes in pipes. They import truckloads of junkies, prostitutes, and thieves and move them into vacant apartments to terrorize holdout tenants.

The doormen were taken out of their fancy uniforms. That saved a small fortune in dry-cleaning bills. To ensure security, the doormen stopped leaving the door to meet tenants halfway down the street to carry their packages. High-wattage lights in the hallways were replaced with lower-wattage bulbs, because, as any cost-conscious landlord will tell you, that alone saves many thousand dollars a year in electric bills.

instead: appointing a long-range planning committee to study the spring-fall question. To me, committees are what insecure people create in order to put off making hard decisions. But at least I’d gotten the fall question on the table as a serious issue. I was made a member of the new committee and I was confident I’d ultimately persuade a majority of owners that the fall was our best hope.

When it comes to making a smart decision, the most distinguished planning committee working with the highest-priced consultants doesn’t hold a candle to a group of guys with a reasonable amount of common sense and their own money on the line.

One of the first things that anyone should learn about real estate—and New York real estate in particular—is never to sign a letter of intent. Years can be spent in court trying to get out of a seemingly simple and “nonbinding” agreement.