How Donald Trump Bends Reality

“There were some pretty depressing times. Because I had owed billions and billions of dollars. $975 million or so was personally guaranteed. That’s a pretty deep hole. And, when you’re that deep in debt, you’re mired in debt. You’re that deep in debt. That’s a pretty rough situation to be in.” Donald Trump explained in a 1998 BBC interview, “I wrote once that I would love to sort of have a bad period financially. Just to see who my friends would be and who my enemies would be. Now I’ll never write it again. Because it’s not fun.”

Last week on Methods of Prosperity.

In 2007, Brad Jacobs sold United Rentals to Cerberus Capital Management for $7 billion. That included $2.6 billion in assumed debt. Cerberus defaulted on the deal, causing United Rentals’ stock to plummet. This resulted in lawsuits between the two parties. United Rentals didn't seek another buyer. Today United Rentals (URI) is trading at over $700 per share.

In 2010, Jacobs founded Jacobs Private Equity LLC and later, in 2011, XPO Logistics. He transformed XPO into a leading transportation and logistics provider. He did this through strategic acquisitions and technology investments. XPO’s advanced digital platform, RXO Connect, facilitates efficient freight transactions in real-time. Jacobs currently serves as the executive chairman of XPO, Inc. and holds non-executive chairman positions at RXO Inc. and GXO Logistics, Inc.

Jacobs emphasizes making M&A deals that enhance company value. Two driving factors are pleasing customers and improving financial results. He advises efficient due diligence and ensuring cultural alignment during integration. Operational integration should be seamless across technology and business systems. Known for his entrepreneurial spirit, Jacobs has completed over 500 M&A deals. He and his team have created seven businesses valued over a billion-dollars each.

Jacobs also stresses the importance of mindset in achieving success. He advocates for expansive, dialectical thinking and embracing problems as opportunities for growth. Recognizing and course-correcting mistakes. Having the right team in place. These are crucial for overcoming obstacles and driving success.

Part 62. Donald Trump

You can find this week’s TL;DR here.

Key Lessons:

• Disregard facts that don’t serve your purpose.

• Negotiate like your life depends on it.

• Buy distressed assets and add value.

• Don’t drink alcohol or do drugs.

• Legally avoid paying taxes.

• Build your personal brand.

• Don’t be over-leveraged.

• Always fight back.

Now there’s a collectible version of this newsletter! Methods of Prosperity newsletter number 25 is available to collect as of August 15, 2024. If you’re so inclined you can permanently own it!

Now is as good a time as any to talk about Donald Trump. He’s currently running for US President again. Be aware that this is not an endorsement. Nor is it an endorsement for his opponents. Donald Trump, love him or hate him, is a billionaire. This newsletter exists to study billionaires. We learn from them. We notice what they do and don’t do. We pay attention to their similarities and differences. They are all very different. But they have one thing in common. They know how to close a deal.

Generational wealth. Let’s define what that means. The next generation is better off than the previous one. A father gives to his son more than what his father gave to him. If more fathers can give more to their sons from generation to generation, that’s progress. That’s a dynamic society.

In 1885, Friedrich Trump emigrated to the United States from Kallstadt, Germany. During the Klondike Gold Rush, he operated restaurants and hotels. He married Elisabeth Christ on 1902. They had three children, including Fred Trump. Fred would be the father of Donald Trump in 1946. Donald Trump was born on June 14 of that year in Queens, New York City.

Donald was fourth of five children born to Frederick and Mary Trump. His father was a real estate developer, and his mother was a homemaker. His father told his sons to be “a king and a killer”. Young Donald was a troublemaker. His father sent him to the New York Military Academy at age 13 to instill discipline. Lt. Theodore R. Tobias was in charge. This man had a bad reputation and was harsh to the boys at NYMA. Donald won him over. Military school paid off for Donald. He became a leader. He earned a high rank. When he returned to New York in 1963, he was leading the parade. It was the Columbus Day military parade in New York City. At the time, he was a 17-year-old senior and the commanding officer of the drill team.

He went on to study at Fordham University. He transferred to the Wharton School at the University of Pennsylvania. There he graduated with a degree in economics in 1968. During college, he worked at his father’s real estate business. That laid the foundation for his career in real estate development. Donald’s older brother, Fred declined to inherit their father’s business. He died of alcohol abuse. At the time around his death, he was a groundskeeper on the family’s property. Donald abstained from drinking alcohol, smoking or doing drugs.

Donald’s first real estate deal involved the Swifton Village apartment complex. Located in Cincinnati, Ohio, Fred Trump purchased it at foreclosure in 1962 for $5.7 million. The next property was Trump Village. It was a seven-building cooperative apartment complex located in Coney Island, Brooklyn. An architect named Morris Lapidus designed it. Constructed between 1963 and 1964, the complex cost $70 million to build. Five buildings of the development were part of the Mitchell-Lama Housing Program. The federal government accused the Trump family business of racial discrimination in 1973.

That’s when Donald Trump met Roy Cohn, who served as his fixer and mentor. Cohn was a controversial figure. He used aggressive legal tactics and had connections in New York politics. He represented Trump during various legal challenges. This included the federal lawsuit alleging racial discrimination against Trump Village.

Around that time, Donald Trump formed the Trump Organization. He became the president of the company in 1971, taking over from his father. Donald Trump began using the name as an umbrella brand for his business ventures. You could say that Trump was ahead of his time. He understood the power of a strong personal brand.

At 25 years old, Donald became interested in expanding from the boroughs to Manhattan. He borrowed a million dollars from his father. New York City was almost bankrupt at the time. There was a lot of distress. That’s the core of Trump’s business model. Buy distressed assets and add value. Donald Trump purchased the Commodore Hotel in 1976 through a complex deal. It was a partnership with the Hyatt hotel chain. The deal involved a significant tax abatement from New York City. Trump negotiated an option to buy the hotel from Penn Central. This was contingent on securing financing and a hotel operator. He convinced the city to grant a 40-year property tax abatement. Which was critical for obtaining bank financing. Trump partnered with Hyatt to operate the hotel. After securing the necessary funds, he transformed the property into the Grand Hyatt. Roy Cohn helped close the deal. Trump reopened the Grand Hyatt in 1980.

Located at 721–725 Fifth Avenue in Midtown Manhattan is Trump Tower. It’s a 58-story skyscraper developed by Donald Trump and designed by architect Der Scutt. Construction began in 1979, replacing the Bonwit Teller department store. The building opened in 1983. Trump claims it has 68 stories, 10 of which aren’t physical. This project involved complex negotiations for land and air rights. It faced controversies which included the destruction of historic sculptures. Illegal labor during demolition and ties to the mob added to the controversy.

Marjorie Merriweather Post was a wealthy heiress and philanthropist. She built the Mar-a-Lago estate in the 1920s. Upon her death in 1973, she bequeathed the property to the U.S. government. She intended it to serve as a retreat for presidents. Due to high maintenance costs, the government returned it to the Post Foundation in 1981. Donald Trump bought Mar-a-Lago in 1985. He acquired the property for a reported $5 million for the house. He paid $3 million for the furniture, and $2 million for beachfront land across the road. The total sale was around $10 million.

The next major acquisition for Donald Trump in the 1980s, after Mar-a-Lago in 1985, was the Plaza Hotel in 1988. Trump acquired the hotel with a loan from a consortium of sixteen banks. He appointed his first wife, Ivana, to manage it.

Donald Trump helped to rebuild the Wollman Rink in Central Park. In 1986, the city faced years of delays and cost overruns in renovating the rink. Trump offered to complete the project. He managed to finish the reconstruction two months ahead of schedule. He negotiated the price $750,000 under the $2.5 million budget set by the city. Trump did not make a profit from the project, and the city reimbursed him for the costs.

He bought a 85.9-metre (282 foot) Benetti superyacht named Nabila. He bought it from Adnan Khashoggi, an arms dealer with connections to the Saudi royal family. Named after Khashoggi’s only daughter, Trump renamed it Trump Princess. He paid close to $30 million. Currently it’s named Kingdom 5KR and is now owned by Saudi business magnate Al-Waleed bin Talal.

Donald Trump owned an airline named Trump Shuttle from 1989 to 1992. Eastern Air Lines was in a distressed financial position in the late 1980s. He paid $365 million for a fleet of 17 Boeing 727s. The deal included landing facilities in each of the three cities that the shuttle flew to. It gave him the right to put his name on the company and its airplanes. In October 1988, Eastern filed for Chapter 11 bankruptcy protection. In June 1989 the deal closed. A syndicate of banks financed through a loan. The new Trump Shuttle operation launched on June 8, 1989. By the end of August market share increased forty to fifty percent from what it was before Trump bought it. Trump pushed to make the new shuttle a luxury service and a marketing vehicle for the Trump name. Passengers enjoyed champaign and caviar. The company was never profitable. The airline ran out of cash and defaulted on its debt in September 1990.

Donald Trump owned a football team. The New Jersey Generals were a franchise of the United States Football League (USFL). Established in 1982, the team played three seasons from 1983 to 1985. Trump backed out after paying an initial installment on the franchise fee.

Donald Trump filed for bankruptcy after buying the Atlantic City Taj Mahal. The casino went through a prepackaged bankruptcy in 1991. That was one year after its opening in 1990. Trump ceded 50% ownership of the casino to its bondholders. This was in exchange for reduced interest rates and an extended payoff schedule.

This is when Donald’s situation became difficult. His personal life was interesting. He cheated on his first wife Ivana. The other woman was Marla Maples. Donald and Ivana divorced in 1990. Ivana kept the Plaza. Donald’s estimated net worth was $1.7 billion the year prior. By 1990, his financial situation had deteriorated. His obligations totaled over $4 billion to 72 banks. This included close to $1 billion guaranteed by Trump in personal debt. According to him, he was negative $900 million. He negotiated a bailout pact allowing him to defer almost $1 billion in bank debt. He gave up ownership of several assets, including the Trump Shuttle. Banks restructured and forgave some of the debt. He had to relinquish ownership of several assets. By 1998, he was up $700 million. Donald met Melania Knauss in 1998. Melania and Donald Trump married in 2005.

Donald Trump first ran for office as an independent in 1999. He sought the nomination of the Reform Party for the 2000 presidential election. Not convinced he could win, he withdrew from the race in February 2000.

Donald Trump became the 45th U.S. President by winning the 2016 presidential election. He announced his candidacy on June 16, 2015. Trump secured the Republican nomination in July 2016. Trump defeated Democratic candidate Hillary Clinton on November 8, 2016. He won the Electoral College despite losing the popular vote. Biden won the following term in 2020. Trump is running for re-election in 2024.

On July 13, 2024, Donald Trump survived an assassination attempt. It was during a campaign rally in Butler, Pennsylvania. The shooter fired shots with an AR-15–style rifle, grazing Trump’s right ear. Two injuries and one casualty resulted for attendees. Secret Service agents killed the shooter shortly after the attack. The incident led to the resignation of U.S. Secret Service Director Kimberly Cheatle.

In conclusion, it’s not the author’s intention to offer any opinions about Trump as a political figure. What’s relevant is the decisions that Donald Trump makes. He tends to disregard facts which don’t serve his purpose. It seems like his belief in himself is stronger than any facts which don’t serve him. Trump as a business man, deal maker, and leader uses this as a skill. It’s a mindset that proves to be useful for someone who bends reality to fit his motives and perception. Hyperbole has its place and can be effective. Persist in your wish, and it will harden into reality.

I like you,

– Sean Allen Fenn

Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.