Thursday, April 21, 2016

Great Review of Trump's The Art of the Deal

Great review:

I started the book with the question: what exactly do real estate developers do? They don’t design buildings; they hire an architect for that part. They don’t construct the buildings; they hire a construction company for that part. They don’t manage the buildings; they hire a management company for that part. They’re not even the capitalist who funds the whole thing; they get a loan from a bank for that. So what do they do? Why don’t you or I take out a $100 million loan from a bank, hire a company to build a $100 million skyscraper, and then rent it out for somewhat more than $100 million and become rich?

As best I can tell, the developer’s job is coordination. This often means blatant lies. The usual process goes like this: the bank would be happy to lend you the money as long as you have guaranteed renters. The renters would be happy to sign up as long as you show them a design. The architect would be happy to design the building as long as you tell them what the government’s allowing. The government would be happy to give you your permit as long as you have a construction company lined up. And the construction company would be happy to sign on with you as long as you have the money from the bank in your pocket. Or some kind of complicated multi-step catch-22 like that. The solution – or at least Trump’s solution – is to tell everybody that all the other players have agreed and the deal is completely done except for their signature. The trick is to lie to the right people in the right order, so that by the time somebody checks to see whether they’ve been conned, you actually do have the signatures you told them that you had. The whole thing sounds very stressful.


Taylor Conant said...

"Developers" are a political creation. Would not exist in a free market. One of the things "developers" do is speculate on what land will be incorporated and allowed for permitting and building next. And they lobby to create an intersection between their speculation and reality.

High Plateau Drifter said...

But before a developer "lies" to each party so as to get their agreement to participate, he had better be sure that each party he has approached will agree. Several early failures of the deal between all parties to gel and the "developer" gets a bad reputation and is out of business. To succeed in that business the developer must understand how each party that he "lies" to is virtually certain to make money. Once he puts a few successful deals together, trust and credit are created and can be maintained as long as the developer maintains a decent track record.

It is this "trust and credit" that Trump is selling to the American voter. The audience wants to believe, although hacking down .gov to size and cutting back on oligarch control, and corporate grift and vig is going to be unimaginably more difficult that voters imagine. Regardless of the outcome, the awakening alone stirred by attempt will be an immense positive.