Latest / Real Donald Trump Wisdom / The Art of the Deal - Chapter 2: Trump Cards - Elements of the Deal - Protect the Downside and the Upside Will Take Care of Itself (1987)

Transcript

The Art of the Deal - Chapter 2: Trump Cards - Elements of the Deal - Protect the Downside and the Upside Will Take Care of Itself (1987) · Real Donald Trump Wisdom

• 0:01
  Hey guys, back for another one. To continue,
• 0:05
  Trump cards the elements of the deal. Next section
• 0:08
  is protect the downside and the upside will take
• 0:10
  care of itself. Trump says, people think I'm
• 0:13
  a gambler. I've never gambled in my life. To
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  me, a gambler is someone who plays slot machines.
• 0:20
  I prefer to own slot machines. It's a very good
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  business being in the house. It's been said that
• 0:25
  I believe in the power of positive thinking.
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  In fact, I believe in the power of negative thinking.
• 0:29
  I happen to be very conservative in business.
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  I always go into the deal anticipating the worst.
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  If you plan for the worst, if you can live with
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  the worst, the good will always take care of
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  itself. The point is that you can't be too greedy.
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  If you go for a home run on every pitch, you're
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  also going to strike out a lot. I try never to
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  leave myself too exposed, even if it means sometimes
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  settling for a triple, a double, or even, on
• 0:58
  rare occasions, a single. So we see here, contrary
• 1:01
  to popular belief, that Trump is not at all risk
• 1:07
  -seeking. He's on the opposite, risk -averse.
• 1:10
  He is careful about the downside. He worries
• 1:14
  about things not going according to plan. He's
• 1:16
  aware that things can go off plan. And that enables
• 1:22
  him to plan accordingly and to make proper decisions.
• 1:30
  Being too positive or only thinking about the
• 1:37
  upside makes you take wrong turns and wrong decisions.
• 1:44
  It's pretty clear how... Focusing on the downside
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  or the downside in general should take more of
• 1:56
  your attention. Warren Buffett says, for example,
• 2:00
  that it takes 20 years to build a reputation
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  and 20 seconds to ruin it. So, of course, you
• 2:08
  want to be much more careful with the downside.
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  And as Trump says, the upside will take care
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  of itself. Here's going to give a specific example.
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  One of the best examples I can give is my experience
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  in Atlantic City. Several years ago, I managed
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  to piece together an incredible site on the boardwalk.
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  The individual deals I made for parcels were
• 2:31
  contingent on my being able to put together the
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  whole site. Until I achieved that, I didn't have
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  to put up very much money at all. Once I assembled
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  the site, I didn't rush to start construction.
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  That meant I had to pay... They're carrying charges
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  for a longer period. But before, I spent hundreds
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  of millions of dollars and several years on construction.
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  I wanted to make sure I got my gaming license.
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  I lost time, but I also kept my exposure much
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  lower. When I got my licensing on the Broadwalk
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  site, Holiday Inns came along and offered to
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  be my partner. Some people said, you don't need
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  them. Why give up 50 % of your profits? But Holiday
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  Inns... also offered to pay back the money I
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  already had in the deal to finance all the construction
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  and to guarantee me against losses for five years.
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  My choice was whether to keep all the risk myself
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  and own 100 % of the casino or settle for a 50
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  % stake without putting up a dime. It was an
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  easy decision. Here, Trump basically explains
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  why going 50 -50 and having zero risk made more
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  sense than going 100%. All the profits, but also
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  all the risk. Because it's almost a no -brainer
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  to maybe limit the upside if you put the downside
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  to zero. And that made sense for him. And then
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  he's going to contrast this with... With Hilton,
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  what Hilton did. Baron Hilton, by contrast, took
• 4:01
  a bolder approach when he built his casino in
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  Atlantic City. In order to get open as quickly
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  as possible, he filed for a license and began
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  construction on a $400 million facility at the
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  same time. But then, two months before the hotel
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  was scheduled to open, Hilton was denied a license.
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  He ended up selling to me at the last minute
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  under a lot of pressure and without a lot of
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  other options. And then Trump renamed the facility
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  Trump's Castle. And it was a successful operation.
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  And basically Trump waited, didn't put a lot
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  of money up front, wanted to have all the permits
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  in place before investing, and even then had
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  a partner that accepted to take a lot of the
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  risk for half of the profit. And that's how he
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  operated on his side. put all the costs up front
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  and were prevented from operating, they didn't
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  get the license. They put a lot of money down.
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  They wanted to go quickly. So they were more
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  looking at the upside, but they ignored the outside.
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  And Trump came out on top in this exchange. So
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  basically summarize, protect the downside and
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  the upside will take care of itself.