Latest / Real Donald Trump Wisdom / The Art of the Deal - Chapter 6: Grand Hotel: Reviving 42nd Street (1987)

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The Art of the Deal - Chapter 6: Grand Hotel: Reviving 42nd Street (1987) · Real Donald Trump Wisdom

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Hey guys, very excited to be back for another
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podcast episode about Donald Trump's The Art
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of the Deal, Chapter 5, The Move to Manhattan.
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So in this chapter, we're going to explore Trump's
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move to the city and what he did to get known
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and to win his first deals. He says, I had my
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eye on Manhattan from the time I graduated from
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Wharton in 1968. The market in the city was very
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hot, the prices seemed very high, and I was unable
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to find a deal I liked, meaning a good piece
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of property at a price I found affordable. Trump
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was very patient with the deals he made. He only
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bought when he thought the price was fair, or
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more frankly, that he had an advantage. So he
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said that although his father was very successful,
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he didn't believe in giving much to his kids,
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and so when he... Trump graduated from college,
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he had a net worth of $200 ,000. And it was mostly
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tied up in buildings in Brooklyn and Queens.
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He wanted to help his father's business, but
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he wanted to go to Manhattan at the same time.
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So he went out to rent an apartment, a studio
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on 3rd Avenue and 75th Street in 1971. And he
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said... It looked out on the water tank in the
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court of the adjacent building. I jokingly referred
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to my apartment as a penthouse because it did
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happen to be near the top floor of the building.
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I also tried to divide it up so that it would
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seem bigger, but no matter what I did, it was
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still a dark, dingy little apartment. Even so,
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I loved it. Moving into that apartment was probably
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more exciting for me than moving 15 years later
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to the top three floors of Trump Tower on 5th
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Avenue and 57th Street overlooking Central Park.
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You have to understand, I was a kid from Queens
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who worked in Brooklyn, and suddenly I had an
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apartment on the Upper East Side. So his family
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operated in Brooklyn and Queens, and now he was
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going to take the lead and go conquer Manhattan.
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So he continues, the really important thing was
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that by virtue of this move, I became much more
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familiar with Manhattan. I began to walk the
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streets in a way you never do if you just come
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in to visit or do business. I got to know all
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the good properties. I became a city guy instead
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of a kid from the boroughs. As far as I was concerned,
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I had the best of all worlds. I was young and
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I had a lot of energy and I was living in Manhattan,
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even though I commuted back to Brooklyn to work.
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Then one of the first things he did was to join
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Le Club, which was one of the most exclusive...
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clubs in the city private clubs and it was located
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on east 54th street and basically it was full
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as he says of very successful men and beautiful
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women and just extremely successful people from
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all walks of life the way he tried to join showed
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how relentless and and driven he was he says
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i'll never forget how i became a member one day
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i called up the club and i said my name is donald
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trump and i'd like to join your club. The guy
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on the other end of the phone just laughed and
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said, you've got to be kidding. Nobody, of course,
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had heard of me. The next day, I got another
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idea and I called back and I said to the guy,
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listen, could I have a list of your members?
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I may know someone who is a member. And he said,
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I'm sorry, we don't do that. And he hung up.
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The next day, I called again and said, I need
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to reach the president of the club. I want to
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send him something. For some reason, the guy
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gave me the president's name and his business
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number and I called him up. I introduced myself
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and I said, Very politely. My name is Donald
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Trump and I like to join the club. And he said,
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do you have any friends or family in the club?
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And I said, no, I don't know anybody there. He
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said, well, what makes you think you should be
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admitted as a member? Just kept talking and talking.
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And finally, the fellow said to me, I'll tell
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you what, you sound like a nice young man and
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maybe it would be good to have some younger members.
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So why don't you meet me for a drink at 21? So
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here we just see Trump manages to, again, he
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takes a shortcut by. contacting the president
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of the club directly. So it doesn't work to contact
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the people that are at the operational level.
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If you go straight to the top, you have a better
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chance at getting what he needed was an exception.
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Of course, he didn't know anyone. He wasn't well
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known then. A decent net worth, but nothing of
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the scale that would automatically grant him
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acceptance. And through perseverance, he got
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in. He says, the next night we met for a drink.
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There was just one small problem. I don't drink.
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I'm not very big on sitting around. And he says,
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I have a father who has always been a rock, very
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straight and very solid. My father would come
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home every night at 7, have his dinner, read
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the newspaper, watch the news, and that was that.
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And I'm as much of a rock as my father. So, again,
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he lauds his father for his discipline and his...
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Soberness. Also, you have to remember, Trump
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lost a brother to alcoholism. So he stays away
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from alcohol. If that was the case, that everyone
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around him drank a lot, I was going to have a
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big advantage. Because Trump stays sober while
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all the other people indulge and weaken their
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faculties. So Trump regrets that eventually all
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the people he was with drank too much and they
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didn't remember the next day when he called the
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president. You know, he had to kind of start
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from scratch. Anyways, eventually, as promised,
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he was admitted to the club and it turned out
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to be a great move for him socially and professionally.
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Okay, so continuing. Trump is going to refer
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also to his mother and to his wife as rocks,
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as anchors, meaning people very solid like his
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father. So he's going to congratulate his father
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and mother for having celebrated 50 years of
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marriage. also his wife, for being a reliable
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partner. And that, he says, is in contrast with
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the people that he saw at the club who seemed
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to have less stable relationships. Then eventually
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he meets the legendary lawyer, Roy Cohn. He doesn't
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like how most lawyers love to take settlements
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because, of course, settlements means less work,
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less efforts, less fighting, less risk. an immediate
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payout for the lawyers and their clients, but
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usually for much less than they could get, make
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concessions. So Trump finds someone who agrees
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with him. Cohen agrees completely that settlements
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are subpar, should not be the default. And where
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Cohen does ask Trump, is this just an academic
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discussion? As in, are you going to hire me for
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a specific job? Or what? And eventually, well,
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Trump tells him that some lawsuits against his
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father's company that he wants Roy Cohn's help
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for. So they start working together. And he says,
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I learned a lot about Roy during that period.
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He was a great lawyer when he wanted to be. He
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could go. into a case without any notes. He had
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a photographic memory and could argue the facts
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from his head. When he was prepared, he was brilliant
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and almost unbeatable. However, he wasn't always
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prepared. Even then, he was so brilliant that
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he could sometimes get away with it. Unfortunately,
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he could also be a disaster. And so I would always
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question Roy very closely before a court date.
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If he wasn't prepared, I'd push for a postponement.
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So, yeah. While Trump knew how to handle someone
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like Roy Cohn, who could be... excellent when
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prepared, but less so when not prepared. And
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Trump had the flair to detect whether he had
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prepared or not. Then he says, tough as he was,
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Roy always had a lot of friends. And I'm not
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embarrassed to say I was one. He was a truly
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loyal guy. It was a matter of honor with him.
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And because he was also very smart, he was a
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great guy to have on your side. You could count
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on him to go to bat for you, even if he privately
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disagreed with your view. And even if defending
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you wasn't necessarily the best thing for him.
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He was never two -faced. Just compare that with
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all the hundreds of quote -unquote respectable
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guys who make careers out of boasting about their
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uncompromising integrity but have absolutely
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no loyalty. They think only about what's best
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for them and don't think twice about stabbing
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a friend in the back if the friend becomes a
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problem. What I liked most about Orocon was that
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he would do just the opposite. Roy was the sort
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of guy who would be there at your hospital bed
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long after everyone else had bailed out, literally
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standing by you to the death. So Trump has a
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lot of praise for Roy Cohn. And again, Trump
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highlights the importance of loyalty in business
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and personal relationships. Eventually, he got
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an opportunity because in 1973, things began
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to turn bad in Manhattan. He says, I'd always
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assumed the market would cool off because everything
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runs in cycles and real estate is no different.
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Even so, I never expected things to get as bad
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as they did. It was a combination of factors.
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First, the federal government announced a moratorium
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on housing subsidies. Second, interest rates
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began to rise. And third, there was a spurt of
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inflation, particularly in construction costs.
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And then the biggest problem was that the city's
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debts were rising and there were rumors that
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New York for defaults and it issued much less.
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much fewer building permits. So the appetite
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to build was not there. And Trump saw that as
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an opportunity. Here he says a very interesting
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quote. I worried about the future of New York
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City too, but I can't say it kept me up at nights.
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I'm basically an optimist. And frankly, I saw
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the city's trouble as a great opportunity for
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me. Because I grew up in Queens, I believed perhaps
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to an irrational degree that Manhattan was always
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going to be the best place to live, the center
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of the world. Whatever troubles the city might
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be having in the short term, there was no doubt
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in my mind that things had to turn around ultimately.
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What other city was going to take New York's
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place? And so with Trump's optimism and flair
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for opportunity, he approached a certain Victor
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Palmieri, who had been in charge of helping Penn
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Central Railroad with their bankruptcy and who
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had control of certain assets that Trump was
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interested in developing. He said, hello, my
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name is Donald Trump and I like to buy the 60th
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street charts. The simplest approach is often
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the most effective. I think they liked my directness
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and enthusiasm. I hadn't built anything yet,
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but what I did have was the willingness to go
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after things that people in a better position
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than mine wouldn't have considered seeking. And
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here Trump gives us a bit of a masterclass on
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If you're interested in buying a property, which
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you should do, so there's three steps. If you
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want to buy something, it's obviously in your
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best interest to convince the seller that what
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he's got isn't worth very much. Number two, the
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second thing I told Victor was how incredibly
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hard it was going to be politically to get zoning
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approvals for such a big piece of undeveloped
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land. I pointed out that the community board
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would fight any development and that the process
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of going before the city planning commission,
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the board of estimate would be endless. Third,
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the third thing I did and probably the most important
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was to sell myself to Victor and his people.
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I couldn't sell him on my experience or my accomplishments.
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So instead, I sell them on my energy and my enthusiasm.
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So to recap, he's telling him what he has isn't
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worth very much. It's going to be very hard to
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exploit or develop given the regulatory challenges.
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And third, he's convincing him that he's the
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best man on the job. With his energy and enthusiasm.
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So this is the birth of the Trump organization.
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Trump says that he works for the Trump organization,
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even though they were just a few people working
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out of Brooklyn at a time. And eventually they
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begin to work together. So he says, by building
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a close relationship with Victor from the start,
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I was able, in effect, to work for him rather
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than just be another buyer. That was terrific
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for me. He's going to explain what he got out
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of it. For example, we dropped agreements giving
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me an exclusive option to purchase the 60th Street
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and 30th Street yards, but subject to zoning,
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subject to approval by the court handling of
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the Penn Central bankruptcy, subject to everything
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except my having to put up any money. That's
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very interesting. So Trump gets exclusive rights
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without having to put down any money, which is
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just brilliant negotiation. Eventually, with
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that option, he can go see the banks. and see
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other backers and raise the money. And so it
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truly is something that works in his favor to
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get an early advantage to go get the financing.
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Trump says he loves to minimize the downside
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and the upside will take care of itself. So here's
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an example. He's not putting any money down.
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He gets an exclusive option and then he'll try
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to make it happen. So here he says, So here he
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says, Trump enjoys his praise, but at the same
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time, he hears criticism from one of his close
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friends that says that Trump has a great line
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of shit, but where are the bricks and mortar?
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So basically saying that he's all talk and no
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action. So Trump was outraged by hearing that,
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and he didn't speak to the guy for a year, but
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then he sort of thought it through and said,
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yeah, the guy's right. If he doesn't deliver
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the merchandise in... you know soon then yeah
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his entire spiel can be called as a bluff he
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said he can do it he hasn't done it yet but the
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only way to prove that he can do it is by doing
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it and he will so that gives him a boost his
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reputation hinges on execution not just on promises
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which is important eventually as soon as he makes
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his Announcements public says other bidders suddenly
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came out of the woodwork, started housing. For
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example, a company we're partners with on the
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Star City Housing Project in Brooklyn made a
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bid for $150 million. On financing and city approvals
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and all the rest, on the face of it, their bid
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was a lot higher than mine. Trump's bid was for
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$62 million. And here we have a company coming
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in at $150 million. But Trump here is going to
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double down on... putting the deals of others
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down and making light shine on his. I'm the first
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to admit that I'm very competitive and that I'll
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do nearly anything within legal bounds to win.
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Sometimes part of making a deal is denigrating
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your competition. In this case, I happen to genuinely
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believe that the started bid wasn't legitimate,
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that the company would never close the deal and
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would not be able to successfully develop the
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site even if the deal did go through. The fact
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is that anyone can bid anything, particularly
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when there are all sorts of contingencies. The
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same thing could be said about my bid, except
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that by then I'd put in enough time and effort
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to have convinced Palmieri's people that I was
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very serious and very committed. In the end,
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I managed to convince Palmieri that it made more
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sense to stick with my $62 million bid than to
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take a flyer on Starrett. And then unfortunately,
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he says, the irony is that less than a year after
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I announced my plans for the site and beat my
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competition, the economic situation in New York
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City turned from bad to much worse. And then
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he details. The whole process for choosing the
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convention sites and there's a lengthy back and
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forth eventually until the mayor leaves office.
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It's still in the air. And eventually it's when
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Ed Koch becomes mayor that it finally gets. Trump
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wants to be the builder of the convention, but.
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is being told that he cannot because of conflicts
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of interest. Eventually, they took much longer
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to build the convention center. They built it
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over budget. He says that by the time the convention
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center was finally finished last year, it was
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four years behind schedule and at least $250
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million over budget. When you add interest, the
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carrying cost for all those years of construction,
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the total cost was probably $1 billion or $700
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million over budget. The construction was a terrible
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disgrace and all the worse because no one raised
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a fuss about it. Here's a very Trump trait that
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we're going to read. I was invited to attend
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opening day ceremonies in 1986. I refused. What
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happened at the convention center is that the
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city and state took a great piece of property
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and a great project and ruined it through terrible
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planning and ridiculous cost overruns. Even if
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the convention center is ultimately a success,
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it can never earn back all the money that was
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unnecessarily squandered to build it. Here we
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see that Trump, of course, is vindictive, of
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course, keeps tabs and is upset that he was sidelined.
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He sees that they made a lot of mistakes. And
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with that, ladies and gentlemen, I encourage
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you to respect yourselves and make yourself respected
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by giving your presence only to people and causes
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that respect you in return. Thanks for listening.