AL­LAN SLOAN

The Washington Post Sunday - - BUSINESS - AL­LAN SLOAN al­lan.sloan@wash­post.com

The Busi­ness 101 les­son that stumps Trump still.

Don­ald Trump is mak­ing the same mis­take now that he made in the 1980s and ’90s. Back then, the mis­take — sur­round­ing him­self with en­ablers rather than with strong sub­or­di­nates — led to trou­ble for his real es­tate and casino em­pire, which wasn’t a big deal ex­cept to Trump and his cred­i­tors. But now, Trump’s mis­take threat­ens to do se­ri­ous dam­age to our coun­try, which is a very big deal.

Let me ex­plain. If you’re a chief ex­ec­u­tive run­ning a com­pli­cated en­ter­prise, you want to sur­round yourself with strong, com­pe­tent sub­or­di­nates who will tell you if they think you’re mak­ing a mis­take and will ar­gue with you.

That’s what you learn not only in Man­age­ment 101 but also in the School of Com­mon Sense.

Even bet­ter, you oc­ca­sion­ally put your top-rank­ing strong sub­or­di­nates in a room and let them duke it out with one another. And with you, if need be. And you ac­cept the fact that even though you’re the boss, some of your sub­or­di­nates are prob­a­bly bet­ter at cer­tain things than you are. They might be right, and you might be wrong.

Com­pare this with the way Trump has be­haved since be­com­ing pres­i­dent. He is not sur­round­ing him­self with strong sub­or­di­nates and doesn’t seem to be pay­ing much at­ten­tion to the few strong ones he has.

Rather, Trump is sur­round­ing him­self with flunkies whose main func­tion seems to be to kiss his be­hind (metaphor­i­cally) in public and pri­vate and with fam­ily mem­bers whose qual­i­fi­ca­tions to play a se­ri­ous role in run­ning our coun­try aren’t ap­par­ent. At least, they’re not ap­par­ent to me.

Take the sud­den rise and fall of the Mooch, a.k.a. An­thony Scara­mucci, who kept pub­licly pro­fess­ing his love for Trump. Af­ter the Mooch mo­ron­i­cally ran his mouth — on the record! — dur­ing an in­ter­view with the New Yorker, Trump is said to have been pleased with the col­or­ful re­marks. Then he back­tracked and fired the Mooch 10 days into his ten­ure. I wouldn’t be sur­prised, though, to see Scara­mucci re­turn to fa­vor one of these days.

Trump, as I wrote a year ago, is no­tably short on im­pulse con­trol. That’s not arm­chair psy­chol­ogy; it’s an ob­ser­va­tion based on years of watch­ing him and oc­ca­sion­ally writ­ing about him.

This makes Trump ex­actly the kind of per­son who needs to sur­round him­self with smart peo­ple who will help save him from him­self. The kind of peo­ple who will tell him about his blind spots, whether he asks or not, and will stand up to him.

Trump got into trou­ble in the go-go 1980s be­cause he got car­ried away. Money was easy to bor­row. The ad­vent of junk bonds — known eu­phemisti­cally as high-yield bonds — made it pos­si­ble to buy pretty much any­thing if you were will­ing to fork over big enough bucks and sign big enough IOUs, some of which Trump fool­ishly guar­an­teed per­son­ally.

Trump, heir to a fam­ily for­tune built on low-pro­file real es­tate but de­ter­mined to be­come a star, grabbed two casi­nos in At­lantic City be­cause he could. He bought them know­ing that there was a big­ger, glitzier casino called Taj Ma­hal in the works that would can­ni­bal­ize them. So he ended up buy­ing the Taj with junk bonds on which he rapidly de­faulted.

Ul­ti­mately, all three of Trump’s casi­nos went into Chap­ter 11 bank­ruptcy pro­ceed­ings, mak­ing Trump what Wall Street-types call a 33 — you know, three times 11. Throw in the bank­ruptcy of another im­pul­sive, over­priced pur­chase, the Plaza Ho­tel in New York City, and two bank­rupt­cies of the public com­pany (stock sym­bol: DJT) onto which Trump un­loaded his post-bank­ruptcy casi­nos, and you have 66. Which is why I call him Don­ald “66” Trump rather than Don­ald J. Trump.

Trump wouldn’t have be­come a 66 if he had sur­rounded him­self with peo­ple who could chal­lenge him, slow him down and make him look be­fore he took fi­nan­cial leaps. But he didn’t.

Con­trast Trump’s wretched per­for­mance with the way Gold­man Sachs and JPMor­gan Chase made their way through the fi­nan­cial cri­sis of 2008-09.

In the case of Gold­man, the firm re­al­ized in mid-2007, as a re­sult of top peo­ple duk­ing it out with one another, that se­cu­ri­ties backed by junk mort­gages were a loom­ing dis­as­ter. The firm switched al­most overnight from own­ing tons of them to bet­ting on their demise.

I came upon this when I was at For­tune work­ing with my then-col­league Doris Burke on a 2007 ar­ti­cle that dis­sected a par­tic­u­larly dread­ful is­sue of Gold­man mort­gage-backed se­cu­ri­ties.

JPMor­gan also hand­ily sur­vived the cri­sis, oc­ca­sional large em­bar­rass­ments such as the Lon­don Whale multi­bil­lion­dol­lar loss not­with­stand­ing. That’s be­cause JPMor­gan had an in­ter­nal-con­fronta­tion cul­ture, where top ex­ec­u­tives would duke it out to­gether and with chief ex­ec­u­tive Jamie Di­mon. Un­like Trump, Di­mon seems to have got­ten more ma­ture as he got older.

Con­trast these suc­cess­ful in­sti­tu­tions, what­ever you may think of them, with the Trump ad­min­is­tra­tion. He puts ill­suited and un­qual­i­fied peo­ple into high po­si­tions and of­ten un­der­mines them with the tweets du jour. The turnover rate is high, which dis­cour­ages peo­ple who aren’t power-mad or Trump-suck-up wannabes from tak­ing these po­si­tions. It’s a vi­cious cy­cle that feeds on it­self.

Trump’s man­age­ment style and im­pul­sive be­hav­ior made for an en­ter­tain­ing re­al­ity TV show that’s a ma­jor rea­son he now sits in the White House. But it’s not a way to run a suc­cess­ful com­pany. And as the spread­ing chaos and paral­y­sis in Wash­ing­ton show, it’s sure not a way to run a coun­try.

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