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.