PDF Summary:The Art of the Deal, by Donald J. Trump

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Shortform Note

For Trump's full schedule and the outcomes of the week's deals and conversations, refer to Chapters 1 and 14 in the book. For the sake of brevity and coherence, we've omitted Chapter 14, which follows up on the events listed in Chapter 1.

Some of the stories and details about Trump’s involvement, practices, and profits in The Art of the Dealhave been questioned or contradicted since its publication. In fact, the book’s ghostwriter Tony Schwartz has said that writing the book was his greatest regret and suggested that the book be “recategorized … as fiction.”

We’ve included Shortform notes to point out several factual discrepancies, though these may not be exhaustive.

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Principle #3: Have a Backup Plan

Always have a plan B, plan C, and even plan D—and don’t get too attached to any one of them.

The majority of deals fall through, so your long-term success depends on your ability to be flexible and change course if need be. When you need to pivot to your backup plan, you won’t waste valuable time coming up with an alternative and figuring out how to approach it—you’ll have had it in mind the whole time.

Trump’s original plan when he bought a large undeveloped site in Manhattan was to build middle-income housing. But when the city’s public housing subsidies dissipated, he agilely shifted to his backup plan of building a convention center on the site. (More on the 34th Street convention center in Chapter 5.)

Principle #4: Know Your Target Audience

Successful people know their audiences. This is true for movie directors, authors, salespeople, and real estate developers. Anytime you’re creating or marketing some kind of product to other people, you need to know who you’re targeting, what they want, and how they think.

Trump believes that understanding your target audience is an instinct—and that he has it....

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Fred’s Beginnings

Fred Trump was born the second of three children in New Jersey in the early 1900s. His father—a Swedish immigrant and restaurant owner—died when Fred was just 11. As the oldest son, Fred took on the role of man of the house: He worked odd jobs, including some on construction sites. That’s where his interest in construction began.

As a teenager, Fred took night classes, such as plan-reading and carpentry, to learn more about the construction business. Before he’d even graduated high school, Fred had his first business building and selling prefabricated garages.

After high school, Fred worked as a home-builder’s assistant. Fred’s natural intelligence, ambition, and hard work—along with the skills he’d learned in his night classes—helped him excel.Within a year, he’d built and sold a single-family home for a 33 percent profit margin.

That was the beginning of his company, Elizabeth Trump & Son. Fred tapped into an eager market for his single-family homes: working-class families in Queens who’d long lived in small apartments and were excited to have a home with more space. Over time, Fred built bigger homes to sell for larger profits.

When the...

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After the renovations, the Trumps ran newspaper ads for the apartments and had zero vacancies by the following year.

(Shortform note: The Trumps were sued for housing discrimination after a black prospective tenant was turned away. They gave the man an apartment and settled the case.)

Appearances Matter: Trump Made Small Improvements For a Big Impact

In order to attract higher-paying tenants to Swifton Village, Trump’s renovations included some unexpected changes, including:

• Adding window shutters
• Replacing aluminum apartment front doors with white colonial doors
• Sanding and staining floors
• Painting hallways
• Landscaping outside the buildings

The improvements were meant to make the building feel nicer and more inviting than the drab, dreary look associated with lower-income housing.

Some of these changes may seem extraneous, but these kinds of details can make a building look like it’s worth more; investing a relatively small amount in improving appearance and cleanliness can add much more in value.

Know When to Fold: Trump Sold When...

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When Penn Central was selling the land, the area was full of welfare hotels and drug dealers. Still, Trump couldn’t resist the lure of undeveloped riverfront property—plus, much of it was still near Central Park and desirable residential areas.

Trump was confident that developing the area would revive the neighborhood. Attracting a different kind of traffic through the area would inevitably lower crime and other issues and allow the land to live up to its full potential.

Have a Bargaining Chip: Trump Convinced Penn Central to Sell to Him

Trump was just 27 years old and didn’t have any construction projects on his resume—besides those he watched his father lead. However, he had the gumption to make a move on the ambitious project, and that drive is what he emphasized to Victor Palmieri, the man Penn Central had hired to sell off the railroad’s assets.

In addition, Trump framed the deal as if he was doing Penn Central Railroad a favor:

• He underscored that the West Side neighborhood was undesirable and that the city was in poor financial shape.
• He talked about how difficult it’d be to get zoning approvals for such a large undeveloped property....

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Trump needed a proposal that would inspire confidence among the banks and the city, so the first thing he did was work with an architect to create a design.

Trump felt that the Commodore’s dark, outdated appearance was hurting its potential. He wanted to make the building look contemporary by covering the brick exterior with either bronze or glass.

When he and the architect had settled on the design, Trump told the architect to make the drawings look more expensive than they were.With his proposals as with his buildings, Trump is convinced that an impressive presentation makes an invaluable impression.

Know Your Target Audience: Trump Chose a Hotel Operator

While looking for a hotel partner to run the Commodore, Trump considered what would give him the best chance of success given the kind of business and clientele he envisioned:

• An established hotel operator could handle the large 1,400-room hotel.
• A national hotel chain had the benefits of being well known, having a proven track record of successful management, and having a large reservation system.
• The company had to have a prestigious enough reputation (Ramada Inn and Holiday Inns...

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But first, Trump needed financing.

Have a Backup Plan: Trump Gave the Bank Options

When Trump approached the bank to finance the $25 million deal, he anticipated some pushback.

Since the lease for the underlying land expired in 29 years, the bank was hesitant to make such a large investment when the land’s owner could take over when the lease was up. Trump offered two backup plans.

First, he could turn the site into an office building with retail on the ground level. The project wouldn’t cost much, and he could easily make enough to pay the rent on the lease plus make a profit over the course of the 29 years.

His second and preferred plan was to buy the underlying land from its owner, Equitable Life Assurance Society. The banker was much more enthused with this option, so Trump set out to put many moving pieces in place.

Have a Bargaining Chip: Trump Put All the Pieces in Place

As with his Commodore deal, Trump needed to secure several interdependent commitments in order to see this project through. He carefully reframed the deal to get all parties to essentially give him what he wanted.

Buying the Underlying Land

Trump offered Equitable the...

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• Disputes over purchase options
• Lawsuits about past agreements for multiple landowners to jointly lease or sell the land

Real estate professionals advised him to avoid such a convoluted project, but again, he felt the property’s issues would help him secure a better deal.

Have a Bargaining Chip: Trump Convinced Landowners to Sell to Him

Trump needed to get all the landowners on the boardwalk site to sell so that he could build the casino-hotel he envisioned.

With Trump Tower on his resume, he played off his credibility: Trump assured the owners that he could give them a fair offer and that he’d finish the project. Given the property’s issues, Trump also leveraged the fact that the owners might not get any other offers because no developer wanted to take on this project.

After a long negotiation, Trump secured all the pieces of the Boardwalk site.

Prepare for the Worst: Trump Spent a Little Time to Avoid Losing a Lot of Money

Trump decided to get his gaming license before starting construction because he knew the licensing process was lengthy and unpredictable.

**Many casinos had started construction while they applied for their gaming license,...

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Not long after, the head of the Golden Nugget started positioning himself to take control of the Hilton company, which was possible because Barron had inherited only enough shares to make him a minor owner of the company. The takeover attempt helped Trump in a few ways:

• Defending the company from a takeover distracted Barron from the licensing rehearings
• The aggressive move repelled Barron from Golden Nugget and made Trump’s offer more appealing by comparison.

Barron sold the casino to Trump for $320 million, allowing Hilton to break even with his investment in the facility.

Learning from his experience at Trump Plaza, Trump appointed his wife to run Trump Castle instead of hiring a general manager.

Under her direction, the casino-hotel grossed $226 million in its first year.

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1. It’s extremely difficult to get tenants out of rent-controlled and rent-stabilized apartments, especially in such a desirable location. This proved to be the biggest obstacle in this project.

Given the challenges to his plan, it was critical that he had alternatives in mind.

Trump’s Actions Fueled the Tenants’ Case

Trump hired an outside company to offer tenants help relocating, but he underestimated how hard the tenants would fight to protect their low rents and desirable apartments. They formed a tenants’ association and hired lawyers.

Trump continued to provide essential services such as heat and hot water, but he cut down on other expenses: He got rid of the doormen’s uniforms to save on dry cleaning, put low-wattage bulbs in the hallways to save on electricity, and stopped allowing tenants to use a telephone in the lobby for free.

(Shortform note: Legal documents claim that Trump, in fact, cut heat and hot water, among other things.)

However, the tenants claimed these changes—along with the relocation offers—constituted harassment and sued Trump.

Some of Trump’s actions inadvertently...

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Flutie’s first game with the Generals was broadcast on ABC and had more than twice the previous season’s average ratings. (Flutie later played for the NFL as well as the Canadian Football League.)

Have a Backup Plan: Trump Pushed to Move to the Fall or Sue

Trump was convinced that if the USFL moved its season to the fall, one of the three major television networks—ABC, NBC, or CBS—would agree to a contract to broadcast the league’s games. Televised games on a major network would make the USFL more competitive with the NFL, and bring in more viewers and money.

If no network agreed, Trump had a backup plan: He felt it would be evidence for an antitrust case against the NFL because the NFL’s season was in the fall and it would have a monopoly on broadcasting. If the USFL won in court, the USFL could use the money from the settlement or damages payment to make necessary improvements.

However, not all USFL team owners were willing or financially able to fight. Many owners were hesitant when Trump suggested a vote on moving the league’s season, but they eventually voted and agreed to move the season to fall.

Fight If You Think You’re Right: The USFL Filed an...

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Trump continued holding press conferences when he hit new milestones, such as pouring concrete. Although these weren’t momentous achievements, he capitalized on the media’s interest, and the reporter turnout was steady.

Koch’s letter had piqued public interest in the feud and the outcome of the project, and Trump capitalized on the free press as promotion for Wollman Rink.

Keep Costs Low: Trump Was a Strong Leader

When Trump took over the Wollman Rink project, one of the biggest problems he identified—at the root of the project’s mishandling—was a lack of leadership.

He recalled a day during the city’s reign when he had walked past the construction site twice, and both times the workers appeared to be doing nothing. Stalled progress leads to delays and cost overruns, so Trump visited the site nearly every day to make sure things were moving along.

Trump insists on two principles that hearken back to his father’s influence:

1. Continually push contractors to get the job done on time.
2. Know what things cost and what jobs entail. For example, if the contractor says that pouring concrete will take two weeks and a million dollars, you need to have...

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Know Your Target Audience: Trump Maximized Assets and Filled Needs

When Trump took over the project he decided to start from scratch; he wanted no association with Macri or his plans. As Trump created his plans, he tailored them to the site’s strengths and area’s needs.

In Trump’s view, the property’s biggest asset was its views. His buildings would be tall to maximize the view, and they’d be designed so that every apartment had unobstructed views of the Hudson River or the Manhattan skyline.

Trump also planned to include retail shopping because he knew the area had a dearth of basic shopping options, such as grocery stores and pharmacies.

To ensure a profit, Trump needed much more generous zoning approvals than Macri had gotten—and he was willing to push as hard and wait as long as he had to in order to get them.

Have a Bargaining Chip: Trump Courted NBC to Leverage Zoning Approvals

To get the zoning approvals he wanted, Trump had to convince city officials that NYC would also benefit from his plans.

Trump found his angle when he learned that NBC was interested in relocating from Rockefeller Center—and that the network was considering a move to New...