On Donald Trump’s Business Failures

One of the talking points Donald Trump has used thus far in his campaign is the fact that his stellar business acumen is exactly what the United States needs. In other words, whatever was in his brain that allowed him to earn a fortune of $10 billion will enable him to do great things for the country.

Naturally, his opponents have made claims to the contrary, and it’s easy to understand why. If they can show that Trump really isn’t as good of a business man as he claims, the rationale for electing him is greatly reduced. Unfortunately for those making the claims, they’ve only displayed their ignorance.

There have been many instances of this argument over the last few months, but I’d like to focus on two recent ones. First, from Gawker:

So to commemorate our country’s imminent President Trump-wrought downfall, we’ve compiled every major, non-real estate-related Trump business disaster out there (we think). Because while we aim for completeness, the man has failed—a lot. If you know of anything we missed, please do let us know down below. And Donald, good luck with that wall.


They then go on to channel Mitt Romney and name 15 initiatives that Trump tried which didn’t work out – Trump Steaks, GoTrump.com, Trump Airlines, Trump Vodka, Trump Mortgage, Trump: The Game, Trump Magazine, Trump University, Trump Ice, New Jersey Generals, Tour de Trump, Trump On The Ocean, The Trump Network, Trumped!, Trump New Media.

Sounds like a lot of failure, until you understand that there are, at least currently, 515 separate entities which Donald Trump, through his Trump Organization, either owns or is a major investor in. Many of those may end up in the scrap heap as well. There are probably many more businesses Trump has owned in the past which failed, or he took a loss on, as well as many others he sold for a profit.

The bottom line is that coming up with a list of 15-20 business failures does nothing but show that Trump has tried a lot of things. People who declare Trump a business failure on the back of that simply don’t understand business in general. Business is about anticipating the demand of the marketplace and attempting to supply that demand.

You might be right, or you might be wrong, but you won’t know for sure unless you attempt to meet that demand. If you’re wrong, you cut your losses and move on. Between 70% and 90% of new business ventures fail, depending on who you talk to. There is nothing wrong with this unless you fail to learn the specific lessons from each experience.

Furthermore, the math is firmly in Trump’s favor. 15 failures against 500+ profitable companies (perhaps), works out to a success rate of about 97%. That seems pretty strong to me. Business is a lot like baseball, in that a success rate of 3 out of 10 in baseball makes you a Hall of Fame player. In business you only have to succeed a handful of times to be a success, as long as those successes are larger than your failures. Indeed, Thomas Edison failed 10,000 times before getting the light bulb right once, and his name is forever etched in history.

The truth is that you only have to be a success one time to be a success in business, let alone several hundred times like Trump has. That line of argument is totally bankrupt.


So is this argument, most recently brought about by Senator Elizabeth Warren in a recent Twitter tirade. Here it is:


I haven’t actually looked at the math, but I’ll take this argument at face value. Even if it is true, it falls apart very quickly on two levels. The first is that it requires Trump to have bought the market at the exact low point in 1974, and held on for 40 plus years without drawing one cent for food, clothes, lodging, and whatever extravagant lifestyle he might have wanted. On top of that, he would have had to sell out at exactly the right time at the 2015 high. Completely unrealistic.

The other way in which this argument fails is the simple fact that Trump went out and built things with his inheritance. The skyscrapers, hotels, golf courses and so forth created tens of thousands of jobs, and facilitated all sorts of economic activity that would not have existed if Trump had put that money in an index fund instead.

In fact, if every single business person in 1974 had put all of their money in an index fund, instead of putting it towards whatever tangible businesses that money was put towards, all that would have happened is that the stock market would have exploded higher and then crashed. The reason being, the very business activity which stock prices and index funds rest on would never have happened.

In other words, the only reason those index funds performed as well as they did from 1974 to the present is precisely because of people like Trump who built things and facilitated the economic growth those index funds are a derivative of.


It’s incredibly ironic for a woman like Senator Warren to be trying to undermine Trump in this manner given her entire claim to fame has been her belief that Wall Street is the cause of all that ails us, from cancer to war, famine and pestilence. You would think that someone who thinks Wall Street collects money without doing anything to benefit society would not ridicule someone who actually did benefit society. Not only that, Warren ridiculed Trump for not just parking money in a derivative instrument and sitting there collecting the profits.

Such is politics, where blatant contradictions are the norm. Mitt Romney is also guilty of this, as he surely knows better. But he made a disingenuous point for political purposes. Despite Gawker’s attempt to drop the mic on Trump’s business acumen, he is a unquestionable business success. You simply don’t go from a few million to a few billion in net worth otherwise.