The Problem of the Businessman President

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If you asked his supporters, much of Donald Trump’s appeal, other than his status as a political outsider, was his acumen as a businessman. The logic of this case is straightforward: He understands organizations and deal-making, as well as the business and economic world, unlike the feckless lawyers and career politicians who pollute Washington and all state capitals. Basically, businessmen are supposed to understand how the economy works and know how to get things done. Unfortunately for Trump’s many supporters, they’ve been sold a bill of goods.

Business versus Economics

Trump is a very good businessman. Few people who start with a million dollars can turn it into billions, let alone a globally-recognized brand. I cringed every time Hillary Clinton or one of her surrogates tried to make the tortured claim that Trump was somehow not a good businessman. The obvious cognitive dissonance of that assertion set alongside images of Trump Tower should have steered them well clear of that line of attack. In fact, by trying to attack his business credentials, the Democrats probably aided Trump; because they subconsciously bought into the notion that if someone was a very good business leader, that would be considered a strong positive for government leadership.

But that is not inherently the case. Being a capable business leader does not make one an expert on all business, let alone the broader discipline of economics. There is a reason that most business leaders work within specific industries: It is because they understand those industries. When business executives try to transition into other industries they frequently stumble. The same goes for businesses that extend far beyond their core competencies into industries they do not understand.

Trump himself, has faced that particular problem in the past. Many of his ventures have turned into punchlines, like Trump Steaks. That is because he is, deep down, a real estate guy. He is a developer and that is the business he truly understands. Trump is an absolute master of the branding side of developments. He understands luxury and what triggers buyer demand for his buildings. He is a brilliant storyteller in the world of glass and steel, but outside that realm he has often struggled.

Trump has never been a student of economics. He understands some aspects of finance, as development is heavily reliant on debt financing. And during his flirtations with bankruptcy he demonstrated an adept skill for negotiating with creditors. But that is not the same as understanding the drivers of interest rates in a broader economic context. Economists have their own set of problems, but they look at the world from a macro-oriented perspective. Trump has spent decades demonstrating that he has little time for economic policy study beyond his own instinctive aversion to trade deficits and foreign imports.

The fact is, a business leader has many valuable skills that create wealth, but none of them translate directly to an ability to run the economic engine of a country.

A Different Kind of Deal-Making

The lack of scope in Trump’s knowledge has already come back to bite him. During the first abortive fight to repeal Obamacare, Trump promised that he could make “the best deals” for citizens. Yet when he met with skeptical House Republicans, many reported that the president did not know the details of the plan he was proposing they vote for. Trump supporters might argue that they didn’t elect Trump to be a details guy; they voted for him to get things moving. Yet without clear knowledge of the details of the repeal bill or its replacement, Trump was hamstrung when it came to actually cutting deals or convincing skeptics.

A crucial part of deal-making, in any industry, is understanding the different levers that affect the various stakeholders. Trump was so good at real estate deals because he had a deep understanding of the levers in that industry. He understood how to wring out the most value from floor plans and materials, he bragged in a speech that he was the first president who understood how much concrete and rebar could be laid in a day, as well as, the optimal financing structures for deals. Because he could manipulate those levers and could sell various trade-offs to investors, banks, and contractors, he was able to make some very impressive deals.

When it came to the healthcare reform effort, Trump had none of that knowledge. Instead, he had to rely on threats and cajoling. But when representatives are answerable ultimately to constituents, not the president, those sorts of threats won’t work.

What did ultimately see to the deeply-flawed AHCA bill clearing the House was the old-fashioned deal-making that has long been the purview of experienced congressional operators. Trump claimed it as a win, but his own talents proved not up to the task. It fell to the very people he had claimed on the campaign trail were spineless and incompetent to get the job done.

A King Alone in His Tower

Trump seems to see himself as some sort of hybrid of a Jacksonian tribune and Renaissance monarch. He likes to hold court in the White House, pitting aides against each other; always with the threat that their jobs could be gone upon the whim of their mercurial king. Meanwhile, he keeps his family as his closest advisors, whose only meaningful qualification for high responsibility is their absolute loyalty to the paterfamilias.

While Trump may be something of an exception in his regal self-image, he is hardly alone among captains of industry. Indeed, most business chiefs are accustomed to an autocratic style of leadership. The presidency, for all its monarchical trappings, is still restricted by competing power centers in Washington and the states. Trump has clearly been frustrated by Republican leaders in Congress who refuse to bend the knee. He expects to have his will done, but politics is not that simple.

At the Trump Organization, Donald was the employer and boss. People were answerable to him and owed their jobs to him. Members of Congress are ultimately elected by voters. Those voters are who congressmen have to look to when they choose to vote for or against a particular bill. When it came to healthcare, or when it comes to tax reform in the coming months, the interests of all these elected representatives will not necessarily be aligned with those of the president. So far, Trump has failed to understand this, to the detriment of his agenda.

Learning a New Art of the Deal

Trump has staked much of his reputation on his facility as a deal-maker. If he wants that reputation to hold, he has to learn how Washington works. Even if he “drained the swamp,” which appears ever more unlikely, the fundamental nature of government power would not change. He is not the dictator and his word is not law.

The president also has to make a belated effort to actual understand the levers that govern policies. He failed on healthcare, he might be able to correct his course on tax reform. That means learning a new art of the deal, one compatible with the public sphere. Whether Trump has the humility or capacity to recognize his own limitations remains to be seen. If he doesn’t learn, we can expect years of hopeless flailing.

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John Engle

John Engle is a merchant banker and author living in the Chicago area. His company, Almington Capital, invests in both early-stage venture capital and in public equities. His writing has been featured in a number of academic journals, as well as the blogs of the Heartland Institute, Grassroot Institute, and Tenth Amendment Center. A graduate of Trinity College Dublin, Ireland and the University of Oxford, John’s first book, Trinity Student Pranks: A History of Mischief and Mayhem, was published in September 2013.