Milken, when informed of the Harrah’s deal in the midst of his own financing negotiations with Trump, told him, “It’s a great deal.”201 He did not even attempt to compete.
Trump’s knowledge, leverage and negotiation strategies here bear incredible similarity to his Commodore Hotel and Trump Tower deals. As noted in Trump Show,
The parallels with the Commodore and Trump Tower deals were striking—Trump had laid claim to a prime location with a minimal early investment, parlayed political advantages and a locally downturned economy into a series of governmental concessions, and then used both the location and the concessions as a lure for an institutional partner that could help deliver the financing he otherwise could not obtain…. [It had become] a proven formula for success.202
Trump created and used his leverage—his counterparts’ relative desperation and his good Plan Bs—to close two financially lucrative low-risk deals and get his casino license.
Ethical Issues Related to Trump’s Leverage
Three final notes on the leverage in these negotiations.
One, what about the ethics of Trump’s not listing the criminal and other investigations on his casino license application? These appear to have been intentional misrepresentations of material facts. But were these material, given that he wasn’t indicted or convicted of anything? Is this acceptable “bluffing?”
Or should Trump get a pass? After all, New Jersey’s Division of Gaming Enforcement and its Casino Control Commission basically ignored his omissions after they investigated and found several misrepresentations. Yet they still granted him a license.
Two, was creating the perception of a busy construction site an ethically acceptable “bluff?” What about its effectiveness long-term, as he did it to a potential business partner?
And three, what about Trump’s “bluff” to Harrah’s about already having the casino financing lined up? While disputed, this fits a pattern he started with the Commodore deal. Then, he told New York City he had already bought the hotel from Penn Central when he had not (he admittedly did this and later boasted about it).203
These are important questions, and directly impact Trump’s credibility—always a crucial issue. Each will be addressed in Chapter 12.
LESSONS LEARNED
| Trump’s Strategies and Tactics | Trump enhances leverage by developing strong alternatives/Plan Bs. |
| Trump takes advantage of counterparts’ desperation—striking while his leverage is strong. | |
| Trump creates illusions of not being desperate—impacting the negotiation reality. | |
| Trump consistently fails to disclose information that could weaken his leverage and makes misrepresentations, threatens, and “bluffs” in others. | |
| Lessons Learned | Leverage consists of parties’ level of desperation and Plan Bs—and parties can strengthen leverage in many ways. |
| Leverage is relative and based on perception. Parties can change their counterparts’ perception of how much they need a deal. | |
| Leverage is fluid—so strike while your leverage is hot. | |
| Parties can strengthen their leverage by creating a better Plan B and changing the perception of their Plan B. | |
| Bluffing, illusions, and threats can negatively impact long-term leverage and credibility. |
THREATS AND LEVERAGE: REAL OR FAKE?
Donald Trump almost always brings a stick to his negotiations along with his carrots. He also almost always threatens to use it. Classic carrot-and-stick approach, right?
Wrong. It’s one thing to have a stick in a negotiation. It’s another to consistently threaten to use it. It’s quite another to actually use it.
What do we mean?
Leverage, as noted earlier, consists of two elements—level of need and Plan Bs/alternatives to a deal. Since negotiations always involve more than one party and leverage is relative, each leverage element must be analyzed to the extent it involves you and your counterparts. For level of need, it’s how much you need the deal relative to how much your counterparts need the deal. For Plan Bs, it’s the strength of your Plan B/alternative relative to the strength of your counterparts’ Plan Bs/alternatives.
In Chapter 5, we analyzed how Trump maximized his leverage in terms of the parties’ levels of need and his Plan Bs.
But we did not evaluate the impact of his counterparts’ Plan Bs—an equally powerful element of leverage. Nor did we consider how Trump affects his counterparts’ Plan Bs, if at all. Total leverage includes these elements.
Trump exercised leverage as it relates to his counterparts’ Plan Bs in three ways:
Trump’s Sticks—Find out their Plan Bs and differentiate,
Trump’s Threats—Worsen their perception of their Plan Bs, and
Trump’s Bullying—Sue them or stiff them.
Trump’s Sticks—Find Out Their Plan Bs and Differentiate
Donald Trump has spent almost 50 years creating and promoting an international brand. Today that brand generates millions of dollars a year for him.
Why do people spend so much on Trump-branded housing developments, buildings, hotels, apartments, golf courses, country clubs, and the list goes on?
Those buyers perceive “Trump” as symbolizing high-end, luxury living spaces and quality goods and services and, by contrast, that the Trump item better meets their luxury needs than their alternative, or Plan B purchase.
In other words, Trump built his fundamental persona and brand on this element of negotiation leverage. Donald Trump knows this and has been promoting and selling it his entire life.
Here are a few of Trump’s counterparts’ Plan Bs from earlier-described negotiations.
Commodore Hotel—New York City’s Plan B: letting this part of town further deteriorate or entice another developer. Unfortunately for New York City, few others early on appeared interested. Several appeared later. But Trump’s Starrett “deal” removed one and his Berger “deal” removed another. Each strengthened Trump’s leverage.
Trump Tower lease negotiation—Bankrupt land owner’s Plan B: selling or leasing to someone other than Trump. Several offered more after Trump signed. Too late. Timing.
Plaza Hotel Deal—Plaza’s Plan B: selling to the next-highest bidder, who bid tens of millions of dollars less than Trump.204
But finding out your counterparts’ Plan Bs is only part of evaluating and strengthening your leverage. (It’s often relatively easy to find out your counterpart’s Plan B if they have