Going on two years ago I read something formative to my understanding of Donald Trump. It was a column by then-Times business columnist Joe Nocera. The column was about a particular swindle with a golf resort. Standard Trump. But the part that mattered was Nocera’s observation about Trump’s fundamental way of doing business and interacting with other people, one he knew from years of covering Trump.
What was taking place in Jupiter was an essential part of Trump’s modus operandi. In every deal, he has to win and you have to lose. He is notorious for refusing to pay full price to contractors and vendors after they’ve completed work for him. And he basically dares the people he has stiffed to sue him, knowing that his deep pockets and bevy of lawyers give him a big advantage over those who
In every deal, he has to win and you have to lose. It actually goes a bit deeper. He doesn’t know he’s won until you lose.
Then a couple days ago TPM Reader DM sent me a post from the real estate economics blog ‘Calculated Risk’. It covered the same ground but placed it in a business school conceptual framework.
Here’s the key passage …
In general, there are two types of negotiations. There is the “win-lose” type (or Distributive negotiation) where one party receives more and the other party receives less. This is the common approach when buying a car or real estate, or haggling at a street market.
The other type of negotiation is “win-win” (or Integrative negotiation). This type is used when negotiating between a company and a worker’s union, with long term suppliers, negotiating agreements between international allies – and even with adversaries.
The tactics for the two types of negotiations are very different. In the first type (win-lose), bluffing, threats (like threatening to walk away), even lying are commonly used. (Sound familiar?)
The approach to an integrative negotiation includes building trust, understanding the other party’s concerns, and knowing the details of the agreement – with the goal to reach a mutually beneficial agreement.
As the author, Bill McBride, goes on to explain, it’s not as simple as one approach is bad and another good. They’re each appropriate in a specific context. If you’re haggling over the price of a used car or bargaining at a flea market, it really is zero sum. It’s a one-off negotiation judged by a single metric – price. One side’s big score has to come at the other side’s expense.
That kind of ‘deal-making’ is really all Trump knows – only in a particularly extreme and cartoonish form. His whole business history is one of cutting ‘deals’ in which he gets lots of gain and little risk and the other guy basically gets screwed. At a minimum, any down side is for the other guy to carry. Even for Trump, the way of doing business had its limits. By the time he became President no major US bank would do business with Trump. He’d burned so many bridges he was reduced to getting most of his capital from shady international operators and money launderers. You can only screw people over so many times before they refuse to work with you anymore.
As President, Trump is playing out the same pattern on every front. Trump failed repeatedly to repeal Obamacare. Now he’s literally and even openly trying to throw the national health insurance market into chaos to force Democrats to do his bidding. This is catastrophic for the people who are imperiled. But it’s not even very effective on its own terms. He doesn’t understand the political dynamics involved – Democrats have zero interest in coming to his rescue. He doesn’t understand what it means to be President. His only prism for success is one-off ‘deals’ in which he gets a ‘win’.
Nor is this the only example. You see it with the Iran Nuclear Deal, NAFTA – which observers think he is increasingly likely to terminate. You saw it when he threatened to start a trade war with South Korea in the midst of threatening a real war with its arch-rival North Korea.
Let’s go back to McBride: “In the first type (win-lose), bluffing, threats (like threatening to walk away), even lying are commonly used. (Sound familiar?)”
In a global order in which the US derives massive benefits from being the disproportionate beneficiary of many international agreements and the very structure of the global system itself, the US is uniquely dependent on trust and the ability to act through soft power. Over recent weeks there’s been a repeated refrain from anti-Obama national security and foreign policy hands. They think Trump is making a mistake by unilaterally abrogating agreements they did not themselves support in the first place. They can see that not remaining by commitments has a steep cost in itself.
Peer nation-states make agreements with the US in part because we tend to stick to our agreements, even through the change of administrations. The entirety of Trump’s vision of ‘deal-making’ is one in which you bully and cajole and threaten the other party until you get a deal that works for you and not them. That may make sense in the highly shystery world of New York real estate. But in the global order we’re going to be dealing with Germany and France and China and Mexico … well, we’re going to be dealing with them forever. Not everything is Kumbaya in international relations. Far from it. But except in war, and not even always them, it’s not zero sum.
This is the root of Trump’s focus on bilateral agreements and contempt for multilateral treaties and agreements. The latter are frameworks for international relations, in which various parties should derive benefits. The very concept is basically inscrutable to Trump. For him, ‘deals’ between nation-states are just real estate transactions writ large. You can see it in the language and mindset he is currently bringing to numerous trade regimes and agreements.
Both abroad and with Congress we can see clearly what should have been clear in advance: President Trump has no idea how to negotiate international accords or treaties or how to pass laws. These require building coalitions and trust because you’ll need to work with the same actors again in the future. You also need to build coalitions of people or nations each of whom think they have something to gain from the effort. As Nocera noted in that column about the golf resort swindle, Trump’s idea of business is basically cheating. That doesn’t necessarily mean breaking the law, though Trump does plenty of that. It means making money by trickery and hard dealing in which the other party usually ends up screwed. Those just aren’t the skills that end up being effective for a President. But that’s all Trump knows. That’s why we currently have what amounts to governance via chaos and outburst. Trump doesn’t know how to be President.
