This article first appeared on the Dorf on Law site.
Long before political pundits became fascinated by Donald Trump and his strangely resilient presidential campaign, business pundits had been even more puzzled by Trump's reputation for being a great businessman.
Some of the longstanding criticisms of Trump's business record have re-emerged in the campaign, such as his repeated use of the bankruptcy process, as well as his general strategy of ex post negotiation by threat, where he ends up extracting better terms for himself simply by siccing lawyers on his counterparties and threatening not to pay even on the most obvious claims.
That so much of Trump's fortune was ultimately built on government money is also at odds with his uber-businessman myth. And we do not even need to get into the emptiness of his book The Art of the Deal. (Morsel: Step 7 of his 11-step formula—"inspired" by Norman Vincent Peale's The Power of Positive Thinking—is "Get the Word Out." Brilliant.)
Even so, Trump is rich, as he relentlessly reminds his listeners. And if he is rich, he must be smart, right? Because so many other people try to get rich, but only a few dozen become billionaires, Trump must have something that other people lack. Or so he would have us believe, and a lot of people are falling for it.
Recently, I came across an article on Vox, carrying the highly descriptive title: "Donald Trump isn't rich because he's a great investor. He's rich because his dad was rich."
The author starts from a simple premise. Trump's father was rich (again, mostly from government contracts, but I digress). How rich?
The reality of Trump's silver spoon is only partially captured in his absurdly tone-deaf Romneyan declaration: "It has not been easy for me, it has not been easy for me. And you know I started off in Brooklyn. My father gave me a small loan of a million dollars."
Not easy at all! Trump's defenders would surely say that he might have had access to a million-dollar loan, but at least he turned it into something much bigger. Right?
Well, no. Citing an analysis from the National Journal , the Vox article points out that Trump would still have been a multi-billionaire if he had simply taken his $40 million share of the family inheritance in 1974 and engaged in the most passive investment strategy imaginable, simply buying an index fund and letting it grow.
Invested from 1974 onward, he would have ended up with something between $2.3 billion and $3.4 billion, depending upon the assumptions one makes about his investment advisers' fees. (The reality would surely have been over $3 billion, based on standard fees.)
How much is Trump really worth? No one knows, and Trump's proclamations about his wealth are highly suspect, but Bloomberg News guesstimates the number at $2.9 billion and Forbes pegs it at $4 billion.
The Vox piece cites further estimates showing that if Trump had become a passive investor in 1982, he would now be worth $6.3 billion, while an early retirement in 1988 would have given him something like $11 billion to $13 billion today. That suggests, I suppose, that Trump might have been a good businessman for about 10 or 15 years, but he's been positively awful since then.
All of that is interesting and politically potent, at least if one imagines that reality has any connection to Trump's political fortunes. The guy's tactics are slimy, and the results are terrible. Who would not want that in a president?
But Trump's sense of entitlement is hardly limited to one orange-hued blowhard, even in the political arena. After all, the Republican establishment's favorite family is all about inherited privilege.
The two best lines about the senior George Bush—"He was born with a silver foot in his mouth," and more pointedly, "He was born on third base and thought he hit a triple"—are all about how the children (and now grandchildren) of the wealthy and powerful think they have skills that they simply lack. Just ask Jeb Bush's speech writers.
Even so, I found myself ruminating over the broader phenomenon of wealthy entitlement that Trump merely exaggerates. Even if the typical trust fund kid does not think he should be president, after all, there is plenty of evidence that people who are rich merely because they started out rich still believe that they deserve their wealth. And a lot of people are willing to buy into those myths. What is especially interesting is trust fund babies who become famous, and whose fame then becomes its own excuse for entitlement.
For example, when Paris Hilton (whose great-grandfather started the Hilton Hotels chain) had a short TV reality-show career in the 2000s, she briefly became the Democrats' best argument for the estate tax and a more progressive income tax.
Even so, some students told me at the time that they thought she deserved "her money," because at least she was smart or savvy enough to use her advantages well. It did not apparently matter that she was only in a position to be noticed by the tabloid press because she was rich in the first place. She deserved what she had "earned." Well, at least we can say that she outdid Trump by not actually making herself less rich through her own actions.
In some ways, I think that this might be one of the deepest disconnects between liberals and conservatives. I have spoken with principled libertarians who admit that the genetic lottery, and luck in general, make the orthodox anti-redistribution logic difficult to take seriously (while still arguing that redistribution should be minimized, for other reasons that I find only partially convincing).
And there have been plenty of conservatives and successful businesspeople (Andrew Carnegie being one of the more important examples) who view inheritance as a problematic concept.
Even so, the broader American conservative trend has been more and more in favor of protecting existing privilege. Donald Trump is merely a crude expression of that trend.