Trump: The Art of the Deal
Merger Mania: Arbitrage, Wall Street's Best Kept Money-Making Secret
Behind the Scenes: In Which the Author Talks About Ronald and Nancy Reagan and Himself
Books, all will agree, are written for a variety of reasons—as literary or artistic expression, to instruct, persuade, or rebuke the reader, or to make money. The last, no doubt, is the most important reason, but there is yet another. There are books by people who, having made a great deal of money, believe that through a book they can enhance or perhaps redeem their public reputation. From the public applause or approval also will come enhanced self-esteem. The money is irrelevant; a book gives something or is thought to give something that money cannot buy.
All the volumes here under consideration are by men who have made some or a great deal of money and for whom, with one very likely exception, the royalties are irrelevant. Mr. Donald Trump has even said with something close to contempt that he is assigning all of his book earnings to charity. The exception with respect to royalties is Mr. Michael K. Deaver, who, having made money, as he says, far beyond any possible personal expectation, if still a small amount by the measure of Trump, Pickens, or Boesky, has seen all of it disappear in one single devastating outrush. In the absence of a successful appeal or a presidential pardon, Mr. Deaver himself will be living at public expense for the immediately foreseeable future. But to his wife, who will still be in the private sector, any book revenues will surely be welcome. Nonetheless, it was his public reputation that Mr. Deaver also had in mind in writing or, as one should possibly say, commissioning this book.
Since all these books were written to improve or retrieve the public view of the person in question, it is by such standard, in fairness, that they should be judged. Still, it is appropriate to comment on the literary and reportorial skill and the grammatical competence of the specialist or specialists hired to write them. That, after all, tells something, perhaps much, of the entrepreneurial skills of the individual in question, which these volumes are meant to display. Nothing in business is more important or more admired than the ability to get the right man for the right job, and writing someone else’s history in a publicly captivating way makes a demanding claim on judgment. But these books should be measured more directly by their success or probable success in putting the person in question in a good, or anyhow an improved, light.
At first glance, the greatest achievement is that of Donald J. Trump. As this is written, his case for public approval and applause has been at or near the top of the best-seller columns for some weeks. This compares, for example, with Mr. Boesky’s book, which, as I will later note, his publisher has sought diligently not to have sold at all. And I certainly would not deny this measure of success to Mr. Trump or to Mr. Tony Schwartz, whom his book was written “with.” A Wall Street Journal writer has pointed out that Mr. Trump also hired his own publicity agent to promote the book, who, in an interview, said that “nothing about this book has been an accident.” Nonetheless it has sold. There are writers who scorn those who make it to, let alone to the top of, the best-seller lists; this view, it is widely supposed, changes when the person is there himself or herself.
Yet there are flaws in the Trump achievement that contribute adversely, one judges, to his public image. For one thing, Mr. Schwartz’s grammar on behalf of Mr. Trump is recurrently defective; I allow an infrequent split infinitive, but his on occasion come two to a sentence. He has also allowed Mr. Trump to intrude recurrent and distracting observations on his personal thought patterns and behavior. “I am given to outbursts of anger but always keep myself under full control.” Or, anyhow, something along that line.
More troublesome are the omissions. New York or Atlantic City architecture is not one of my strong points. Until recently, I confess, I had supposed that the name Trump Tower came from a game, as in “he held all the trumps,” and I haven’t been in Atlantic City since the nomination of Lyndon Johnson in 1964. However, I did expect, when I read this book, to learn how Mr. Trump chose his architects and settled on the particular design for each building. This, more than anything else, is what gives hard reality to the builder’s public image. It involves also an awesome and maybe even unreasonable exercise of personal power. With what Mr. Trump decides millions of New Yorkers must live. Of this far from minor matter there is very little here. The art is not in the buildings or larger developments but in the deals, including the deals that depend on winning the acquiescence of New York City or New Jersey authorities—righteous, well-intentioned, or mostly, it here seems, otherwise.
As the buildings are largely incidental, so also are the construction companies, to which, one judges, Mr. Trump is greatly indebted for bringing his projects into being on time and under budget, as repeatedly he affirms they do. There is a rather breathless account here of the rehabilitation of the Wollman skating rink in Central Park. I would have thought some considerable credit belonged to the construction company. Mr. Trump takes nearly all of it for himself.
Mr. Schwartz, guided here with some care one judges by Mr. Trump, has also a way of dressing up failures, misjudgments, and disasters in a more than slightly improbable way so that the reader, instead of ignoring them or accepting them as part of the game, has a mean pleasure in removing the disguise. So it is with Mr. Trump’s disastrous venture into professional football—the now defunct United States Football League and his equally defunct New Jersey Generals. Mr. Trump speaks in glowing terms of the entire venture, but then the reader discovers it all ends in no team, no league, one can only suppose a considerable personal cost, and a successful antitrust suit against the NFL that at the time the book was being written had yielded only one dollar. Mr. Trump, nonetheless, applauds volubly, almost exuberantly, his role in the enterprise
Mr. Trump and Mr. Schwartz bring their art similarly to bear on 100 Central Park South. This apartment house was purchased some years ago by Mr. Trump in order to join it up with the Barbizon Plaza Hotel next door. It was occupied by tenants enjoying rent-stabilized or rent-controlled quarters, who, not surprisingly, did not wish to move out. Mr. Trump’s idea was to bring the services and amenities down to the level of the rent—lights dimmed, doormen’s uniforms discarded, the windows of empty apartments “tinned up.” In a particularly compassionate gesture, he proposed making the house a refuge for the homeless as a strategy to force the tenants out.
None of this was very nice, but it is here made to appear an exercise of great entrepreneurial skill and acceptable public behavior. A special difficulty with this presentation, as it perhaps may be called, is that back in 1985 in New York magazine Mr. Tony Schwartz and no other had told the same story in rather less varnished terms. It was entitled “A Different Kind of Donald Trump Story.” A certain flexibility of view must no doubt be allowed a craftsman who is engaged primarily in improving the public image of his employer. But it should not be so evident.
Fortune reviewed Mr. Trump’s book and, after noting that he is not really one of the largest players on the real estate scene and that his performance has been otherwise mixed, asserted in an unkindly way that he is “the finest example we have of materialism, ambition, and self-love among the baby-boomers” and “the leading egomaniac in American business.” This sort of comment, encouraged as it is by a book, is not fully for the benefit of one’s public reputation, and The New Republic, nominally at the other end of the political spectrum, was equally severe. In a piece called “The Triumph of Trumpery” Louis Menand commented on Trump’s rather spacious personal preferences as he states them in the book. “While I can’t honestly say I need an 80-foot-long living room [in Trump Tower] I do get a kick out of having one.” However, Mr. Trump, it must be said, is not wholly without reticence. What is apparently a very adequate spread in the northern suburbs goes unmentioned, as does a fairly ample yacht of Arab descent. Paul Goldberger, the architecture critic of The New York Times, was also markedly adverse, writing that the book is an unduly extravagant exercise in self-promotion and Trump himself “a symbol of a gaudy time.”
Mr. Trump did not take any of this criticism lightly. In a letter to Fortune he came close to suggesting that the staff member who was the author of the offending review, a public relations operative, be sacked for incompetence and said he thought Forbes was a better magazine. And without actually seeking the discharge of Mr. Goldberger, he did protest his selection as a reviewer since he, Trump, had made some unkind references to Mr. Goldberger in the book. Evidently you should never be allowed to comment on anyone who has said anything adverse about “you.” A severe restraint.
One wonders whether Mr. Trump fully appreciates the effect of an angry response to an unfavorable review. It advertises a certain personal and professional vulnerability, and without much doubt it gets a lot more attention for the things criticized. It is my own belief that when someone has exposed a plausible shortcoming or error in something I have written, extreme silence is by all odds the best strategy.
Returning to the purpose of this book—to have it do for a public reputation what money does not do—I’m inclined to doubt its success. It shows Mr. Trump, now the owner also of the Plaza Hotel, to be a remarkably ambitious and energetic man. That doubtless is good. But too much that is bad for him (and for the public, needless to say) will be remembered. Too much that is merely banal will be forgotten. On balance, Mr. Trump’s position would be better, I’m persuaded, if he (or rather Mr. Schwartz) had not written the book.
Mr. T. Boone Pickens, Jr., of Mesa Petroleum Company and Amarillo, Texas, has done better than Mr. Trump for his public reputation. More exactly, in hiring Jim Conaway, as he says, “to collaborate with me on writing and structuring [sic] the book,” he has shown himself a considerably better judge of the requisite talent. It is sad but in a way encouraging that a Texan should be so much more advanced in literary judgment than someone from New York.
Mr. Pickens’s business, like that of Mr. Trump, has had extensively to do with real estate, in his case assessing the chance that there might be oil or gas under a particular acreage of land or sea and then acquiring the right to drill and get it out. This, however, would not have got Mr. Pickens much attention and would never have required a book had he not gone on to be the special scourge of the big oil companies—Cities Service, Gulf, Phillips, Unocal. Such he became by borrowing astonishing amounts of money, given the microscopic to eventually modest size of his own firm, and, with similarly disposed partners, threatening to take over and reorganize (here “restructure”) the operations of the giant, and, more than incidentally, dispense with some or much of the existing top management. This, to say the least, the latter did not welcome; the name corporate raider was applied to Pickens with special venom, a label he does not care for at all. Mr. Pickens sees himself instead, and here presents himself, as the friend and ally of the much abused, even much exploited, stockholder class in our time.
None of his really big takeover attempts actually came off, but in each case he did stir up a storm before being bought out in one way or another or forcing a merger in defense. Mr. Pickens is here concerned to show that his operations, all of which led to major run-ups in the stock of the target companies, were, as noted, for the benefit of all the stockholders. He did not, he avers, take greenmail, that is to say, take a special personal price for the stock he bought as an inducement to go away.
These matters are not, however, Mr. Pickens’s sole interest. He has much to tell of his family origins and private enjoyments. He is a faithful and admiring husband. His first wife apparently did get very tired of hearing about the oil business and lapsed into distressing silence in his presence. However, his second wife, Bea for Beatrice, entered fully into the spirit of the oil game and had a North Sea oilfield named for her. (The wives of Trump and Deaver are good and faithful and in the case of Mrs. Trump thought to be very good at managing casinos and now the Plaza, but they are kept by their husbands or their husbands’ writers more deeply in the shadow. One does not escape a certain admiration when one thinks of what, like Mr. Pickens’s first wife, they may possibly endure in at least partial silence.)
Mr. Pickens is greatly helped because, unlike Mr. Donald Trump, he has a case to make, one that runs through the entire book. That case concerns the self-serving incompetence of much modern corporate management. A few months ago at a large civic festival in Cleveland I was invited to debate Mr. Pickens. He is a Republican, a friend and close supporter of President Reagan, and a money-raiser for the present and politically regressive governor of Texas, William Clements. Accordingly, it was expected that we would be more than adequately in conflict. It didn’t so turn out.
Some twenty years ago I developed the case—I called it “the approved contradiction”—that traditional economic theory contains an inescapable anomaly with respect to maximizing profits in the case of the great corporation. According to traditional theory such maximizing of profit is the central and inescapable motivation in all economic life, and, in the case of the large corporate enterprise, not for management but for stockholders. The stockholders are both powerless and, of course, mostly unknown. The management, in other words, has a powerful commitment to maximizing profits but where its own interest is concerned a surprising and improbable detachment from this commitment. My point, I venture to think, has gained a substantial measure of popular acceptance. (It has been less successful in conventional economic theory, where inconvenient circumstance can always be subordinated to theoretical convenience.)
My point Mr. Pickens accepts. He goes on to argue that corporate CEOs and their acolytes do maximize if not their cash income then their general well-being, and at the expense of the stockholders. Pay, corporate perquisites (one CEO of his acquaintance had a personal piano in his plane), congenial corporate-paid recreation (he notes that when high executives gather, there is an especially uninhibited slaughter of birds and animals out at the corporate hunting lodges), and a relaxing delegation of thought are all designs to the above end. At our meeting in Cleveland, to the possible discontent of the audience, we came out on the same side.
Mr. Pickens goes beyond managerial largesse on its own behalf to identify a powerful tendency to bureaucratic ossification in the large corporation. He also identifies a congenial relationship between chief executives that both conceals mutual inadequacy and brings them together at The Business Roundtable in Washington to seek the care and attention of government. Free enterprise, he believes, is greatly praised until a tariff, quota, tax concession, or, very specifically, an oil import fee is wanted. Then the corporate jets head for National Airport.
Mr. Pickens pictures himself, not implausibly, as the opponent of such inadequacy, incompetence, self-gratification, and escapism. His characterization of his fellow executives is pungent, even insulting. One business colleague is described as “overweight, red-faced and very arrogant.” Another, a Gulf executive, is “abrasive and foul-mouthed.” He is held to have annoyed people at a critical point in a negotiation by referring to Walter Wriston as “a little fart.” Business prose is traditionally, perhaps inevitably, very bland. Pickens, or perhaps Conaway, knows how interesting it is to hear one great executive say of another that “his face was red, his eyes puffy and blood-shot” and, more mildly, that he “had a reputation for not keeping his word.”
All in all, Mr. Pickens makes a good case for himself. That does not mean that his case is all good. His raids have enhanced stock values and, one must suppose, stirred managements out of their much enjoyed lassitude. But they have, as indeed he concedes, left his targets with a greatly increased burden of debt and debt service, this incurred from buying up their own stock and thus fending off the raid. And his maneuvers have contributed to defensive mergers by the oil majors and to yet greater (and possibly yet more stifling) corporate bureaucracies than before. Meanwhile lawyers and investment brokers have extracted huge fees at the expense of stockholders and perhaps also the customers, and Pickens himself has done very, very well.
Finally, it could hardly be imagined that when he turned his attention to a company, much executive attention remained available for longer-term planning and development or support to research and innovation, or that the flow of capital for these purposes was other than impaired.
Mr. Pickens’s public image, in other words, also emerges as rather less than perfect. Since his book was published, that image has been further diminished. Mr. Pickens has recently been featured in Forbes for the row he has been having with, of all things, his hometown newspaper, the News Globe in Amarillo. Responding to what he regarded as inaccurate or, more likely, inconvenient criticism of some of his community activities, he organized or anyhow encouraged an advertising boycott of the paper. And he appears also to have got one of the more offensive critics banished to “faraway Georgia.” All this was badly received, even, evidently, by the local chamber of commerce. It probably wouldn’t have been noticed if Mr. Pickens (helped by Mr. Conaway) had not written this book with the purpose of presenting himself in a much more glowing light. The man so presented must then live up, more or less, to the image.
A more challenging problem in improving public image is shared by Ivan F. Boesky and Michael K. Deaver, the latter having the necessary but still gravely inadequate help of Mickey Herskowitz. Both efforts are under the heavy shadow of legal proceedings and present or prospective confinement.
Mr. Boesky’s is the more nearly hopeless case. Although “edited” by Jeffrey Madrick, his book does seem, unfortunately, to be mostly his own, and it includes material drawn from lectures at New York University that could not possibly have been edited at all.
Mr. Boesky begins by telling readers that his life “has been profoundly influenced by my father’s spirit and strong commitment to the well-being of humanity, and by his emphasis on learning as the most important means to justice, mercy and righteousness.” It is “with this inspiration,” he continues, that “I write this book.” It is sad that such impeccable guidance could go so wrong unless, of course, Boesky, Sr., was a bit on the devious side, which, in all decency, I doubt.
The book is primarily concerned with telling how one assesses the prospect for merger or takeover operations or attempts such as those of Mr. Pickens and how one invests, through “arbitrage,” to take advantage of the prospective increase in price of the relevant securities. The arbitrage is between the present price of the stock in question and the value after the merger or acquisition comes off. The risk is that nothing will happen or that a plausible opposing effort will be fielded successfully, with some unpredictable result. Mr. Boesky, who thinks for largely undisclosed reasons that these operations are very useful, goes into the means of assessing risk and, in the now accepted tradition of the Harvard Business School, offers a case study, that of the acquisition of Utah International by General Electric.
As with Mr. Trump and Mr. Pickens, the flaw lies in what Mr. Boesky glosses over or omits. And here, far more than in the case of Central Park South or the Pickens legacy of junk bonds, the fault has been made evident to all the world. The best and surest way of reducing risk, the one central to his own success, is the purchase of accurate inside information about merger prospects. Mr. Boesky’s failure to mention this is a glaring omission and one for which, to repeat, I think his father should not be held responsible.
There is another reason why this book is less than successful as an exercise in image making. The publisher, as earlier indicated, has declined to sell it. After Mr. Boesky was arrested, Henry Holt & Co. froze all the copies in their warehouse, something authors have often thought publishers do for less good reason. To anyone who has written a book to improve his public image this action must surely be thought the most devastating blow of all. Possibly in the case of Boesky it didn’t make all that much difference.
Nearly all of the comment I have seen on Michael K. Deaver’s Behind the Scenes—in keeping with the nature of this literary genre I must again give equal credit or accord equal responsibility to Mickey Herskowitz—has had to do with his White House association with Nancy and Ronald Reagan. And in the acknowledgments this is stressed; Mr. Deaver says that he owes “a special debt” to Barbara Walters “for persuading me that I could write about my friendship with the Reagans, without compromising their trust.” (One admires the special authority and sensitivity of Ms. Walters on this matter.) In fact, however, through much of his association with the Reagans, Mr. Deaver has also been a businessman interested in making money. It was in this role that he suffered a serious early setback and more recently, after huge financial gains, personal disaster. And, especially in the later chapters, it is his business image that he seeks to improve, just as did Trump, Pickens, and Boesky.
The initial business setback came in January 1975. Mr. Reagan was then contemplating his first run for the presidency, and Mr. Deaver was serving him through his public relations firm. He was called abruptly to account one day for the high level at which he was, of all things, billing the Reagan candidacy. “There may actually,” he here concedes, “have been a month in which the Reagan campaign was billed thirty thousand dollars by Hannaford and Deaver.” But there were reasons. The thirty grand paid for secretaries, limousines, office space, and “for, say, a trip to China.” Mr. Deaver was so insulted by this unjust criticism that he left the campaign for six months. Only Nancy Reagan’s intercession brought him back.
His business career continued. During the time he was in the White House some lesser money-making ideas—a book on executive cuisine was one—were floated for, or by, Mr. Deaver, and after he left, there was his total plunge into money making, with an eventual need to improve his public image which was even more demanding than that of Mr. Trump and his football team and which rivals that of Mr. Boesky.
Not surprisingly, the result is not very successful. Attention is diverted, as noted, to Mr. Deaver’s association with the Reagans and to his unremitting efforts, jointly with Mrs. Reagan, to keep the President wise and alert. And to his association with the Washington liberal establishment, something that casts a shadow on those so cultivated, for their only possible response, as the book makes clear, could have been not to Mr. Deaver’s political intelligence or insights but to his White House address. His explanation that he was drinking copiously and was thus made irresponsible much of the time—including the occasions when he is alleged to have sought help improperly for his clients and for which he was indicted—while unusual and in its way persuasive, is not a wholly appealing claim to public distinction. The grand jury trial transcript wherein he seeks to show how mild was his transgression is, at least for a nonlawyer, very hard to assess so far as guilt is concerned.
There is also a long succession of conspicuously commonplace digressions from his primary and needed purpose of self-enhancement. On first seeing Ronald Reagan, he says, “I was struck by his healthy complexion.” He tells that “Roosevelt was a hero [of Reagan’s] and a role model in his later approach to the American people.” “Nancy Reagan,” he advises, “is not uncomfortable among free spirits and intellectuals. Most people would be surprised by how bright she is.” In a touching passage he says that “I finally decided I needed to ask her if she had thought about where she and the President would be buried,” and he goes on to reflect on “how easily they entrusted this most intimate of decisions to my recommendation.”
There are also some slightly distracting errors. Thus the embassy and hostages that were seized back in the Carter administration by the followers of the Ayatollah are held to have been in Beirut. I can’t really think that this was a general view in the White House and the NSC, their marked capacity for error in assessing that part of the world notwithstanding. However, it is possible that some of these and the numerous other such lapses should be attributed not to Mr. Deaver but to Mr. Herskowitz. And here Mr. Deaver’s business situation enters again. Mr. Trump, had he the requisite judgment, and Mr. Pickens, who did, had obviously the money to buy the very best talent. Mr. Deaver had to take whatever was available at his price. Still, I do not want to be too hard on Mr. Herskowitz. Next time with some less challenging subject, say Carl Icahn or perhaps even Ed Meese, he could maybe do much better.