The Real Trump Deal. Martin E. Latz
you to walk away, relative to how easy it is for the other side to walk away. The easier it is for you to walk away and the harder for the other side, the stronger your leverage.171
Trump knows the first “level of need” element well, writing, “Leverage is having something the other guy wants. Or, better yet, needs. Or, best of all, simply cannot do without.” 172
He also knows the second “Plan B/alternative” element well, stating, “Part of being a winner is knowing when enough is enough. Sometimes you have to give up the fight and walk away, and move on to something more productive.” 173 That “something more productive” would be his Plan B.
RESEARCH: Leverage also is relative and based on perception. Leverage is only strong or weak in comparison to the other side’s needs and wants.
Most of us naturally focus on how much we need or want what the other side has to offer. Don’t. Focus instead on the relative needs of all the parties. In leverage terms, your needs and wants don’t mean much independently. They only gain relevance when analyzed relative to the other parties’ needs and wants. It’s natural to focus on what we need. Ignore the urge. Focus instead on the parties’ relative needs.174
Parties’ perceptions of the other side’s needs and wants also impact the negotiation, not some “true” level of desperation. Perception trumps reality here. It especially impacts leverage.175
Leverage is also fluid, meaning each party can change their leverage. The most effective negotiators also know that everyone has the ability to change their leverage. Leverage is not static. Everyone’s level of need likely will change during the negotiation. At the least, a party’s perception of its level of need may change. This changes its leverage.
Likewise, you may be able to improve your Plan B. Or you might be able to make your counterpart’s alternative (their Plan B) less attractive. In short, you can change your leverage and improve your ability to get what you want even when it appears you have weak leverage.176
The lesson: Analyze your leverage—then strategize ways to strengthen it. Take charge of your leverage.177
Trump understands this. As he has written, “Leverage: don’t make deals without it.” 178
Trump has taken charge of his leverage in many business negotiations. Let’s analyze three:
his first Atlantic City casino lease purchases,
his casino license negotiations, and
his casino partnership with Harrah’s.
For each, we will focus on Trump’s level of need, his Plan B, and how he strengthened his leverage. We will address leverage in terms of his counterparts’ alternative plans in Chapters 6 and 7.
Trump’s First Casino Deal—Creating a Strong Plan B
Donald Trump wanted in on gaming before he ever did a New York City real-estate deal. “As far back as 1976, he was telling reporters he would build the world’s largest casino in Las Vegas and name it Xanadu.”179 But when New Jersey approved casino gambling in 1977, Trump started eyeing Atlantic City seriously.
His first step—just like in real estate—obtain the rights to the land on which to build a casino. He decided to lease and not buy. Why was this a smart negotiation move? Leases better satisfied his interests (as opposed to buying), as Trump could lock down a key casino property but still walk away with little lost if the deal didn’t happen. “Preserving his options [with this move] was precisely what Donald wanted.”180
As Trump wrote, “I never get too attached to one deal or one approach. I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first.”181
Trump wanted to develop a good Plan B, too. The better his Plan B/alternative, the stronger his leverage.
His best Plan B versus an Atlantic City casino? A New York City casino in his newly redeveloped Grand Hyatt Hotel (the old Commodore). But New York had not legalized casino gambling. Trump sought to change this—taking practical, concrete steps to strengthen his leverage vis-à-vis a New Jersey opportunity. This is a crucial and often overlooked leverage-enhancing strategy.
Here was Trump’s effective research-based strategy.
In 1979, when the campaign for gambling heated up in New York, Donald became a prominent public spokesman for it. Declaring in a multipart Daily News series on gambling that the still-in-construction Hyatt was designed for casino use, Trump said: “We designed the building so it can easily be converted to one larger than the MGM Grand in Las Vegas.
[Trump later said in a July New York Times feature that] “We are missing the boat every day casinos are not approved.”182
New York did not approve casino gambling. But Trump’s strategy provided leverage for his Atlantic City negotiations.
He also intimately involved himself in the substance of those negotiations, using his leverage to get a great deal on the leases where he would build his first casino. Here’s how his interactions were described in Trump Show.
The [negotiations] took place on a hot March day in an unair-conditioned Resorts suite, and as the hard bargaining wore on, [Trump’s broker and lawyers] who’d come down from New York with Donald, and many of the rest of the group got down to their shirtsleeves. Donald’s only concession to the heat, however, was his unbuttoned suitcoat. He chatted and sparred with [his counterparts] and, after threatening at various points to “just forget about it,” he finally arrived at the basic terms of the deal. [Emphasis added.]183
Two elements to highlight. One, Trump fully engaged in the substantive details. This later changed. And two, Trump’s comment several times to “just forget about it” reflects his ability to walk and go with his Plan B—a powerful leverage move.
And while we don’t know if Trump would have walked (he could have been bluffing—creating the misperception he would walk), his creation of a New York Plan B and the existence of other deals at the time made this statement credible.
Did Trump negotiate a good deal? Yes. He got the lease and only paid out “an unescrowed $1.5 million, and his counterparts gave him promissory notes that would require the repayment of even these sums if certain conditions weren’t met.”184
Trump’s leverage was key.
New Jersey Gaming Approval—They Are Desperate, and Trump’s Not
Donald Trump wanted an Atlantic City casino. But he didn’t need it.
New Jersey needed Donald Trump—desperately. This gave Trump leverage. And he knew it.
On March 14, 1982, the [New Jersey] Casino Control Commission took up Trump’s application for a casino license…. Atlantic City officials all but bowed before him. It didn’t matter that he had no experience running a casino, had not assembled financing, and had been investigated for dealings with organized crime figures. To the officials, Trump’s presence showed the city was on its way back….
The license was approved in less than two hours. [Emphasis added.]185
The timing worked out well for Trump, too. Atlantic City was desperate for Trump. He wasn’t. Strong leverage for Trump.
This also illustrates another important leverage element: timing.
RESEARCH: Given the fluid nature of leverage, you will always want to complete your agreements when your leverage reaches its peak. Strike