DOES SUCCESS INCLUDE SOME “FAILURES?”
by Bruce McKay, ©2016
(Apr. 7, 2016) — Gawker put out an article in mid-March that purports to be a “complete” list of Donald Trump’s business failures. Please note this “complete” list has 15 items on it.
First of all, I think I would take issue with whether The New Jersey Generals, one of the items on the Gawker list, rightly belongs on the list at all. The Generals were a team in the USFL football league that folded in 1986. Do we consider that because the league folded, causing the team to fold that it truly was a business failure of Trump’s? George Allen, Jim Kelly, Marv Levy, Steve Young and Reggie White were all affiliated with the USFL. Do we consider all of them “failures” because the league folded? I suspect not. By the same token, even though as an owner, Trump would have had some degree of culpability for the league’s failure, I’m not sure it’s reasonable to lay the whole failure of the league, and therefore the “failure” of the team, at Trump’s doorstep.
More to the point, however, if this represents a “complete” list of Trump’s business failures, then does it really indicate that he’s the business incompetent that people want to paint him as? A table put out by the Bureau of Labor Statistics indicates that since 1994 the number of “new” businesses that actually make it to their 10-year anniversary is roughly 33.5%. [See: http://www.bls.gov/bdm/us_age_naics_00_table7.txt]
Mitt Romney also has criticized Trump fairly recently, citing some of Trump’s business failures, stating “A business genius he is not.” [See: http://www.nbcnews.com/politics/2016-election/mitt-romney-eviscerate-donald-trump-phony-fraud-n530877] Mr. Romney, as one of the founders of Bain Capital, appears to be uniquely qualified to evaluate someone else’s business success. Bain has an impressive list of success stories to its credit including Staples, Toys “R” Us, Dunkin’ Donuts and Burger King, just to name a few. A January 2012 article for the Wall Street Journal examined “…77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999,” to see how they fared during Bain’s involvement and shortly afterward.
Among the findings: 22% either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested …” with a further 8% in so much trouble that all the money Bain invested was lost. [See: http://www.wsj.com/articles/SB10001424052970204331304577140850713493694] While a nominal 70% “success” rate may not seem spectacular, it’s considerably better than the 33.5% rate I cited earlier from the BLS. And to be fair, as noted in the WSJ article, “The numbers, however, also reflect Bain’s investing style, which, particularly during the firm’s early years, was focused on smaller and sometimes troubled companies that Bain hoped to fix or build.” [IBID] So, strictly speaking, we’re not really talking purely about “start-ups” at Bain, and with a different philosophy, they also might have improved on their “success” rate [though likely at the expense of some of the spectacular returns they got on some of their more high-profile “success” stories.
So if the normal rate of survival as indicated by the BLS is about 33.5% and a “successful” firm like Bain has a nominal 8-year survival rate of 70%, how does Trump’s “incompetence” compare?
A number of media outlets have reported that Trump’s FEC filing indicates that he has interests in 515 business entities. [See: http://online.wsj.com/public/resources/documents/TrumpFinancialDisclosure20150722.pdf] If the Gawker list IS in fact a “complete” list of Trump’s business failures, then that gives him a success rate of 97.09%. . . . o.O . . . I realize it’s a long time since I took math in school, but isn’t that somewhat “higher” than either the “average” I cited from the BLS or the “successful” rate demonstrated by Bain Capital? Keep in mind as well that 515 only represents Trump’s current holdings. We don’t really have accurate numbers that *include* figures for the businesses he’s bought and sold over the years.
While there are a number of things one might legitimately criticize Trump for, at least based on the numbers, he doesn’t appear to be the business incompetent that some people seem to want to make him out to be.
[BTW, the Gawker article can be found at: http://gawker.com/a-complete-list-of-donald-trump-s-business-disasters-1764151188]