I Can’t Believe I’m About to Defend Donald Trump’s Business Skills



Donald Trump may be a bankruptcy court recidivist and serial exaggerator of his net worth, but some recent criticisms of his business skills may have—shockingly—gone overboard. At Vox, Dylan Matthews has a piece titled “Donald Trump isn’t rich because he’s a great investor. He’s rich because his dad was rich.” The gist is that in 1974, long before he had turned his family name into a global byword for garishness, the current GOP front-runner inherited a $40 million stake in his father’s real estate empire. If he had simply liquidated it and invested the cash in the S&P 500, he would—maybe—be about as rich as he is today. Here’s the math:

If someone were to invest $40 million in a S&P 500 index in August 1974, reinvest all dividends, not cash out and have to pay capital gains, and pay nothing in investment fees, he’d wind up with about $3.4 billion come August 2015, according to Don’t Quit Your Day Job’s handy S&P calculator. If one factors in dividend taxes and a fee of 0.15 percent—which is triple Vanguard’s actual fee for an exchange-traded S&P 500 fund—the total only falls to $2.3 billion.

It’s hard to nail down Trump’s precise net worth, but Bloomberg currently puts it at $2.9 billion, while Forbes puts it at $4 billion. So he’s worth about as much as he would’ve been if he had taken $40 million from his dad and thrown it into an index fund.

Of all the criticisms you could lob at Trump, this is a weirdly weak one.1 Basically, the man took a $40 million kernel and, while spending lavishly enough to surround himself with all the gold-plated bathroom fixtures his heart desired, managed to do a 26 percent better job growing his fortune than if he had quietly left it to grow in stocks without selling a single share or spending a single dividend check for 41 years. I’d say that’s pretty good. How many actual money managers could brag they’d done the same with their clients’ cash?2

Of course, Trump is not strictly an investor. Throughout his career he has been a real estate developer and manager, a builder of golf courses, a casino magnate, a reality TV host, a celebrity who slaps his name on assorted buildings for a fee, a hawker of power ties, and much more. This cuts against the idea that he is merely a glorified trust-fund kid: Rather than sit on his wealth while someone else saw to its care, he decided to jump into a number of highly entertaining, risky, and at times ill-advised business ventures, which have collectively turned him into an international celebrity. He took risks with the money he was given, and they seem to have paid off over time, both financially and personally. Meanwhile, Trump runs a company with thousands of employees. Whatever wealth he has created for himself, the total value that his company has created over the years is probably far greater.

Finally, it’s a little strange to criticize someone who isn’t a money manager for failing to trounce the stock market’s returns. The S&P 500 is not a benchmark index for real estate conglomerates. You could argue Trump has done worse than some his fellow developers, but that’s a different issue.

Anyway, now that I’ve spent a few hundred words defending Trump’s business, I feel the need for a shower. Would the short-fingered vulgarian be fabulously rich today without the start his father handed him? My guess is not. But claiming that his father’s money is the only reason he’s a billionaire today? That’s a little unfair, even to a boor like Trump.

1Not to get hung up on details, but it’s worth noting that the first S&P Index Fund wasn’t founded until 1975. Meanwhile, Vanguard exchange traded funds, or ETFs, didn’t show up until 2001.

2All of this assumes that Bloomberg’s estimate is close to accurate. Also, Trump’s assets aren’t very liquid, which makes valuing them versus stock a bit tricky.