I have never spent a day in a classroom in the Wharton School of Business at the University of Pennsylvania, but based on the behavior of one of its undergraduates, there is only one of two possibilities. The faculty of this prestigious institution does not understand the foundations of successful enterprises (which I doubt) or this alumnus did not pay attention to his professors or the course content.
During my nine years as a professor in the Richard T. Farmer School of Business at Miami University, I would continuously tell my students, “You can forget everything I have every said in class except this. Business is about relationships, not transactions.” And the example I would use was one not from my own experience, but one shared by a former associate of Ewing Kauffman when he worked for Mr. K at Marion Laboratories.
Upon returning from a sales trip to England, this Marion representative boasted how he had cut a more profitable deal with a new British customer than that available to other clientele. Mr. K was outraged. He asked the sales representative whether he thought the new customer would eventually find out they were treated differently than other retailers of Marion products. And when that happened, would you expect them to place additional orders. Mr. K told the associate to get back on the plane, meet with the client, apologize for trying to take advantage of them and renegotiate the deal. Mr. K’s message? You may have made a sale, but you did not make a customer.
Which brings me back to that Wharton graduate who promised us he would run government like a business. This morning, Richard Haass, President of the Council on Foreign Relations, used similar language when asked about the cancelled June 12 summit between the the heads of state of the United States and North Korea. Donald Trump’s off-the-cuff invitation to meet with Kim Jung Un was not about building a relationship with the North Korean leader. It was a transaction designed to get an affair with a porn star off the front page. But Haass went on to say, even if the original purpose, to change the media narrative, was questionable, it was an opportunity if done right. And a real businessman would have seized the moment to lay the foundation for a win/win situation for both parties.
What we learned yesterday is Trump’s promise to run government like a business is one of his few honest statements uttered during the 2016 campaign. With one very important exception. His business model is not a traditional one which has served many entrepreneurs and corporate executives well, but his own unique brand of business where maximizing personal profits from each transaction takes precedence over the long-term benefits which might accrue when both sides agree it is in their mutual interests to continue working together.
Here are just two examples. The Trump Organization is notorious for stiffing sub-contractors. Which is more likely to increase the company’s bottom line over time? The savings from non-payment of a single contract? Or a relationship in which the subcontractor discounts EVERY contract because the Trump Organization is a reliable source of future revenues?
The second example, of course, is Trump University. Do you think anyone in the Trump Organization expected repeat customers or referrals from those who had laid out as much as $35,000 for a slipshod curriculum from unqualified instructors and a photograph with a cardboard mannequin of Trump? The entire scam was based on the premise, “Get their money and move on to the next sucker.”
In the case of North Korea, the now Public Trump Organization (which ironically appears to generate more profits than it private sector incarnation) made no pretense of repeating their pre-inaugural behavior. It dispatched National Security Advisor John Bolton and Vice President Mike Pence to suggest a good outcome in North Korea would be based on “the Libyan model.” If true, unlike Trump business transactions where subcontractors got stiffed by being shortchanged, Kim too would eventually be stiffed, as in rigor mortis. In the spirit of recent analogies of the Trump Organization to a mafia family, this was an offer Kim COULD refuse.
We should not be surprised. To paraphrase Ethel Merman, there’s no business like Trump business. So, let’s go on with the show.
For what it’s worth.
Dr. ESP