Real Lessons from Trump University
What it really taught, and what that tells us about Trump’s style of doing things and the failures of our government
As no one has written about their experience of Trump University, I thought I’d write about what I saw and learned there.
Why’d I go?
Back in college, I really enjoyed watching The Apprentice. It seemed like a window into the kind of world you might want to join once you got out.
Then I read The Art of the Deal — which we have since learned was ghost written by someone else (Lame!).
So, when I heard there was a Trump University seminar in my area, I had to go. This was when Trump University was new and didn’t have bad press.
Just $1,500 and I was in!
How was the experience?
It was a typical Trump affair:
Expensive hotel — the experience of affluence that he sells — and being told that the team that had been sent out was the very best of the best…
The teachers were the best people, and even the event coordinator was the very best they had!
But, in hindsight, that’s just how Trump talks about everything.
At the time, though, it was really cool to hear we had the very best people taking care of us.
Was the content terrible?
I went mostly out of curiosity, and I learned a lot so I was happy. For others though it may have been less good.
At this point, I was in my first job out of college, doing some consulting work for a Fortune 500 company through a consulting firm. But that doesn’t mean that I was more than a cog in the machine.
From that perspective, what Trump University taught was quite enlightening. I learned interesting new things about both business and how the law affects things.
What were they teaching?
It was a very packed three-day affair, I’m just going to do an overview of two areas they might make one more money, that also reveal things about the game itself:
- Flipping houses
- Tax liens (much more interesting than it sounds)
1. Flipping Houses
The core of being able to flip a house fast is getting it so far below market price that you can make a profit selling it to someone else, who still thinks you’re offering a sweet deal!
Naturally, this is harder than it sounds.
The person selling their house to you either needs to be desperate to sell soon (motivated seller), or you need to convince them that their house is worth a whole lot less than it is. Or both.
This is really an information game, and you need to find those deals and close them before other people find out about them.
As an example, a guy found a house listed for ~$500K that was worth ~$650K+ because the seller and their agent were from out of town and didn’t know any better. He made the offer right there and got it in writing.
The next day, the seller got an offer for $650K — but the deal was already done. Game over!
So, how were you supposed to find these really good deals as well as people to buy them?
Finding investors
The simplest way was just to put out ads that you have a well priced property for sale in an area.
If you really didn’t, you just told them that it had been sold but that you could reach out to them when you got new deals, if they tell you what kinds of deals they are interested in.
This isn’t unusual. Lots of people use this type of idea to build lists of qualified prospects.
Finding the really good deals
This is a bit harder. And recommended approaches included:
- Looking through public records to find people who might be in trouble or at risk of foreclosure.
- Looking through obituaries for the recently deceased whose heirs might need to sell property soon.
- Driving around and finding rundown homes that maybe the owner isn’t living in that are just a tax burden.
- Building a network of people who would get a commission if they brought you a lead that resulted in deal.
Once you found these opportunities, you had to get an accurate sense of their worth, and convince the home owners that it was in fact worth a whole lot less.
Then you’d get them to sign a contract to sell it, so you could shop it around to your investors.
How do you really make this work?
This is where things get dodgy. In order to have a high chance of making profit you need to get a number of things right. For example:
- Don’t be a realtor, so you’re not subject to those laws! (exploiting that loophole!)
- Include a back out clause in the contract for you, but not the seller. Like “pending confirmation from my business partner” — If you can’t sell it for a profit, you just kill the deal! But the seller is stuck with you.
- When you get the contract, go to the Title office and you muddy the title so the seller can’t sell it behind your back.
- Do a double transfer at the title office, so that instead of the seller directly selling to the investor, they sell to you (for a second), and then you sell to the investor, but it’s the investor’s money that buys the house — your wallet is never exposed!
The benefit? The seller doesn’t find out you already made $20K selling their house! - You can even give the seller a couple of thousand dollars extra so you look like a super nice guy — and get a testimonial out of them!
Trump University even supplied you with some rationalizations:
“No one had made a better offer to them, so who can say if they would’ve found a better deal. You definitely gave them the best offer they’ve gotten so far!”
… The fact that a little lack of information can have large costs for people is quite sad.
2. Tax Liens
Tax liens are interesting both for the high return you can get, and because they show you a little about how the government does business.
The idea is simple. If you owe taxes, the government may put a tax lien on your house.
Let’s say that you owe $1,000 in taxes on your home. Depending on the state, you may be hit with a tax lien and then have to pay an amount like $1,500… Or $2,000.
These tax liens are auctioned off so that government gets all the money it planned to. As an investor, the chances of you getting the expected return are very good.
The interesting thing about tax liens is that — with the way the law is setup — if it’s not paid and you manage to successfully foreclose on one, you can usually get the house free and clear (with any remaining mortgages owed to banks erased).
Naturally, if there is a mortgage, the bank will usually pay you rather than end up losing a ton of money.
But even so, this leads to the development of investment strategies that account for laws in different places, and your chances of events like the foreclosure succeeding, to maximize your projected profit.
It is worth noticing that this is a result of a government supposedly acting for the sake of its citizens. Decent businesses would not be as callous towards customers experiencing hardship.
You see this pattern elsewhere also. You couldn’t pay $200 in court fees? The debt was sold and now you owe $500 to the debt collector! Yay!
It would seriously do the government good to have better business sense and more respect for its customers’ well being.
How did Trump University get in trouble?
During the ~$1,500 seminar, the instructors would push hard for you to hire a Trump University mentor for three days, full time for upwards of $30K.
They’d even give you scripts for what to say to your bank to increase your credit limit so you could put it on your card!
The idea was that during those three days, the mentors would help you close deals with their greater experience. And you would learn to do it right by seeing real experts in real life situations.
There were a ton of complaints around this, that people didn’t get much attention from the mentor after paying the money, and that most may not have made back the $30K+ during those three days.
Plus, some of the people who felt scammed were older people. I personally knew a retired USAF officer who I believe was in his 70s, who did put that $30K+ on his credit card.
IIRC, he was bailed out by his estranged son. So, where it didn’t end too badly for him, it must have still been pretty humiliating.
Could you have had a good experience after paying the $30K?
I don’t personally know someone who was happy after paying that $30K. But, I also didn’t know everyone in my group.
It may be because this was early on for Trump University and it hadn’t quite turned into a money making machine yet. And maybe I’m being optimistic but, I didn’t feel that the instructors were actively trying to be dishonest with us.
Even so, the setup for the three days of mentorship was risky. This is what you had to do to before those three days, so you could get the best results:
- Set up your company
- Make connections with the many different kinds of people you’ll need
- Find many motivated sellers
- Find many suitable investors
- And then schedule all the meetings for the 3 day window when your mentor would be there.
Eh???
That’s a lot that you have to get perfect so you can really milk those 3 days.
Can this even be done?
You might be able to pull this off if you’re a super go getter, but then I wonder if you really need these mentors. If you can’t though, then that $30K+ is burned!
The court filings also show that many of the instructors teaching these courses (at least later on), had themselves failed at real estate before joining Trump University…
If you were stuck with one of those guys, even perfect execution wouldn’t be able to save you from the fact that your mentors themselves were incompetent.
Closing thoughts
What one expects from any respectable business is that the value offered exceeds the value they paid to get what they want (at least in the mind of the customer).
You at least have to aim to for most customers being happy with your service… You can’t be a thief.
The way Trump handled this, and the way he seems to have handled many other projects; it looks like he doesn’t care enough about the real details of how the businesses will provide the value they promise.
Often, he’s really just selling his name and the public image he’s created of living the rich lifestyle that people aspire towards.
The awkward part… He could just hire talented people to handle the details for him!
There just aren’t many excuses to be made. The style of doing business just isn’t that of a real professional.
What does this say about our government?
As we can see, the problem isn’t just with businesses. The kinds of business opportunities Trump University taught you to exploit exist in part because of the way that our government has set things up.
There has been a lack of attention to detail, and a lack of appreciation for how the ways the laws are setup impact people’s lives. That casualness in doing things has a very long history.
What at least some Republicans hoped for in Trump, was an effective businessman — an effective professional who really knows how to improve how things work.
Looking at Singapore for example, it went from 3rd world to 1st world in 30 years or so under Lee Kuan Yew’s leadership.
One of Lee Kuan Yew’s key decisions was to make the public sector competitive with the private sector, in the war for talent. Because it’s worth it to have the best people working in government.
If we look at what Trump has been doing…
Pre-COVID, the main things that Trump did with the economy were to reduce taxes without reducing government spending (and maybe reduce some regulations)
Which is like doing a large stimulus package — at a time when the economy was already doing well and when it had already been under stimulus for a long time.
This is like taking out a large loan and carelessly throwing money over the place. Obviously, for a while that’ll make it look like things are going really well!
But the money didn’t go to the most impactful places.
Which means that once the extra money runs out, you’ll find that many of the investments that looked okay when you were flush with cash were in fact bad investments. And now you’re in even more debt than before.
More debt limits your freedom and opportunities in the future.
This is not unlike what Trump has done with his own businesses. He started off with hundreds of millions of dollars from his dad — free and clear.
And now… He still has the appearance of affluence, but he’s taken on so much debt that he hasn’t used well that no respectable US bank is willing to lend him much more money.
Seriously… It’s not personal. You should build teams of good professionals, give them clear responsibilities — and then let them handle it!
