Donald Trump, the Republican frontrunner in next year's presidential primary, has been pitching voters on his experience in business.
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Citing data from Forbes, The Associated Press estimates that Trump's net worth quadrupled from $1 billion to $4 billion between 1988 and today. That's an impressive gain, but it's nothing compared to the wealth produced by investors such as Warren Buffett and Bill Gates. Gates's wealth increased from about $1 billion to $80 billion over the same period. Buffett had about $2.5 billion in 1988, and has $68 billion today.
Yet perhaps the most telling comparison is between Trump and his golf buddy, Richard LeFrak. The LeFraks and the Trumps have been rivals in New York's real estate business for generations. LeFrak's father, Samuel LeFrak, took a no-nonsense approach to the business. He focused on minimizing risk and making money, according to a 1992 profile in Business Week, before the magazine became Bloomberg Businessweek.
"He might be strutting around like a peacock today, but he's gonna be a feather duster tomorrow," the elder LeFrak told Business Week when asked about Trump.
Over time, the LeFraks came out ahead of their competitors. LeFrak is worth $7 billion today, and he's 181st on Bloomberg's list of the world's richest people. Bloomberg puts Trump's wealth at just $2.9 billion -- far less than Forbes's estimate. He doesn't even make the list.
The LeFraks are a family with long experience in a very competitive industry, but Trump's returns are less even than those of an ordinary investor saving for retirement.
Experts on personal finance generally recommend that people saving for retirement or to pay for a child's college education buy and hold in index funds -- mutual funds that are invested in a wide range of stocks or bonds. The price of the funds will go up and down with the market, but over time, these investments will generate a reliable return as long as the investor avoids the temptation to sell in a financial panic.
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Citing an independent evaluation, Business Week put Trump's net worth at $100 million in 1978. Had Trump gotten out of real estate entirely, put his money in an index fund based on the S&P 500 and reinvested the dividends, he'd be worth twice as much -- $6 billion -- today, according to the calculator maintained by the blog Don't Quit Your Day Job.
(In this scenario, Trump doesn't quit his day job. The calculation above does not include any allowance for living expenses, so if he had put all his money in index funds, he would have had to live off the dividends or find some other source of income.)
Trump disputes the independent appraisals of his wealth by Forbes, Business Week (now Bloomberg) and others. He says he is worth about $10 billion today.
Using Trump's preferred estimates of his wealth, he has still performed worse than our hypothetical Main Street retiree. He told The New York Times he was worth $200 million in 1976, an amount that would be worth $12 billion today.
"That a purely unmanaged index fund’s return could outperform Trump’s hands-on wheeling and dealing calls into question one of Trump’s chief selling points on the campaign trail: his business acumen," writes S.V. Dáte in National Journal.
In a way, though, all of these comparisons are misleading. Donald Trump's father, Fred Trump, built his real-estate business on federal subsidies, as The Washington Post's Emily Badger has reported. Financing from Uncle Sam isn't available to the typical investor (although homeowners do benefit indirectly from federal subsidies and can deduct interest they pay on their mortgage from their tax bill). The younger Trump has continued that strategy, boasting about his ability to secure taxpayer dollars from local officials, as the Los Angeles Times has explained.
At other times, Trump has relied not on taxpayers but on banks and private concerns. Firms under his control have gone bankrupt on four occasions, but those catastrophes aren't fully reflected in Trump's net worth today, since his lenders absorbed the losses. The LeFraks, by contrast, have avoided imposing losses on their creditors, while still finding a way to turn a profit.
Trump is running for president on his business acumen, but over his long career in real estate, he just hasn't been able to put up the numbers.
