Tuesday, July 23, 2024
Topic: Politics
Content Type: Opinion
Keywords:
Trump
Is Trump a Good Businessman?
Back in 2016, colleagues of mine claimed that Trump was a low-performing business owner because he was outperformed by the S&P 500. Even then, assuming it was true, I found this claim erroneous. At the time, my primary counterclaim was that if a person doesn't beat the S&P 500, that doesn't mean he's bad at business, it means he's not as good as the 500 largest, publicly traded companies in the United States.
This is an important distinction since the S&P500 is not illustrative of all firms operating. I would argue that these companies are the best-run companies in the world, so saying Trump isn't as good as these doesn't really say how good a businessman he is across all business owners.
Granted, it certainly means he's not the best, and perhaps his money would have been better used invested, but I think this story is much more complicated than just comparing his returns to the average return. What would the implication of this be? Every business that doesn't grow as fast as the (value-weighted) average S&P500 firm should close shop and invest in other companies?
But now, I'm learning that this claim wasn't even true at the time, as many claims about Trump turned out. Now, according to Forbes, Trump did beat the S&P500 through 2016. And even more, up until 2020, when the market tanked because of Covid.
What accounts for the change? Pre-2018, journalists used the easiest public record, an estimate of his net work from 1982. In 2018, however, after an exhaustive review of public records, the New York Times reached the conclusion "Had Mr. Trump done nothing but invest the money his father gave him in an index fund that tracks the Standard & Poor’s 500, he would be worth $1.96 billion [in 2018]."
Based on these two datapoints, it seems that Trump must have made a large portion of his fortune prior to 1982, and then not done as well.
So what does this say then? Not as much as critics think. Remember, he was President so wasn't even running his company anymore, so, really, the clock should have stopped in 2016. Everything after that implicates his family who ran it, not him.