August 01, 2016
Donald Trump vs. the Reality of Team Production
Posted by Matt Bodie

Donald Trump's interview with George Stephanopoulos has been getting a lot of play, for a variety of reasons.  I wanted to focus on one aspect of his comments that is actually a fairly common turn of phrase but that nevertheless is deeply wrongheaded, in my view.  When asked about the sacrifices he has made for his country, Trump said this:

I think I've made a lot of sacrifices. I work very, very hard. I've created thousands and thousands of jobs, tens of thousands of jobs, built great structures. I've had tremendous success. I think I've done a lot.

While many have objected to this notion of "sacrifice," Trump's claim to have "created thousands and thousands of jobs, tens of thousands of jobs" is also objectionable.  First of all, a job is a relationship: it's a position that works to the advantage of both the employer and the employee.  And since "employers" are generally companies, it's better to envision a company as a group of people--equity contributors and labor contributors--working together on a joint business enterprise.  Thus, a job is not "created" any more than one person "creates" a marriage by asking another person to get married.  Trump's companies may have employed ten of thousands of people, but the companies did not "create" those jobs--they instead asked workers to join in the group effort to carry on the joint enterprise at hand.

Second, just because Donald J. Trump is the head of various "Trump" organizations does not mean that "he" is those companies.  Perhaps he was instrumental in legally creating those companies and getting their businesses off the ground.  But "he" did not employ tens of thousands -- the companies did.  He's not a sole proprietor!

Third, Trump is actually a poor exemplar of the creator-capitalist, because his business model is to use his family "brand' to work with other companies to actually develop ongoing businesses.  The company puts the Trump name of the project, and then other companies generally do the work.  As a result, the Trump brand appears to be much more extensive than its actual reach. As Forbes Magazine described his approach:

Over his roller-coaster career, a core part of Trump’s decision-making process can be summarized in four words: Trump always comes first. Whatever the deal, Trump must be the star. He routinely values two things above all, even over making money: being the boss and gaining publicity. No one values the Trump brand higher than Trump himself.

Trump may have managed his brand very well, as the proliferation of Trump hotels, golf courses, and resorts would indicate.  But his company often leaves the heaving lifting to other companies as a way of leveraging the brand name while keeping the Trump organization fairly lean (i.e., fewer employees).

Trump's claim that "I alone can fix it" is symptomatic of his approach to his businesses and, presumably, his potential government service.  He doesn't see the legions of others who have worked with him to make his businesses and brand into successes.  As Alchian & Demsetz explained, businesses are team productions -- not solo efforts.  Trump has not created jobs, out of thin air, in service to others.  He instead has worked with tens of thousands of other people to make their joint enterprises into successes.  That deserves credit.  But his claim to be an economic Zeus, calling forth employment from the primordial ooze of the economy, deserves skepticism instead.  

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