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CHAPTER 6

THREATS AND LEVERAGE: REAL OR FAKE?

Donald Trump almost always brings a stick to his negotiations along with his carrots. He also almost always threatens to use it. Classic carrot-and-stick approach, right?

Wrong. It’s one thing to have a stick in a negotiation. It’s another to consistently threaten to use it. It’s quite another to actually use it.

What do we mean?

Leverage, as noted earlier, consists of two elements—level of need and Plan Bs/alternatives to a deal. Since negotiations always involve more than one party and leverage is relative, each leverage element must be analyzed to the extent it involves you and your counterparts. For level of need, it’s how much you need the deal relative to how much your counterparts need the deal. For Plan Bs, it’s the strength of your Plan B/alternative relative to the strength of your counterparts’ Plan Bs/alternatives.

In Chapter 5, we analyzed how Trump maximized his leverage in terms of the parties’ levels of need and his Plan Bs.

But we did not evaluate the impact of his counterparts’ Plan Bs—an equally powerful element of leverage. Nor did we consider how Trump affects his counterparts’ Plan Bs, if at all. Total leverage includes these elements.

Trump exercised leverage as it relates to his counterparts’ Plan Bs in three ways:

 Trump’s Sticks—Find out their Plan Bs and differentiate,

 Trump’s Threats—Worsen their perception of their Plan Bs, and

 Trump’s Bullying—Sue them or stiff them.

Trump’s Sticks—Find Out Their Plan Bs and Differentiate

Donald Trump has spent almost 50 years creating and promoting an international brand. Today that brand generates millions of dollars a year for him.

Why do people spend so much on Trump-branded housing developments, buildings, hotels, apartments, golf courses, country clubs, and the list goes on?

Those buyers perceive “Trump” as symbolizing high-end, luxury living spaces and quality goods and services and, by contrast, that the Trump item better meets their luxury needs than their alternative, or Plan B purchase.

In other words, Trump built his fundamental persona and brand on this element of negotiation leverage. Donald Trump knows this and has been promoting and selling it his entire life.

Here are a few of Trump’s counterparts’ Plan Bs from earlier-described negotiations.

 Commodore Hotel—New York City’s Plan B: letting this part of town further deteriorate or entice another developer. Unfortunately for New York City, few others early on appeared interested. Several appeared later. But Trump’s Starrett “deal” removed one and his Berger “deal” removed another. Each strengthened Trump’s leverage.

 Trump Tower lease negotiation—Bankrupt land owner’s Plan B: selling or leasing to someone other than Trump. Several offered more after Trump signed. Too late. Timing.

 Plaza Hotel Deal—Plaza’s Plan B: selling to the next-highest bidder, who bid tens of millions of dollars less than Trump.204

But finding out your counterparts’ Plan Bs is only part of evaluating and strengthening your leverage. (It’s often relatively easy to find out your counterpart’s Plan B if they have a good one, as it helps them to share it. If your counterpart has a bad Plan B, they will usually try to hide it. So listen deeply to what your counterparts say and don’t say.)

Trump understands the crucial need to find out his counterparts’ Plan Bs as his actions in these deals consistently reflect this.

What should you do if you find out your counterpart has a good Plan B, which weakens your leverage? Improve their perception of your deal (Plan A) relative to their Plan B. By making your deal appear better without any statement regarding their Plan B, it strengthens your leverage vis-à-vis your counterparts’ Plan B and differentiates you.

I have trained thousands of sales professionals since I started studying and teaching negotiation in 1995. The most powerful sales-related strategy leverage-wise? Help your customers understand and evaluate how you (Plan A) can meet their needs and interests better than their alternative, or Plan B. Their Plan Bs? Your competitors.

Sales and marketing is fundamentally about this component of leverage—what differentiates you from your competitors.

Has Trump done this? Absolutely. He built and sold Trump Tower condos as an incredibly luxurious residential living space. This Plan A for his buyers, due to the features he included, was then evaluated relative to nearby luxury condos. He did this effectively.

And he didn’t trash his competitors (usually an ineffective strategy despite Trump’s comment about sometimes having to denigrate your competition). By building Trump Tower this way, he and his sales staff could act as trusted advisors and help possible buyers differentiate it from their competitors.

What else has Trump done to change his leverage? Focus on his competitors’ weaknesses and inability to satisfy his counterparts’ needs and interests, impacting their perception of their Plan B.

Here’s how Trump has done this.

Trump’s Threats: Worsen Their Perception of Their Plan Bs

Donald Trump hired New York Governor Hugh Carey’s chief fundraiser Louise Sunshine in 1974 for many reasons. One, according to Sunshine, “Everybody thought Donald was this brash, hard-charging young kid…. I was the one who took Donald everyplace…no matter who it was, because they didn’t really know Donald. I was Donald’s credibility factor.”²⁰⁵

Trump also “was not shy about using [her] political connections.”²⁰⁶ Donald Trump and his father had city connections. But Sunshine brought state connections, influence, and access.

Along with the Trumps’ political contributions to Carey’s gubernatorial campaign—$390,000 in 2016 dollars, more than anyone except Carey’s brother—Donald Trump gained political influence by hiring Sunshine.²⁰⁷ This brought him leverage in his real-estate deals involving political entities.

One way he attempted to exercise that influence/leverage: threats. What is a threat from a strategic perspective? A very aggressive leverage-related statement communicating, “I can make your Plan B really, really bad!”

The classic threat comes from The Godfather: an “offer you can’t refuse.”²⁰⁸ Your Plan B? Death. Bad Plan B. You might as well accept our deal (Plan A) by comparison, right?

How consistently did Donald Trump issue business-related threats? Often and in many different negotiation contexts. Threats constituted a regular part of Trump’s strategic repertoire. Here are three typical Trump threats spanning several decades of Trump’s business career.

The Trump World Trade Center Threat

Trump wanted to buy the World Trade Center in the mid-1970s. But several other developers were interested (the World Trade Center’s Plan Bs). Here is a classic Trump political threat, meant to make the World Trade Center’s owners more likely to sell to Trump.

The following negotiation, according to Trump Revealed, occurred between Trump and Peter Goldmark, the executive director of the Port Authority of New York (owner of the World Trade Center). Goldmark was also a political appointee of New York Governor Hugh Carey.

Trump’s chances truly soured when he started flexing his connections. “He threatened, ‘You wouldn’t last in your job very long if Governor Carey decided you weren’t doing the right thing on this,’ Goldmark recalled [Trump saying]. “‘You should know I have a lot of weight in Albany.’” Trump [then] dropped Sunshine’s name. “As soon as he threatened, I made [it] clear I didn’t want to talk anymore,” Goldmark said. “He’d expected me to quake and shake.”

Trump denied Goldmark’s account, saying, “I really don’t talk that way.”²⁰⁹

Trump’s leverage-related message? My deal is your best Plan A. If you don’t believe it, I can make your personal Plan B really bad as I can get Governor Carey to fire you.

The Trump NFL Threat

Here’s how NFL head Pete Rozelle described another Trump threat, from his USFL-related meeting with Trump. Recall that Rozelle took notes of this and discussed it with the NFL’s finance chairman. Trump, noted earlier, disputed Rozelle’s characterization.

Rozelle’s version was a Trump shakedown. Trump opened the meeting, said Rozelle, with warnings [that] he was busily developing an antitrust suit and arranging for new ownership of two floundering USFL teams….According to Rozelle, Trump then warned him that if the NFL did not agree right away to his demands, he would have to push forward on the lawsuit.²¹⁰

Trump threatened antitrust litigation.

The Trump Reporter Threat

Trump has also consistently threatened litigation against reporters and editors when they published something unfavorable or considered doing so. Jim Brady, a gossip-page editor at The New York Daily Post, recounted the following, described in Trump Revealed.

One summer [Brady] heard that Donald and Ivana had been granted a temporary summer membership at a club in East Hampton, where they were renting a home. The Trumps wanted to become permanent members, but Brady learned that the club’s board would never approve them. Brady put that news on Page Six [the gossip page] and got a quick call from Trump. “He was cursing me with every four-letter word,” Brady said. “‘You SOB. You bleeping this. You bleeping that. I’m going to sue you. I’m going to sue the Post. I’m going to sue Murdoch [the Post’s owner]. I’m going to sue everyone.’”

A moment later, the phone rang again. It was Cohn [Trump’s lawyer]. Expecting another tirade, Brady told Cohn if he was going to sue, he should call the newspaper’s lawyer. “Jim, Jim, Jim” Cohn said. “There’s going to be no lawsuit. It’s very good for Donald to let off steam. That’s just Donald. And we encourage that kind of thing, but no one’s going to sue anybody. I’m just telling you that there will be no lawsuit.” There was no lawsuit.²¹¹

Of course, Trump sued in many instances. But not every time he threatened it.

“Wait,” you might say. “What’s the difference between a threat and a promise to exercise your legal or other rights that negatively impact your counterparts’ Plan B/alternative? Isn’t it legitimate to identify the steps you might take to strengthen your leverage by increasing your counterparts’ downside risk, or making their Plan B worse? Isn’t that just differentiating yourself?”

Excellent questions. Here’s a research-based framework in which to evaluate Trump’s threats. This relates to implicit or explicit actions or statements (“threats”) that can be made to impact a counterpart’s perception of their Plan B.

Implicit or explicit threats, of course, can be either effective or ineffective. Just calling them threats—which has a negative connotation—doesn’t strategically help determine if they work. Nor does the label address whether threats should be used in a negotiation.

RESEARCH: Initially, understand the nature of threats. Columbia Professor Adam Galinsky and Brigham Young Professor Katie Liljenquist define a threat as “a proposition that issues demands and warns of the costs of noncompliance.”²¹²

So, if, when, and how should you use threats? And how has Trump used them?

Threats constitute an often-unspoken element in almost all negotiations. They’re simply a very aggressive effort to exercise leverage. Your ability to negatively impact their perception of their Plan B through a threat—the costs of noncompliance with your demand/offer—can strengthen your leverage.

Keep in mind, though, threats are not inherently evil. And they should be used at times, albeit in limited circumstances. As noted by Galinsky and Liljenquist, “researchers have found that people actually evaluate their counterparts more favorably when they combine promises with threats rather than extend promises alone. Whereas promises encourage exploitation, the threat of punishment motivates cooperation.”²¹³

Evaluating the Effectiveness of Threats

Understanding this, here are four research-based guidelines to use in evaluating the effectiveness of threats, including Trump’s.

1. Strategically Planned?

“Put your bike away now, or no electronics for a week,” Mom might threaten after she finds her 10-year-old’s bike in the driveway for the umpteenth time.

Every parent has lost his or her temper. Does it help? No.

Threats based on anger, volatile emotion, and momentary pressures are almost always counterproductive. “Multiple studies have linked anger to reduced information processing, risky behaviors, and clouded judgment,” according to Galinsky and Liljenquist.²¹⁴ Research also shows anger limits people’s ability to identify the relative importance of issues to others, according to University of California-Hastings Law Professor Clark Freshman.²¹⁵

Strategically planning threats in advance, not acting or reacting instinctively, addresses these concerns and reduces the possibility of counterthreats and retaliation, which could spiral out of control.

Crucially, the goal of a threat is to satisfy your interests. Effective threats thus motivate cooperation instead of punishing bad behavior.

2. Used in Limited Circumstances?

Professor Jeanne Brett, Director of the Kellogg School’s Dispute Resolution Research Center at Northwestern University, and her colleagues have identified three circumstances in which threats can be necessary and effective:

– Getting counterparts to the table when facing a seemingly intractable deadlock (like threatening aggression or sanctions to get a recalcitrant country to engage in peace talks);

– Breaking an impasse by signaling strength and fortitude (bullies sometimes only respond if you demand respect by flexing your muscles); and

– As a mechanism to ensure compliance and implementation of an agreement.

Brett and her colleagues emphasized that the focus must be on the other parties’ interests to be effective. In other words, emphasize their interest in accepting your Plan A relative to their Plan B (your threat).²¹⁶

The reason to only threaten in limited circumstances? Even well-crafted threats can carry significant negative consequences, including:

– Provoking resistance and anger, thus decreasing a counterparts’ likelihood of granting your wishes;

– Undermining an agreement’s legitimacy if a counterpart believes it resulted from coercion; and

– Inciting a desire for vengeance. “Psychologists have found that revenge has biological foundations, persisting until it is satisfied, like hunger. The more severe a threat’s consequences, the more extreme the retaliation is likely to be.”²¹⁷

Threats should not be a regular part of a negotiator’s repertoire.

3. Credible or Empty Threats?

Negotiators should never start a war they’re not prepared to finish. Former President Barack Obama threatened Syria with severe consequences if it crossed a “red line” by using chemical weapons.

What did he do after the world saw unmistakable evidence it had crossed his red line? He said he didn’t have congressional authority to engage militarily and negotiated a deal to stop it from happening again.²¹⁸

Did this prevent Syria from doing it again? No. Did Obama and the United States lose credibility relating to its future promises and threats with Syria and the rest of the world? Yes.

Reputations matter, especially relating to the credibility of threats.

4. Was the Threat Appropriately Framed?

Effective threats should be framed so they can be realistically satisfied and not engender ill will. They should thus:

- be specific and detailed;

- address your counterpart’s interests (This is crucial, per Brett.);

- be delivered respectfully in a measured, serious tone;

- include meaningful consequences;

- link to a timeline; and

- possibly include an escape route if circumstances change.²¹⁹

They should also be used very sparingly in situations involving a future relationship between the parties. Threats can backfire long-term.²²⁰

They can also have long-term benefits. President Ronald Reagan in 1981 threatened 12,000 striking air-traffic controllers with the loss of their jobs if they did not report back to work “within 48 hours” of his statement. 11,359 did not comply. He fired them.

“Many observers view Reagan’s controversial threat and follow-through as a pivotal moment in his presidency and the foundation for future political victories,” according to Galinsky and Liljenquist.²²¹

Has Trump Effectively Used Threats in Business?

Donald Trump has effectively used implicit and explicit threats in many business negotiations. He has also used them ineffectively, and they have backfired.

In analyzing successful and unsuccessful threats, we will do so based on two criteria. One, how much did they help him achieve his goals and satisfy his interests? And two, how much did his threats match up with our framework?

Of course, we can’t know with certainty whether every threat works. It may help close a short-term deal yet induce such ill will that it eliminates a greater opportunity down the road. Even the most effective threats rarely include all the factors described earlier.

However, we know this from the research: Including these proven elements increases the likelihood the threat will work short- and long-term.

Here are two business negotiations in which Trump effectively used threats to strengthen his leverage and achieve his goals.

• Trump’s Commodore Hotel Threats

Donald Trump, as described earlier, needed an unprecedented tax break from New York City to get his Commodore deal done. To get it, he needed New York City’s land-use authority, its Board of Estimate, to approve the tax exemption.

Here’s the Trump threat that got them on board, according to Trump Revealed. This occurred during a press conference outside the hotel called by three local lawmakers, just a day before the Board vote.

When the politicians had finished, Trump, who had shown up to refute their argument, told reporters that if the city did not approve the assistance, he would walk, and the Commodore would rot.

To dramatize how decrepit the Commodore would be without him, Trump had [earlier] directed his workers to replace the clean boards covering up the hotel windows with dirty scrap wood.²²²

Trump got his tax exemption.

Was his threat “to walk and [leave] the Commodore to rot” and the stark image of a dirty, shuttered hotel in a decrepit part of town effective? Yes.

First, it reflected strategic planning. Trump smartly understood the public impact of the image of a shuttered hotel with “dirty scrap wood” and directed it like a TV producer.

Second, was his threat to walk credible or empty? Credible. Without a significant tax exemption, no developer could make that project work. But Trump highlighted the city’s risk by focusing on his control of the hotel site. And the city wanted the area improved (the city’s Plan B now appeared worse).

Third, was this strategically selective? Perhaps. Trump’s flair for the dramatic and the visually compelling image of the run-down hotel could have impacted a board member who might otherwise have voted against it. In that sense, his threat could have broken an impasse.

Did it undermine the legitimacy of the vote or engender ill will or resistance to implementation? Unlikely.

Fourth, was the threat appropriately framed?

– Specific and detailed? Yes.

– Address the Board’s interests in redeveloping a rundown area? Yes.

– Delivered respectfully in a measured, serious tone? Unclear.

– Include meaningful consequences? Yes.

– Link to a timeline? Yes, the Board voted the next day.

– Include an escape route if circumstances change? No, but that would have been counterproductive as the Board would either approve or disapprove the redevelopment.

Overall, Trump’s threat satisfied many of these elements, and he got his tax exemption two years later, after working with the city to address many other items on the negotiation table.

Thus, this particular threat didn’t appear to cause long-term damage to his relationship with the city.

• Trump’s Tiffany Threat

Trump had a grand vision for Trump Tower. To make it work, however, he needed the air rights from his soon-to-be neighbor on Fifth Ave, Tiffany. Tiffany occupied a small classic building adjacent to Trump’s proposed tower. Trump was willing to pay $5 million for the air rights but didn’t want to. He also was afraid Walter Hoving, who ran Tiffany, would balk, as Trump’s proposed design was radically different from the architectural style in that area.

What did Trump do? Before meeting with Hoving, Trump had his architect construct two different models of his tower. One was a graceful, fifty-story building. The other was an ugly building Trump could argue would be what New York would end up with due to zoning requirements if he didn’t have Tiffany’s air rights. Trump showed Hoving both models, implying Hoving’s Plan B would be a very ugly neighbor. Trump limited the attractiveness of Hoving’s perceived Plan B.²²³

Hoving sold Trump his air rights.

Was this implicit threat to build an ugly tower next door effective? Yes.

First, Trump strategically planned it.

Second, was it credible or empty? Probably empty. Would Trump have built an ugly building if he didn’t get it? Unlikely. He probably would have just paid more for the rights.

Third, strategically selective? Not according to our criteria. On the other hand, it would be far less likely to engender ill will and invite retaliatory measures than if it were explicit.

Fourth, did Trump appropriately frame it?

– Specific and detailed? Yes.

– Address Tiffany’s interests in a beautiful structure next door? Yes.

– Delivered respectfully in a measured, serious tone? Unclear.

– Include meaningful consequences? Yes.

– Link to a timeline? Unknown.

– Include an escape route if circumstances change? Unclear but unlikely.

Overall, pretty effective.

Trump’s threats, though, proved ineffective in other business negotiations.

• Trump’s NBC/Television City Threat

Donald Trump controlled 75 acres on New York City’s west side in 1986. NBC had recently informed city hall it planned on leaving Rockefeller Center and Manhattan unless it received a huge tax break. To Trump, a marriage made in heaven.

His vision? Lure NBC to the site, build the world’s tallest building along with 7,600 luxury condos in six 76-story apartment buildings, two office buildings, a retail mall, a massive parking garage, and a vast amount of open space and parkland. Trump hoped to vault to the top of New York City developers in one single bound.

The problem? He needed a huge tax break to make these nuptials happen. NBC wasn’t yet committed. Neither was New York City. So Trump applied for a $700 million tax abatement from New York City to underwrite the development’s construction, hoping to use it to entice NBC. Trump called this development-in-waiting “Television City.”²²⁴

Here’s a description of Trump’s negotiations with New York City and Mayor Ed Koch and the threats associated with them. Keep in mind that Trump’s relationship with Koch and New York City had already been strained due to problems related to the Commodore Hotel.

The following meeting took place on September 11, 1986 and included Koch’s top economic development officials, including Deputy Mayor Alair Townsend. It was described in Trump Show.

A cocksure Trump told the assembled bureaucrats that unless the city acted, a cramped NBC might move to New Jersey or to Burbank, where the network had a great deal of extra acreage….

Trump argued that he had the only site in the city suitable for major new television studios and that he had worked out a deal with the network giving it a third of his site. “NBC is in love with it,” he said, claiming that the network had been designing its own facility for the property over the past three months. Asked by Townsend how strong a commitment Trump had from NBC, Donald replied: “We’re negotiating the terms of a lease.”

Donald’s strategy was to act as if he were NBC’s exclusive agent, knowing that the city desperately wanted to retain the network’s thousands of jobs, and then to convince the administration to grant him zoning bonuses and tax abatements for the whole site so he could afford to offer the network a sweetheart deal on its portion of it. “I don’t want the mayor to confuse the issue by bringing up other sites [NBC’s and New York City’s Plan Bs],” said Trump. “Nothing else in Manhattan does it.”

To underline the seriousness of NBC’s threatened departure, Trump then sent [Deputy Mayor] Townsend a confidential copy of the network’s request for proposals for a competitive site in New Jersey’s Meadowlands.²²⁵

Trump sought to step in the shoes of NBC—which had the leverage with New York City—and use its leverage, in the form of threats to leave New York City, to get his full tax abatement.

There are two problems here. Trump bluffed on his authority to represent NBC, which was simultaneously negotiating with New York City over a possible tax package incentivizing it to stay at Rockefeller Center. And Mayor Ed Koch, a huge personality, was not prone to give in to threats.

Trump’s strategy backfired. Here are sections of two letters Trump and Koch exchanged after New York City rejected Trump’s requested tax benefit.

Trump letter to New York City Mayor Ed Koch, May 26, 1987:

Dear Ed,

Your attitude on keeping NBC in New York City is unbelievable. For you to be playing “Russian Roulette” with perhaps the most important corporation in New York over the relatively small amounts of money involved because you and your staff are afraid that Donald Trump may actually make more than a dollar of profit, is both ludicrous and disgraceful…. I am tired of sitting back quietly and watching New Jersey and other states drain the lifeblood out of New York—and consistently get away with it for reasons that are all too obvious.²²⁶

Mayor Ed Koch letter to Trump, May 28, 1987:

Dear Donald,

I have received your letter of May 26. I was disappointed that you continue to believe that you can force the City’s hand to your advantage through intimidation. It will not work…. I also refuse to place hundreds of millions of dollars in future taxes at risk so that you can more easily build a 15-millionsquare-foot luxury condominium and retail development…. If NBC chooses your site and you make a profit, that’s fine and the American way, but it will not be on the backs of the New York City taxpayer…. I urge you to refrain from further attempts to influence the process through intimidation. It should already be clear to you that this tactic is counterproductive.²²⁷

This wasn’t just a personal feud between Trump and Koch. The city officials’ attitude toward Trump was summed up by NBC’s representative, Michael Bailkin, a former city official who had worked with Trump on the Commodore deal.

Bailkin indicated “the city did not like or trust Trump and was being forced to do business with him.”²²⁸

But Donald Trump wasn’t prepared to give up on Television City even without NBC. How could he proceed? Threaten to support a new mayor in the 1989 elections.

He met in Trump Tower with Lee Atwater, head of the Republican National Committee, and Roger Stone, the GOP consultant who was Donald’s lobbyist, and discussed ways he could put a fortune on the line against Koch without violating campaign finance limits. The strategy they came up with, leaked to the newspapers, was that he would spend up to $2 million on commercials that assailed Koch yet endorsed no one.²²⁹

Later, after several political developments, and with Koch looking better in the polls, Trump dropped this effort.

We know Trump’s advertising threat was empty. How? Trump and Koch ran into each other at Cardinal John O’Connor’s residence on Christmas eve 1988, shortly after Trump made this threat. According to Trump Show, “Donald [there] confided [to Koch] that he wasn’t really going to buy the commercials attacking Koch that he’d announced only days before.”²³⁰

Koch lost that election. But before he left, he put another nail in the coffin for Trump’s Television City. It was yet another example of how Trump’s threats backfired. According to Trump Show,

In the final months of the mayor’s twelve-year reign, top Koch officials moved to push the administration’s favorite projects to the top of the certification list…. [Trump’s Television City was placed] on the bottom. It was the first time that City Hall had ever dictated the priority list for certification.²³¹

A footnote. NBC and New York City negotiated a deal directly in which New York City gave NBC and Rockefeller Center a “thirty-five-year property tax abatement, $800 million in partially tax exempt bond financing, and a fifteen-year sales tax write-off on most of an estimated billion in machinery and equipment purchases…. [This was] the richest package of public benefits ever given [to] a city business.”²³²

Its value to NBC? $98 million.²³³

Trump’s reaction? Threaten to sue. He also claimed the city deal gave NBC “substantially more tax abatements” than had ever been offered for Television City and that it created a “horrible precedent.” NBC’s representative Bailkin conceded this, noting that NBC received a better package than anything it had offered Trump.²³⁴

This seems strange. Why would the city give up a financially better deal with Trump to go with NBC? Only one reason—the city distrusted Trump. This had value.

One final comment on this deal, this one from Trump.

There were some who told me that I was hurting my chances for zoning approval by taking on Koch in the media. They may well have been right. I’ve waited a long time to build on the West Side, and I can wait a little longer to get the zoning I feel is necessary. In the end, I will build Television City with or without NBC and with or without the current administration.²³⁵