‘He never went right’: Warren Buffett exposed the top reason for Donald Trump’s business failures decades before he became president — here was his big mistake and what to learn from it

Story by Gemma Lewis. December 24, 2024.

Nearly 35 years ago, Warren Buffett, one of the world’s most successful investors, was lecturing at the University of Notre Dame when he recounted that Donald Trump had made his assets appear to be worth much more than they really were by locking in property loans at prices far higher than their true value.

It also meant he incurred significant and excessive debt to acquire them in the first place.

In recounting where and how Trump went astray in his business ventures, Buffett observed “the big problem with Donald Trump was he never went right.”

In his lecture, Buffett also expressed his belief that “you really don’t need leverage in this world.”

However, if you’re drawn to the real estate market, some amount of leverage is often essential for most Americans, particularly those looking to buy a home. But ownership is far from your only option when it comes to investing in real estate.

Given Buffett really isn’t a fan of taking on debt, perhaps it’s no surprise he’s made most of his money by investing in companies at cheap prices.

He once explained in a letter to his partners, “This is the cornerstone of our investment philosophy: Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.”

While it’s hard to find anything inherently flawed with that logic, price isn’t everything. A low price tag might very well be indicative of a low quality investment.

Before Trump’s political career began, Buffett also found fault with Trump’s strategy when it came to debt and loans. At his 1991 lecture, he estimated Trump owed “perhaps, $3.5 billion now, and, if you had to pick a figure as to the value of the assets, it might be more like $2.5 billion.”

To avoid similar pitfalls, securing a loan that accurately reflects the asset’s true value is critical for anyone looking to manage debt responsibly.

Buffett’s overarching message about Trump from his lectures was that Trump’s business foundations were shaky right from the start.

And he was indeed right. According to a report from the Associated Press, Judge Arthur Engoron ruled earlier this year in Trump’s civil fraud trial that he engaged in a yearslong conspiracy to deceive banks and insurers about the size of his wealth, and the true value of his properties.