Trump University Documents Reveal Perils of Unregulated, For-Profit “Guru” Education

Posted By Derek Johnson on June 10, 2016 at 11:27 am
Trump University Documents Reveal Perils of Unregulated, For-Profit “Guru” Education
Republican Presidential nominee Donald Trump, left, announcing the establishment of Trump University at a press conference in New York in 2005. Source: Bebeto Matthews, AP Images

Trump University is a perfect example of the enduring power of branding in America. And despite the fact that it was not accredited, had no teachers and was not actually an institution of higher education, the scandal of the now-shuttered for-profit education company has somehow fallen on the higher education world. Part of that is the name (which New York regulators eventually forced Trump into changing). But another big reason is the way the company marketed its services to the public.

Trump University’s sales playbook, released late last month by U.S. District Court Judge Gonzalo Curiel as part of two ongoing class-action lawsuits, reveal much about the company’s operations. Chiefly, they display the stark contrast between the way customers were viewed behind the scenes versus what they were told publicly. Outwardly, customers were referred to as “students” who paid “tuition” to attend real estate seminars – but only if they were “accepted” and “enrolled” after rigorous scrutiny. Internally in the playbook, however, they are often referred to as “buyers” or “potential buyers.”

Another reason Trump University tends to get lumped in with higher education is that it purported to give customers a truncated, hyper-expensive real estate training and education experience on par with that of most real universities. The rise of the for-profit private education industry has largely been a response to two underlying trends: rising tuition prices at traditional universities and the widespread loss of blue-collar American jobs that do not require a college degree. As a result, thousands have flocked to alternative educational programs and “micro-credentialing” in recent years, hoping to receive the necessary qualifications to thrive in the 21st century economy.

While many of these programs can offer valuable training, certification and education, they exist in a largely unregulated environment – alongside bad actors who are not subject to the same constraints or standards by which most institutions of higher learning must abide. These companies are not accredited, cannot accept federal student aid and aren’t subject to even the very lax standards regarding accountability and student outcomes that are vexing the higher education world.

This is particularly true in the real estate seminar industry, where a series of highly successful “gurus” have started companies promising to teach their secrets to the general public in exchange for tens of thousands of dollars. While Trump University’s hyper-aggressive sales tactics eventually led the company to shut down amidst multiple fraud lawsuits, the core business model it operated by remains alive and well.

Staying on offense: the psychology of selling a real estate seminar

The first page of Trump University’s sales playbook states “[O]ur success is measured by the results that our clients achieve applying what they have learned from us in the real world.” Beyond that, however, the document does not lay out any actual criteria or metrics for judging the success of their customers. In fact, Trump University operatives were specifically prohibited from promising customers any real, quantifiable return on their investment. Instead, the playbook is largely a manual for teaching operatives how to leverage psychology, information asymmetry and high-pressure sales tactics to disorient potential customers and manipulate them into pricey upsells.

“Because we decide what happens in the seminar, an attendee must react to what we say. They don’t have a choice. For example, we can spend hours and hours planning a question that they must deal with and give an answer to within seconds,” reads one section. “We also have the advantage of testing the question out on hundreds of people and adjusting it to increase our chances for a desirable response. The attendee does not have the luxury of ‘practicing’ his or her answer.”

The document repeatedly harps on the importance of power dynamics and controlling the setting. Everything is scripted and stage-managed down to the most minute detail, from the spacing between chairs during seminars (to bring buyers “out of their comfort zone”) to placing sales packages in front of every attendee regardless of their stated interest.

“Get the packages out in front of potential buyers ASAP so even if they have a problem or question later on – or even if they do not buy at all – it looks to everyone else in the room that people are buying packages and filling out registration forms. When a package is sitting next to someone, a bystander assumes it is sold.”


Diagram of Trump University preview seminar. Source: Trump University Sales Playbook, 2010

In conversations with prospective buyers, operatives are urged to control the conversation, limit questions and always “stay on offense.” Questions from prospective buyers are often described as obstacles or dangers that shift the power dynamic from seller to buyer.

“Do not get in conversations where you answer one question after the other, yet getting no closer to the sale whatsoever. Irrelevant questions take too much time, you lose power by answering them. The person asking the question always has the power. You should only allow potential students to ask one of these questions and then take back the power.”

Another section on how to conduct one-on-one sales consultations continues this theme. Sales operatives (or “consultants”) are advised to spend no more than 20 minutes with each prospective buyer, more than enough time to make a sale. The play book advises, “Once you sit down with a student or couple, make sure that you maintain control of the conversation. You may begin with some small talk to establish rapport with the students but do not let them take control of the conversation… You must be very aggressive during these conversations in order to push them out of their comfort zone.”

Using information asymmetry to convince customers that they couldn’t lose by investing in Trump University was also a tried and true strategy. Marketing and promotional materials often touted the idea that regular, middle and lower class Americans could get rich by funding their real estate deals with OPM: “Other People’s Money.” In the playbook, sales operatives are urged to use a series of questions and registration forms filled out by prospective buyers to rank them by liquid assets. Customers with maxed out credit cards were taught how to cash in their retirement accounts to free up extra money. Lack of money or high debt loads on the part of a customer were not considered acceptable reasons for not making a sale: “Money is never a reason for not enrolling in Trump University; if they really believe in you and your product, they will find the money. You are not doing any favor by letting someone use lack of money as an excuse.”

The perils of “guru” education

At the center of the entire operation was the success and promises of Donald Trump himself. Trump was the owner of Trump University; his “secrets” were the curriculum and his career was the “proof” that his methods worked. While it can be tempting to isolate Trump University from other private education companies, it is actually part of a growing industry of “guru”-led real estate teaching endeavors that follow a similar pattern of charging tens of thousands of dollars in exchange for real estate investing guidance.

At their core, these businesses typically have a well-known real estate figurehead in a prominent role, offering (initially) free real estate investment guidance and advice to newcomers. That free guidance usually comes at an event or preview seminar, which is often a prelude to much pricier courses or events down the road. Critically, while some of the attendees may have some intermediate experience in real estate, the vast majority are novices who are lured in with the promise that they are essentially paying for a shortcut to big money. Many are already in debt or in dire financial straits, and these companies strongly imply (if they don’t outright state) that gaining these secrets are the solution to all their problems.

Many established real estate professionals are deeply skeptical of these guru-led businesses. Real estate investment specialist Joe Pryor of The Virtual Real Estate Team warns his followers that these schemes are almost never worth their investment for the overwhelming vast majority of people.

“I will promise you this: if you have bad credit and no cash you shouldn’t be giving your money away. It’s like investing in the lottery. In fact, I think the lottery probably has a better return on investment,” said Pryor on YouTube.

Since the Great Recession, The Federal Trade Commission has launched a widespread crusade against what it calls “last dollar scams,” which they define as taking “advantage of financially distressed consumers” through “bogus promises of a job, government grant or some other money-making opportunity.” In 2012, the commission levied a record $478 million dollar fine against three real-estate marketers and banned them for life from the infomercial and telemarketing business for schemes that sound remarkably similar to the claims made at many real estate seminars. A federal district court found these parties “falsely represented that consumers could purchase homes at tax sales in their own area for pennies on the dollar and that they could make money easily with little financial investment” and that they “misled consumers by creating an overall impression that a typical consumer can easily, quickly, and ‘magically’ earn thousands of dollars per week simply by purchasing and using the system.” In reality, 99 percent of customers lost money on these schemes.

Jason McGlone of The Better Business Bureau also warned consumers to stay away from real estate seminars after attending an unnamed event in 2012.

“Ultimately, any kind of real estate investment seminar will only get you so far.  It’s entirely possible that if you’re interested in investing, you might learn a thing or two from these so-called gurus,” McGlone writes. “There really aren’t any secrets to investing; just like anything else, in order to make a living, you have to work hard at it.  Given time, hard work and maybe a little luck, you can have some good investments turn out to be lucrative.  But paying hundreds, perhaps thousands of dollars for coaching?  It’s probably not going to get you too far.”

Buyer beware

There are organizations that provide free and paid real estate investment advice that have much better reputations among independent third party consumer advocates. Bigger Pockets is an online community started by real estate investor Joshua Dorkin. Dorkin started the site because he wanted to provide a forum for professionals and novices to learn about the real estate market. The company has an A+ rating from the Better Business Bureau and is praised by REtipster – a real estate investment site for part time professionals – as a place to learn, exchange ideas and give advice without the type of conflict of interest that runs rampart in the industry. The topic of Trump University and real estate guru seminars pop up frequently, with more experienced investors often steering newer posters away from more questionable gurus and advising them to use free resources or invest those thousands into an actual real estate deal as a learning experience.

Return on investment is the key word for any education, whether you’re discussing a four-year university, third party credentialing or a private company offering training or education in a certain industry. The question of uncertain return is one that plagues all educational endeavors in some way. For-profit universities have come under intense scrutiny over the past decade as tuition and cost of attendance prices have skyrocketed, leaving many to question whether the trade off is worth the up front payment.

Even traditional four-year degrees are not immune to criticism. Last year multinational banking firm Goldman Sachs released a report showing that the average return for going to college is falling and that it is taking longer and longer for graduates to pay off their debt. The report also found that, from an earnings perspective, students attending colleges ranked in the bottom 25 percent are financially better off not attending at all or pursuing less costly training or certification programs. For years, the Obama administration has pushed to hold colleges and universities to higher standards when it comes to student outcomes, whether through the gainful employment regulations or the New College Scorecard. And recent studies show that a majority of students aren’t sure their college education was worth it.

The idea that any educational endeavor is a financial transaction (money + educational opportunity = more money) is a drastic oversimplification. Still, the lessons of Trump University and other real estate guru seminars show that there are gradations to the question “So – what exactly am I getting in return for this?”

Derek Johnson
Derek Johnson is a writer, journalist and editor based out of Virginia. He received a Master’s degree in Public Policy at George Mason University and a bachelor’s degree in Communication from Hofstra University.

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