The Lakers!

The Lakers!

I have always and continue to love the NBA.  Ever since growing up going to the Sixers games with my pops, there has always been something beautiful and nostalgic about the game.  I even liked the NBA finals this year, seeing two small-market teams battle it out in game seven.  That said, this blog isn’t about my love for the NBA; rather, it is an eye-opening one about finances.

Selling the Lakers

You see, the big news in sports as of writing this is that the Los Angeles Lakers have officially been sold.  Jerry Buss, RIP, bought the team in 1979 for $67M and turned them into one of the most established and storied franchises in pro sports history.  They are making noise in the news as the scions of the family have decided to sell the franchise for a record-setting 10B!  You read that correctly, they are now the most valuable professional sports teams to have ever been sold in this fine land of ours.

Now, I am not bringing this up to make us all feel poor.  I am bringing this up as an interesting anecdote.  If you do the math, that is 149x their investment over 46 years.  I think if you asked any human on this planet if they would be ok accepting 149x their investment over a 46-year span (basically a normal working lifespan in America), you would get a resounding yes. 

If you know anything about the Lakers it hasn’t always been the franchise they are today.  They’ve had some terrible seasons, some poor attendance, and plenty of scandals throughout the year.  Sufficient to say they aren’t selling at their low, but rather waited until the time was right and are now selling at an all-time high.  This sounds like buying low and selling high. 

Investing Instead

All that said, that is not even what is astounding.  Here is the stat I read and want to highlight.  Let’s, for a moment, say instead of Jerry Buss buying the Lakers for $67M he did something foolish like simply invest it in the stock markets (say S&P 500).  Let us also assume he simply left it there, reinvesting dividends during all those years.  He would have experienced hyperinflation, countless wars, the tech bubble, the housing crisis, the world pandemic, and a plethora of other unpredictable events.

Clearly, if he just invested those dollars, he would be a lot worse off, right?  Wrong!   In fact, if he simply invested in the markets and didn’t panic, or sell, or literally do anything, his family would be sitting on a whopping $13 BILLION DOLLARS.  I mean, what is $3 billion dollars amongst friends?

I bring this all up because, for whatever reason, tons of people I talk to simply don’t believe the markets grow like that.  They can’t seem to comprehend that getting rich doesn’t have to be sexy or super risky.  Rather, it has to be disciplined and takes time.  I can’t tell you how many of my friends or clients love to “invest” in these super esoteric and convoluted schemes.  A venture capitalist fund over here, a private equity exclusive deal there, a movie or theatre production, or even a chicken scraps business.  Yes, I’ve seen it all, and the crazier the investment, the more excited people get about investing in it. 

Investing in Something Risky

A small part of me “gets it” that investing in something crazy can have some sort of allure.  However, simply put, I’ve rarely, and I mean rarely, ever seen these obscure investment opportunities turn into some massive windfall.  Truth be told, I never have, but leaving the door open as my memory ain’t what it used to be.  That said, when I ask my friends, they all want that quick sizzle that seems to always fade away. 

So, what is it about a boring and simple way to get rich that is so often overlooked?  Is turning $67M into 10B in a sexy manner better than turning it into 13B in a boring manner?  Do we not want to believe the markets simply go up over time as long as we don’t unnecessarily interrupt them (as Charlie Munger infamously said)?  Or is it that we get too nervous seeing the market fluctuations and thus simply don’t believe in the efficacy of the markets. 

All I can say is the markets work, and if you view things with the right mindset, outlook, and equanimity, it can make you super rich as well, although it certainly is easier if you start out with $67M!

As always, stay wealthy, healthy, and happy!