#8: The NBA player who could have been WEALTHIER than Jordan!!
Michael Jordan is the wealthiest athlete in the world with $1.6 billion net worth thanks to his timely business decisions. But there's one player who could have been 16x that today...ONLY IF...
Spencer Haywood was an NBA player that few from this generation would know of. This doesn’t mean he wasn’t great in his own right. He averaged 19.2 points per game (PPG) and 9.3 rebounds per game (RPG) over his career. Almost double-double. And his career is as decorated as they come. Here’s what his resume looks like —
4x NBA All-Star
4x All-NBA (2x All-NBA 1st teams, 2x All-NBA 2nd teams)
Naismith Memorial Basketball Hall of Famer
Besides this, he also won the Gold Medal for the USA at the 1968 Olympics, got his #24 jersey retired by the Seattle Supersonics (the team he played for), and to put a cherry on top, won the NBA championship with the Los Angeles Lakers in 1980.
Despite an accomplished career, Haywood will always have one regret. If he had done this one thing differently, he would have been the wealthiest athlete in the world today, and BY FAR!!
But, as we know, it’s not the case today. The wealthiest athlete in the world happens to be Michael Jordan with a $1.6 billion net worth.
HOW MICHAEL JORDAN BUILT HIS WEALTH:
Michael Jordan is an NBA great (some say 'G.O.A.T.' and it’s hard to argue). But he is just as savvy in the business world as much as he was on the court. Today, he owns NBA franchise Charlotte Hornets and the 23XI Racing, a pro auto racing organisation in NASCAR, a car dealership, some restaurants, and also actively invests in startups.
The Result?
Today, MJ sits on a $1.6 billion fortune. Not to mention, the 5% royalty he receives on the sale of every product of the Jordan Brand, literally doing nothing!!
But, this one is not about Michael Jordan.
This is about Spencer Haywood.
Here’s the story —
Spencer Haywood came into the NBA in 1971, before which he was lighting it up in the ABA (another major basketball league at the time that merged with the NBA in 1976) where he began his professional career in 1969. He won both ABA Rookie of the Year and ABA Most Valuable Player (MVP) honours together in the same year, in his debut season. To tell you how big a feat this really is — This feat may never ever be achieved by any rookie again in future in the NBA. Or, it may happen. But it is unlikely — as unlikely as a rocket ship landing in your bedroom right now out of nowhere.
Two years into his NBA career, Haywood had already become a big star in the NBA. This was the time when he was approached by an up and coming sneaker company that went by the name Blue Ribbon Sports (BRS), which would later go on to be known as Nike. Nike was less than 10 years old back then. Nike wanted to sign Haywood for a shoe deal. In simple words, in a typical shoe deal, Haywood would have to wear Nike shoes on the court in return for a marketing fee that would be paid to him by Nike.
Back in 1973, BRS was a fledgling company that wasn’t having a very good year. Ever since the launch, the company experienced its first loss — of $57,000— in 1973. BRS was also anticipating a legal dispute with Onitsuka. Supply-demand problems in the shoe industry were on the rise due to the rising demand for shoes. Supply, being inconsistent, was not being able to keep up with the demand (though Adidas and Puma were facing the same problem of demand-supply, they were in a better position to absorb it, being big companies). Dockworkers’ strike that came later certainly didn’t help as it further delayed the shipments and hence, cash-generating chances. Add all of these problems, and BRS was looking at potential bankruptcy, the outcome that would put BRS out of business. BRS dodged the bullets though and survived through all of this. But, that doesn’t mean it was flourishing. It was still struggling.
Now, Nike or then, Blue Ribbon Sports (BRS), wanted to raise their brand awareness to a level that their brand would be on everybody’s lips (and feet, of course). But the road was jammed by the already established Adidas, Puma and Converse. BRS started signing shoe deals with NBA players. But, since BRS didn’t exactly have everything going for them, they couldn’t offer much to the athletes. So, when BRS approached Spencer Haywood, they gave him 2 offers —
A $100,000 (today’s $614,871) lump sum payment,
BRIEF HISTORY OF SHOE DEALS IN THE NBA AND SNEAKER CULTURE:
Haywood’s deal would have paid him $100,000. Even adjusting for inflation, it doesn’t come close to the multi-million dollar deals NBA players are signing today. Let’s take the latest example — Zion Williamson signed a shoe deal with Nike which is worth $75 million over five years. This gives him $15 million per year, which is the highest Average Annual Value (AAV) from a sneaker deal for any NBA player. This has been possible due to the sneaker culture that is now so deeply ingrained in the lifestyles of people. But, back in 1973, it wasn’t like that. And hence, sneaker deals back then were not as wild as they are today. But seeds of this were planted in the 1970s. Signature shoes were going to be a big thing but they were not yet big. Kareem Abdul Jabbar got his signature shoe made by Adidas. Walt ‘The Clyde’ Frazier got his signature shoe by Puma, named — “The Clyde” in 1973. Converse was a big player and had shoe deals with many NBA players in the 1970s. Converse even got the two biggest stars of the late-70s and early-80s in the league to wear their shoes — Magic Johnson and Larry Bird. This was still all business, sneakers were used for their utility and sneaker companies did shoe deals with players to boost sales. All business. But sneakers soon became part of the culture. This eruption in the sneaker industry happened in the 1980s when Nike signed Michael Jordan and launched his signature Air Jordan line. MJ’s success on the court translated to the shoe’s success in sales. Everyone wanted to “be like Mike”. Just a year later hip-hop legend Darryl “DMC” McDaniels released “My Adidas”. The sneaker culture was born. All brands had to do was to keep innovating. Nike, Puma, Adidas, Reebok were all going at it competing with each other. Trying to release better shoes. Trying to onboard the best players etc. The result —Today, almost every marquee NBA player signs multi-million shoe deals.
OR
An apparent 10% stake in Nike (as Haywood recalls)
“The number that I remember… [was] 10 percent of the stock. In talking with Nike [later], everybody said, ‘Nah we didn’t offer you that much’, but I had some stock.
Now, Haywood’s agent had the power of attorney, meaning the agent had the authority to make business decisions on Haywood’s behalf. So, the agent chose the guaranteed $100,000 sum over a 10% stake of what would become the biggest sports apparel company in the world — valued at something around $258 billion. Meaning — if Haywood and his agent had taken the 10% stake, they would have been sitting on a $25 billion fortune. And, yes, Haywood tells Nike guys said that they didn’t offer as much as 10%. But hey, even 1% of Nike stake would have made Haywood a billionaire (and a ‘wealthier than Michael Jordan’ one at that)!!
But, I don’t think there is anyone to be blamed for it, not Haywood and not his agent. Whatever happened, happened back in 1973, when no one could have known an obscure company by the name Blue Ribbon Sports would go on to become Nike and the leader in the sports apparel market. As a matter of fact, BRS was very likely to be out of business for all they knew. Back then, it was just the right decision to make. Being in that situation, it wouldn’t have made sense to forego a $100k sum and bet on a little fledgling company. Especially for the agent, who would have got his guaranteed cut off the $100,000 sum but wouldn’t have got any cut off the Nike stock until it was liquidated. Yes, choosing a 10% stake would have made for a fairytale ‘betting on the dark horse’ story for the ages. But, let’s be honest, living in 1973, the odds of BRS failing would have been way higher than BRS becoming the giant Nike.
Having said that, it’s good to see NBA players of today (and their agents) doing what Spencer Haywood and his agent didn’t do in 1973. Today, NBA players, and even other athletes in general like to make smart bets and invest their own money into up and coming start-ups instead of taking a guaranteed multi-million dollar endorsement cheque. And sometimes when God is kind, the upside on your equity investments can be INSANE. Just look at this example —
When Coinbase went public, it touched $100 billion valuation. Kevin Durant, who invested in Coinbase through his VC firm at $1.6 billion in 2017, saw his investment become 61.5x!! This means, every $1,000 invested by Kevin Durant’s firm was now worth $61,500.
Now, try beating that with the endorsement deals.
Nah, I’m just kidding. No one can just start buying up equities randomly. Athletes (or their research teams) do their due diligence before investing. Most of the times, athletes themselves use the product they invest in. Investments may or may not give extra-ordinary returns (like or unlike Coinbase). At the end of the day, it all comes down to risk appetite.
And, I’ll leave it at that. That’s all from my side today. If you loved the content, why not subscribe to have more of such in future right into your inbox. That too, for free!! This is even better than the Coinbase deal.