Author Topic: Andrew Luck - Retired at 29 with an extra $25M severence package  (Read 4672 times)

nereo

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Re: Andrew Luck - Retired at 29 with an extra $25M severence package
« Reply #50 on: August 27, 2019, 06:35:53 AM »
I believe the notion that it's better to be an owner than an employee is confounded with survivorship bias. The examples given (e.g. Michael Jordan) are from successful players-turned-owners.  But there are plenty of examples where this didn't work out so well.  Many players have invested a fortune to become owner (or part owner) but never got much of a return on that 'investment'.  Even more common is the ex-player that becomes an owner of a 'farm'/semi-pro team that goes bust.  Or former players that become the owner of any number of businesses, from restaurants to scouting agencies, and discover that competence on the field does not translate to competence in the front office or board room.

While compensation *can* be an order or two magnitude higher for owners over players, the advantage players have is that their compensation isn't as tightly correlated to the success of one individual team.  Just like employees in the rest of the business world, if their company starts tanking they still get paid according to their contract, and talented individuals can jump to a better team when their contract ends (i.e. "free agency").  IN some cases an owner will go bankrupt trying to keep a struggling franchise afloat - yet players still get paid, even when they go 0-16.  They don't get playoff bonuses, but the can count on getting paid their millions regardless of the outcome.
« Last Edit: August 27, 2019, 08:13:35 AM by nereo »

ReadySetMillionaire

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Re: Andrew Luck - Retired at 29 with an extra $25M severence package
« Reply #51 on: August 27, 2019, 06:49:57 AM »
I believe the notion that it's better to be an owner than an employee is confounded with survivorship bias. The examples given (e.g. Michael Jordan) are from successful players-turned-owners.  But there are plenty of examples where this didn't work out so well.  Many players have invested a fortune to become owner (or part owner) but never got much of a return on that 'investment'.  Even more common is the ex-player that becomes an owner of a 'farm'/semi-pro team that goes bust.  Or former players that become the owner of any number of businesses, from restaurants to scouting agencies, and discover that competence on the field does not translate to competence in the front office or board roam.

While compensation *can* be an order or two magnitude higher for owners over players, the advantage players have is that their compensation isn't as tightly correlated to the success of one individual team.  Just like employees in the rest of the business world, if their company starts tanking they still get paid according to their contract, and talented individuals can jump to a better team when their contract ends (i.e. "free agency").  IN some cases an owner will go bankrupt trying to keep a struggling franchise afloat - yet players still get paid, even when they go 0-16.  They don't get playoff bonuses, but the can count on getting paid their millions regardless of the outcome.

I was posting something similar. I would add that the examples cited are from the top five greatest athletes/entertainers in the last forty years: Jordan, LeBron, Tiger, Brady, Dr. Dre, etc.

The fact is that a very, very, very small fraction of these athletes have the starpower to make something like this work. A random golfer on the PGA tour won't get anywhere near the fraction of Tiger. Stephen Marbury and Tracy McGrady lost millions trying to emulate MJ because they didn't have the necessary gravitas to make their brands work. Multiple NFL lineman tried starting weight lifting companies that failed.

As someone who is friends with several professional athletes, your best long term path is to live well below your means, get as many endorsements as possible while you are playing (my one friend has a gym membership for life and other similar arrangements), and leverage your next career move while you are playing. For many athletes, this means coaching. But you have to network and be smart about this. You could also network with your school. Anthony Schlegel, a former linebacker at Ohio State, started an awesome football equipment company.

So, the idea that you should just be an "owner" and start your own brand really only applies to maybe one percent of athletes. Some of them could also start their own businesses like Schlegel, but just like the rest of us, that requires a ton of hard work and a couple breaks to work out.

nereo

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Re: Andrew Luck - Retired at 29 with an extra $25M severence package
« Reply #52 on: August 27, 2019, 06:59:06 AM »
As someone who is friends with several professional athletes, your best long term path is to live well below your means,...

I think we can put a full stop right there, and expand it to include everyone, not just professional athletes.
For the high-paid stars we are talking about in this thread (e.g. Andrew Luck) their compensation is enough where living below their means is sufficient to be FI for life.  Once you clear ~$10MM you can live an upper-class lifestyle forever, if you are smart with your money.

For most other athletes where they are more likely to earn under $1MM over their entire career they will of course need to be smart about hteir 'next chapter' in life.
FWIW I was a high-caliber athlete in college in a sport where even the absolute best struggle to earn as much as a doctor or lawyer. It's been informative to watch many of my former friends and teammates try to transition into the working world when they spent most of their 20s competing and living off 4-to-5 figure endorsement deals instead of climbing the business ladder.
« Last Edit: August 27, 2019, 07:01:15 AM by nereo »

BoonDogle

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Re: Andrew Luck - Retired at 29 with an extra $25M severence package
« Reply #53 on: August 27, 2019, 07:37:14 AM »
Andrew Luck's story belongs on the Epic FU Money thread.