Wednesday, August 24, 2011


Where does the money go?

Microsoft’s Raymond Chen usually blogs about interesting things about Windows. He also throws in assorted items about other things, and today he points to some old articles about how professional athletes go broke, despite multi-million-dollar salaries.

One of the articles is an NPR story from May, and it contains this wonderful quote at the beginning:

They see [their salaries] as infinite, like it doesn’t end, like they can’t spend it all, says accountant Scott Bercu, who has handled the finances of professional baseball and basketball players. But, if you get $5 million a year, by the time you get done paying your agent and taxes, you have $2 million left to spend. That goes very quickly.

That goes very quickly, indeed, hm. I should say so! Certainly the last couple of million I saw went away before I even noticed it.

The point of the story is that unlike most highly paid people, these athletes aren’t hired for their business sense, and managing money is, let’s say, not their long suit... and, so, naturally, when they come into enormous salaries, they do what they’ve always done with money: spend it all. They need, the story says, education — just as they get training in playing their sport, they need training in money management.

I don’t know; I find this really hard to accept. Basic, rank stupidity just isn’t something I have much tolerance for, and most people don’t have to be told that even large quantities of limited resources are still limited. It’s hard to have sympathy for someone who’s paid five million dollars, only has two million left after some necessary expenses, and then finds that the two million just goes very quickly.

Maybe it’s just schadenfreude, but, no, I have no sympathy at all.


Brent said...

I wonder how much of it comes from having a "staff" that keeps the facts/truth from the "boss". If they keep telling you that all is ok, buy what you want...and you trust them...

Nathaniel Borenstein said...

It's not just athletes, and has nothing to do with their intellect, I believe. The same thing happens to lottery winners, to people who inherit fortunes unexpectedly, and (ahem) to people who make single digit millions as entrepreneurs.

Some suggest that there's a certain period of learning and "getting it out of your system" that newly rich people need to do, and if you can get through that period without spending everything, your prospects of staying rich improve dramatically.

If you're interested in understanding the strange and overly-envied problems of the newly rich, I recommend Michael Phillips:

available at