Lance Stephenson, guard for the Indiana Pacers, posing with a million dollars
I listen to a lot of sports radio on my drive to work, and recently all the talk is about whether Carmelo Anthony of the Knicks will re-sign with them or leave. (Yes, I am a long suffering Knicks fan hoping Phil Jackson can turn this sinking ship around). They argue that Carmelo very likely will stay because the Knicks can offer him $22 million a year versus $17 million that other teams can offer him. So for $5 million dollars extra, there is no reason not to stay. Well, for most players, their stated goal is to WIN. If that is the ultimate goal, wouldn’t you want to go to a winning team. I’m not a naive sports fan thinking that ball players should take less money. Sports owners make even more money, so far be it for me to tell the player to take less money. But when your salary gets into the eight figures, does a few million more make that much of a difference? As Bud Fox said to Gordon Gekko in Wall Street, “How many yachts can you waterski behind?” Thanks to Joe from The Free Financial Advisor for mentioning that quote in a comment on my previous post. It’s so true.
It just puzzles me when it comes to that amount of money. Why is more money still the deciding factor?
Of course, the wealthy have a much higher standard of living that I could never comprehend. It takes money to maintain that lifestyle. And I’m sure many wealthy people have seen those who fall from grace and lose their fortunes. Many celebrities and athletes have quickly loss their fortune spending way way above their means: Mike Tyson, Vince Young and Evander Holyfield, just to list a few. Another prime example is Latrell Sprewell who has made $96 million in his NBA career, but is now broke. He infamously rejected a contract offer of $21 million for 3 years. He said, “I have a family to feed … If Glen Taylor [the owner] wants to see my family fed, he better cough up some money. Otherwise, you’re going to see these kids in one of those Sally Struthers commercials soon.” I’d like to see his monthly food budget to see why he can’t feed his family on $7 million a year!
For a million dollars, Beyonce performed five songs at a New Year’s Eve party for Mutassim Gaddafi, son and national security adviser to the now deceased Muammar Gaddafi, a brutal dictator and tyrant. The year before, Mariah Carey sang at a New Year’s Eve party thrown by Mutassim. Many other celebrities who are very famous and very wealthy have also performed for dictators. While many of them have apologized and donated the proceeds to charity, I’m not sure if they’re remorseful or if it was just a public relations move.
When you have millions of dollars, do you really need to compromise your morals for another million dollars?
Another instance where I just don’t get the actions of a wealthy person is with Martha Stewart. The sale of Imclone stock with the use of insider information allowed her to avoid a loss of about $45,000. Martha Stewart is worth millions, why risk getting embroiled in insider trading when a $45,000 loss is just a drop in the bucket for her? Similarly, Raj Rajaratnam, a founder of the hedge fund Galleon Group, was a billionaire so why get involved in insider trading. He will be spending 11 years in prison after his conviction.
When you have millions of dollars, do you need to risk going to prison for more money?
Many who have made millions and are rich and famous may also be arrogant. They don’t think that they can do anything wrong. It is likely that all that power goes to their heads and makes them feel invincible. Another reason is probably because they are mindless accumulators.
What other reasons may cause the very wealthy to continue try to make more money?
I’ll never understand this mindset, but it seems that people constantly compare themselves to their peer group, no matter how much money they are making. This causes them to lose sight of all objective reality as to what is “enough.”
While I would play for one 82-game season at $7 million per year and then retire to enjoy the next 60 years of my life, someone like Latrell Sprewell blew every single dollar he ever made on ridiculous possessions. It really is hard to imagine…
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I don’t know…if I were an NBA player (my childhood dream)…I’m not sure I’d retire! =) I definitely wouldn’t be spending frivolously like many athletes though.
I think in the world or celebrities or athletes, they are so arrogant because they have been catered to all their lives. Athletes are the big people on campus and are coddled by coaches, teachers etc. and they do get away with a lot simply because they are athletes. Celebrities have their entourage that constantly tells them how great they are. I think they are actually pretty insecure, not knowing how long their star will continue to rise, so they have to get as much money as they can while they are at the top. They could crash at any time. As far as why they lose their fortune, don’t underestimate that they really may not be very smart. They have no background for managing their wealth, and frequently their education is a sham, so they can’t handle the investments. This provides the opportunity for unethical people to take advantage of them.
That’s true, I’m sure many athletes and celebrities have been catered to even at a young age which gives them a sense of entitlement. And yep, their entourage is filled with yes-men. There have been many examples of “financial advisers” taking advantage of athletes and celebrities who may not be that savvy with their money.
It’s hard to fault celebrities completely in this case, though. I have gone through life considering money, understanding how money affects my life, both positively and negatively, and I have come out with a money strategy that works for me. For me, it would be EASY not to compromise my morals in their situation. I would play one game or come out with one successful album and have enough money to last for quite some time.
However, growing up, these people were focused on one thing, whether it be sports, entertaining, etc. They didn’t have time to consider money and their relationship with it because they “knew” what the path was to fix their money problems.
And when they achieved that success, they certainly didn’t need to reflect on money issues. So they never had exposure to learning about the dangers of lifestyle inflation, what priorities can lead to happiness, etc.
Money is tempting. Pretty much everyone I know has been tempted by it at some point in their lives. It takes an active education and reflection to curb that temptation.
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Yea, it’s true that because of their upbringing, many of them may not be good with their money. That explain why many lose their fortune. But I wonder why hundreds of millions of dollars is still not enough and they still crave more.
I’ve often wondered this myself Andrew. I think there is some greed behind needing an extra million when you’re already making 25 million per year. At that point, I would look more towards winning and being in a place I want to live. But at the same time, I don’t fault any of them (except for the insider traders. That is just shady crap jerkhole moves). I think everyone is wired to avoid loss and gain as much as possible. When you reach those income levels, I think the competetive nature kicks in, and no one wants to see their worth decline. Maybe it’s societal pressure imposed by the elite earners upon the elite earners. But either way, I know I would be pretty okay with a salary like any of the ones you mentioned above.
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That make sense that we’re wired to avoid loss and to gain as much as possible. Much like the recent psychological experiment regarding mindless accumulation. Good point about competition…I guess when you’re among the elite, you’re competing with them.
Very interesting post, Andrew! I think it’s relative. To a poor person in Indonesia, he probably couldn’t comprehend why I’d leave a job I really like paying $80,000 to take on a new job that is more stressful for $160,000. I think it boils down to how accessible the party is to the viewer. To someone who’s making just slightly more or slightly less than me, I can identify with their decisions. To someone making 10x more than me, it’s very hard for me to comprehend their thinking if it differs from mine.
Of course, I don’t think it’s great to compromise your morals for money. But assuming that someone isn’t breaking the law, I can see why a player would stick with a losing team for $5M extra per year. For one, $5M can do a lot of good for one’s family, future generations, charities, etc. etc. Additionally, there’s the very likely possibility that these players simply aren’t saving a lot of that money. That fact alone justifies the urge to earn more. When you can’t (or don’t) save, you must continue to earn as much as possible.
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Yea it is relative, but hundreds of millions of dollars is rich…very rich…anywhere and everywhere. And I agree that $5m is a lot, but when you already have $17m (probably more if you’ve saved anything from previous years), does that $5m really make that much of a difference.
To the player, the $5 million raise matters less (and doesn’t improve his happiness as much) than his first $5 million. We know that part. But presuming that some of that money is making its way out of his personal budget, then it matters a lot. For example, if $100,000 out of that extra $5M raise makes its way to a charity, it provides $100k of help. That could be huge to them, even though most of that $5M might not be that helpful to the player. If that $100,000 is spent on, I don’t know, another fancy car, that probably doesn’t help him out a ton (though I guess even that helps the economy, the car dealership, workers in that factory, etc.)
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I always have to laugh when I see what these professional players are asking for. I’m sure a lot of us could retire on a few years of their salary. I can’t relate since my total worth is no where near the millions. I’m guessing greed factors in; they have so much and they continue to want more, no matter what the cost. It’s kind of sad, and just seems to be the standard for most celebrities. Money is a status symbol.
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That’s true, their salaries are astronomical. And the owners make even more. I’m a sports fan, but I don’t really spend much of my hard earned money there.
I cant fathom why people take those risk when they are worth so much. (Martha Stewart) The athletes that go broke-, I feel it happens because they have a I know more than you attitude. But never really learned how to be frugal or watch expenses based off annual income. Do you know why this pacer’s star posted with a million?
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At first I just figured that Lance Stephenson was just showing off the money, but when I searched online, it seemed that the Pacers had to sit through a mandatory league meeting centered on financial education. For some reason, I guess the money was part of the lecture. I probably would have posed with it too!
“What other reasons may cause the very wealthy to continue try to make more money?” They haven’t read John Bogle’s book, “Enough: The True Measure of Money, Business and Life.”
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I’ve got to read that too.
I think many people make the mistake of using money as a measure of self worth. If you make this mistake than no amount of money will ever be “enough”.
Another possibility in the Carmello Anthony example would be that salary is a measure of respect. If you were happy with your salary at 100k a year, would it change your opinion if one of your peers was making 250k a year? I think Melo sees himself in the elite class of nba players and elite players get max money.
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I think you hit the nail on the head. It is what I’ve heard on those sports talk radio…they equate their salary with respect. And good analogy…while $100k is a good salary, you’d definitely feel like it wasn’t enough if someone was making a lot more who was doing the same thing as you.
Actually, professional athletes have a pretty short working life. An extra $5 million dollars may make a big difference in his retirement. It’s not just the lifestyle now that he is funding, but his dreams for the future when he can no longer play. And if he’s really worth that much, maybe he can help the team be a winner.
Yea, that’s true, most athletes have a short career…especially in Football. You have to make the money while you can.
It seems like with athletes and maybe celebrities like musicians and movie stars, it’s not about the dollar amount, but the fact that joe smith made this amount doing the same thing and as a matter of some sort of pride they think they deserve more than that person. Just absurd. I can understand wanting/needing enough to cover if you ever got injured and could never play again, as that is your livelihood…but… I just read that the guy who played opposite tom hanks in captain phillips is essentially broke. I think he made like 65k two years ago and of course that’s really only about a year’s salary. Can you imagine. Here you are nominated for oscars and golden globes, and the guy you acted opposite against made millions on that job. Nothing against tom hanks of course because I love him, but it’s not like tom hanks put more EFFORT in the film than that other guy.
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Interesting example with the Captain Phillips movie…though I think part of the reason why Tom Hanks makes the big bucks is because he’s the big name bringing the audience into the seats. Without Hanks, the movie would more likely flop…no matter the effort of all the other actors in the movie.
I actually have this conversation with my husband ALL the time! When I was with a large financial advisory firm, I knew that once my biz took off I wanted to hire more people to help them grow their own career and many of the other advisors said “But that’s money out of your pocket.” And my response was, how much money do I really need? I definitely would love to get to the place financially where I don’t have to “worry” but I don’t want to get to a place financially so I can have more “stuff.” It is just an empty existence and I am on the mission to create something more out of life.
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I’d also like to get to a place where money is not a worry and I wholeheartedly agree that I’d like more in life than more “stuff.”
It’s probably like a drug: you always want more, the more you have. Plus, when you’re a millionaire, you start to hang out with other millionaires who might have more than you and afford more. You’re in a race to impress, most likely, and you’re ready to do anything for that. Plus, probably just like you said, they just don’t think that anything can happen to them since they have so much money…
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Good point, I’m sure making money is a drug and the more you make, the more you want to make. And definitely, when you hang out with the very rich…there’s bound to be lifestyle inflation.
The Martha Stewart example is the most glaring imo. Was she thinking she’d avoid a much bigger loss or was it just a lapse in judgement? We’ll never know but it’s strange to think about. I don’t blame athletes for wanting the maximum amount of money they can get. I mean, their careers are short and the odds of them winning a championship even on a good team are pretty low.
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I’m thinking she probably felt she could get away with it. As for athletes, I guess making as much as possible is the goal…I can’t compare a normal lifestyle to the lifestyle of the ultra rich.
Money is definitely addicting the more and more it gets tied to your life and self importance. I’m always surprised when people get upset that they lost a certain sum of money. To me it seems inconsequential because looking at the big picture they have so much more. But in reality, to them, it’s still money that could have been theirs and they will do anything to prevent from losing it or gaining it. Kind of sad to think about that’s how they view money.
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You’re right…making more and more money is a drug and addicting. I think it’s probably tough to lose money even if you have a lot more. Heck, I get upset if I lose a few dollars and in relation to how much I have…the few dollars is but a small amount.
I’d like to think I can feed my family on $7 million. Ha! I guess if you can demand that kind of pay raise, why not? I can’t fathom that kind of money, but I wonder if at that point, it becomes less about the actual money and more about the number for sake of competition and stature. If so and so is making $10M/yr, I’m surely worth more than him. There was show on MTV, cribs, I think??, that was all about celebs showing off the size and opulence of their homes, their limited edition chrome-coated cars, etc. Makes me wonder what their views are on frugal blogs, ha! But I’ll surely keep Mr. Sprewell words in mind for my next job performance review. LOL.
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Yea, it absolutely has to do with competition and stature. I remember MTV cribs…and the Lifestyles of the Rich and Famous back in the day. No need to be frugal when you have that much money right? Let me know how that next job performance review goes!
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Andrew,
At that income level you’re surrounded by the elites, thus you benchmark where you’re at against your surroundings. What seems a lot to us isn’t a lot to them. Someone who makes $10 an hour believes $20 is great pay, while someone making 80K wants to get to 100K and doesn’t think $20 hr is that much.
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While I totally agree with you, I think these people get so wrapped up in their expensive lifestyles and so obsessed with their money that they fear losing it and not having enough.
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In the case of athletes, we have to remember their careers can be pretty short. You can get signed one day and injured or cut the next. Also $1 million is not really $1 million for them. It’s more like $500-$600 hundred thousand after taxes, agent commissions etc. I think it’s ok to accumulate wealth for a few reasons: leaving a legacy for future generations and charitable contributions. Personally, I would be honored to see my great grand children go to college on my dime so they could pursue their passions and contribute to the world in a positive way.
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You’re right that athletes have relatively short careers, but when we get to the tens and hundreds of millions, it just seems that money shouldn’t be an issue anymore. I’m not sure how many of them are trying to accumulate more and more money to leave to future generations and for charity…it seems more that they are living for today.
This reminds me of that whole “Affluenza” debacle with the kid who killed people in a drunk driving incident, but somehow being rich is used as an excuse. In the case of Anthony, I’d think being on a winning team could be a major deciding factor, especially if he’s investing his money well and feels he can sustain his lifestyle making a few million less.
Speaking of athletes and money you should check out 1) “Broke” the ESPN documentary on Netflix 2) The Bloomberg Game Changer about Magic Johnson (also on Netflix) and 3) the Planet Money podcast titled LeBron James is Underpaid (episode 427). I think they’d all really interest you!
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Thanks for the recommendation…they definitely sound interesting and I’ll have to check them out. I remember reading about the Affluenza debacle…such an injustice! The kid pretty much left a trail of devastation with his poor choices and got a slap on the wrist. The judge seemed to try and say it wasn’t about “Affluenza” but I’m not what other explanation there is.
I think it’s greed, plain and simple. Anyone who can’t “feed their family” on $7 million per year needs a huge-ass reality check!
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Haha, yea I think he lost all support after he made that statement!
I have often wondered about this, Scottie Pippen apparently filed for bankruptcy even though he made around $120 million during his basketball career. I think it really comes down to lifestyle inflation that we could never fully understand. To them, the idea of not having a live-in cook and maid staff is beyond comprehension. Grab the Swiffer and clean their own floor? Yeah right. The number of former athletes who end up broke is pretty startling.
A bunch of former athletes who have lost their fortune. Most of them from spending extravagantly. I think Pippen bought an expensive Jet…that didn’t work! Plus he made some bad investment decisions. When you’re making that much money, lifestyle inflation is expected, but some of these guys go really crazy.
It would be really hard to imagine what to do with more than a million or two. Honestly beyond the first million, what do you do but buy vanity?
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Well…some lifestyle inflation is expected when you get to that level of rich. I can understand that…but you’re right, at a certain point, it’s just to show off.
To some a lifetime dream, for others just the penny lying under the couch. Seriously, some people make so much money in a day that if they were to give a large sum of cash to charity ($2 million) it is only a few hours of working for them.
Great post!
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Yes it is a lot of money! I think Miguel Cabrera of the Tigers signed a contract which will basically pay him a few hundred thousand dollars EVERYTIME he steps up to bat!
It’s always mind-boggling when I hear about celebrities or athletes who end up being broke after their career. I think unfortunately when these massive sums of money are earned in a short amount of time, instant gratification comes into play to the point of excess.
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They definitely have an issue with instant gratification. I’m sure there are much different pressures when you roll with the social circles they’re in.
LOVE this as usual, Andrew. DB40 makes a great point too, I think. Anyone living in a third world country would LOVE to have my husband’s paycheck, and if we had a million in cash, we could likely live off of it for life. Sometimes I just have to wonder, though, like you said, how many yachts can a person waterski behind. Don’t the ultra rich get bored running out of extravagances to spend money on?
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Thanks Laurie. It’s definitely all relative, but when you get to tens and hundreds of millions of dollars…do you really need anymore? I’m wondering the same thing…do they get bored? Actually I think many of the very rich probably are and are also unhappy. I think that’s why many of them also turn to drugs. You can’t always buy happiness! =) It’s great to have money, I won’t lie…but some of the best things in life are free.
“I’d like to see his monthly food budget to see why he can’t feed his family on $7 million a year!” HAHA! I’ve often wondered about this, too. If you’re a multi-millionaire, what’s the big deal? Take your money and shut up! A big part of me wants to say it’s just about ego. But I don’t know. Maybe it’s not about money at that point, but about the principle–they know how much the owners/producers earn, and since the players/actors think are contributing to that insanely high percentage, they want a part of that wealth, too. I’m not saying they shouldn’t be stoked to have millions. I’m just not 100% convinced it’s as simple as, “they’re jerks and they’re greedy.” The first part of Chris Rock’s Rich vs. Wealth bit comes to mind here. I dunno, just a thought. I’m sure many of them are just greedy jerks.
The Gaddafi and insider trading examples, though, are just mind-blowing, yeah. One of the things I’m most thankful for about my financial security is that I have the luxury of making decisions based on my principles and morals. That hasn’t always been the case.
You’re right, I think a lot of it is about ego and “respect.” No doubt the owners make a lot of money…much more than the players. I have no problem with them making as much as they can, it just seems like “more money” shouldn’t always be the reason for the decision.
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It amazes me how people lose their way. The problem is most people don’t know the definition of “enough” and how to apply it to their own lives. After you hit a certain number, it’s all diminishing returns. However, that isn’t all. All of that junk you buy robs you of time and just causes more headaches. I want a million dollars, but the least amount of stuff I can get by with. I’ll then be gloriously free to do whatever I want.
Money can free you, but many choose to let it enslave them*.
*Oh man, you just gave me a good post idea! Thanks and good night!
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Looks like you’ll be free pretty soon Mr. 1500! Love that quote there and I look forward to reading that post!