534: The Economics of Professional Sports

This week’s Wealth Formula Podcast is about the economics of sports—if you are a sports fan like me, you will love it.

But before we get to that, I want to give you my two cents on one of the most important elements to financial success in anything: conviction.

As I write this, Bitcoin sold off from a high of $126K to under $90K. Other cryptos have lost 50-90 percent of their value in the same time. It’s been called a blood bath. Some are even saying it’s over for Bitcoin.

I might even believe them if I hadn’t seen the same story at least 5 times before over the past decade. True bitcoiners have tremendous belief in what bitcoin means to the world.

Someone who bought $1,000 of Bitcoin in 2010 and simply refused to sell would now be sitting on hundreds of millions of dollars. That is the reward for true conviction.

The irony of this bitcoin cycle is that many of those individuals with high conviction are finally cashing in on the fruit of their patience. Almost every day, another wallet that hasn’t been active since 2011 is selling off a billion dollars into the market into the hands of Wall Street and governments. That’s why prices are tumbling. 

But don’t be fooled into thinking that these buyers are the dumb money holding the bag. The story does not end here. Nor is the Bitcoin story a one-off either. History repeats itself as the story of investments unfolds over time. 

In December 1999, Amazon stock traded at $106. After the dot-com crash, it fell to $5.97. Every talking head had a eulogy written for the company. But if you were crazy enough to hold through the storm, your conviction paid off spectacularly: $10,000 invested in Amazon in 2001 is worth over $20 million today.

Now, moving on to the topics of sports. One of my favorite examples of conviction is from 1920, when George Halas bought the Chicago Bears franchise for $100. 

The Halas family could’ve “taken profits” countless times. They lived through multiple depressions, a world war, a dozen recessions, five or six league restructurings, labor disputes, player strikes, and decades of bad seasons. Anybody else would’ve bailed.

But they didn’t, and today, the Chicago Bears are valued at over $6.3 billion.

These stories have different time periods and different industries, but they all teach the same lesson: Conviction is one of the most profitable assets you can own.

That’s the message I want to leave you before we move into a perhaps more entertaining topic: the economics of professional sports.

Most people think of sports in terms of touchdowns, rivalries, and Super Bowl rings. But the truth is… professional sports is one of the greatest wealth-creation machines in American history.

Few people understand those engines better than our guest this week. He’s one of the clearest, most respected voices in sports economics today, and he’s going to break it all down for us: salary caps, streaming deals, and team valuations. 

If you are a sports fan, you are going to love this week’s episode of Wealth Formula Podcast!