Tidbits 2 – Fallen Stars

A while ago there was an article on WSJ.com regarding post-playing career bankruptcy rates for professional athletes.  While I cannot recall the specific numbers, the highest rate was in the NBA (some 70%+ within 3 years of hanging up the sneakers), followed by the NFL and the MLB had the lowest (but it was still ~30%).  The vast majority of us can only fantasize about a pro-athlete’s paychecks – $100MM+ multi-year contact, plus endorsements (there are 11 of them in the NFL, including Michael Vick, the only player in history of any league to have more than one such contract, e.g. pre-incarceration and post-incarceration).

So two recent articles on Sports Illustrated on Lenny Dykstra and Antoine Walker really befuddled my mind…   Both had ~100MM in life-time earnings, one going to jail for fraud (Dykstra) and the other languishing in Boise’s developmental league with a seven-figure debt and a myriad of lawsuits.  How is this possible?  Aren’t there start-ups (including one of mine), that would go like gangbusters to produce positive returns for investors, if given a mere fraction of these earnings?  These former all-stars in their respective sports blame the  rock-star lifestyle (Dykstra was still flying private planes while penniless), poor investment decisions (both invested in real estate during industry decline) and surrounding themselves with bad influences (Walker at one time had up to 70 friends and family members on payroll).  Some blame such downfall to rags-to-riches mentality, e.g. many pro-athletes came from nothing so when they have something, they make poor decisions, much like how a good chunk of lottery winners go bankrupt not too long after winning their millions.

Others blame the league front office for their failure to mentor, educate and intervene.  I say you just have to look in the mirror to lay the blame.  Sad stories indeed – hopefully there’s good endings for both…

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About Richard Lee
Experienced finance and operations professional. Currently partner in five companies, adjunct professor of economics at Columbia College and executive contributor to a small business blog (www.SMBmatters.com); following corporate finance, M&A and management consulting tenures with Orbitz and Diamond Technology Partners; and six years of service with the United States Army.

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