This article originally appeared on GOBankingRates.com: 10 Money Lessons Even Warren Buffett Could Learn From LeBron James
Generally speaking, turning to professional athletes for money advice is inadvisable. As a profession, athletes have a pretty terrible track record when it comes to intelligently — or even just adequately — investing their money. However, one person has broken the mold for the often financially reckless group of young people suddenly bestowed with unimaginable wealth, and that’s LeBron James.
As one of the richest NBA players, King James has managed to give the royal treatment to his money from playing basketball, making smart investments that have positioned him well to turn his hefty NBA paycheck into an even heftier personal portfolio. In fact, his money moves have even caught the eye of the nation’s best-known investor, Warren Buffett.
“People really do have minds that function better than other people’s in certain areas that you can’t give a test for,” Buffett told USA Today Sports in a phone interview. “And LeBron, in addition to a lot of other talents, he has a money mind. And he gets stuff.” Although Buffett understands money, even he knows that someone like James could teach investors new money lessons.
Never Act on Impulse
When asked about his best money decisions, LeBron James recently told listeners of “Kneading Dough” on Uninterrupted — the multimedia company he founded — that he was faced with a crucial decision at the tender age of 18 when former Reebok CEO Paul Fireman offered him $10 million to sign an endorsement deal with the company. The deal came with a caveat, though: Sign with us now before talking to Adidas or Nike.
Showing what can only be described as nearly inhuman restraint for an 18-year-old — let alone one whose childhood had been marked by ongoing struggles to make ends meet — James turned him down. He ultimately reasoned that the only reason why Fireman would make such a lucrative offer is that he knew James was worth much more. James ultimately signed a $90 million deal with Nike en route to the massive $1 billion lifetime contract that followed after building his relationship with the company.
It just goes to show that if someone offers you a deal that has a shot clock on it, there’s a pretty good chance it’s because they don’t want to give you the opportunity to do the research necessary to see why it’s not worth your while.
Another thing that Fireman’s efforts to get James to sign with Reebok taught him was that the former CEO’s willingness to commit cash upfront was probably a sign that it wasn’t the most important part of the deal. You can frequently get a lot more value by taking equity and becoming an investor rather than just a gun for hire.
Case in point, the other “best money decision” that James cited in his “Kneading Dough” interview was Beats headphones. James accepted a small equity stake in the company in exchange for wearing the headphones back in 2008 when the company was first starting. His endorsement probably could have grabbed him a decent payday at the time, but by taking a piece of the company instead, James ultimately scored a reported $30 million for his stake in the company when it ultimately sold to Apple — the biggest equity cash payout for a professional athlete in history at the time in 2014, according to ESPN.
Limit Frivolous Spending
Of course, not everyone can secure equity deals in exchange for endorsements. However, there’s one money lesson from James that you can take advantage of without having to be a superstar: Don’t spend unless you have to.
James is actually known among his teammates and the NBA as the cheapest man in the league, despite having one of the biggest paychecks. The basketball star told ESPN’s Rachel Nichols, “I’m not turning on data roaming, I’m not buying no apps, I still got Pandora with commercials on.”
Actress Gabrielle Union — whose husband is James’ former teammate and friend Dwayne Wade — confirmed this information in a 2016 interview with Kelly Ripa. “He doesn’t take his phone if he’s not assured of WiFi,” said Union.
Click to see other rich people who live like the average Joe.
Invest in What You Know
Famed investor Peter Lynch told readers of his books to invest in what they know, positing that you need to have some sort of unique insight to get a leg up on the rest of the market. As such, James has certainly leveraged his ability to spot brands with long-term potential and secure equity deals early on that generate big returns.
In addition to his investment in Beats, James has also turned an investment in professional sports into a big return. In 2011, he took a 2 percent stake in Premier League soccer team Liverpool in lieu of $6.5 million (equity over cash, once again), and that has since grown to a value of over $32 million. Although James clearly had to do a lot of additional research to be sure the investment was worth it, sticking to a business he was intimately familiar with most likely helped him understand the opportunity he was getting when he took equity.
Keeping your eye on what’s ahead can be difficult, especially when what’s happening right now is netting you $80 million-plus a year. However, the bevy of professional athletes finding themselves falling into financial ruin almost as soon as their careers end shows just how crucial it is to prepare for changes to your earning power.
For most of us, that takes the form of stashing six months’ worth of living expenses in an emergency fund. Although James, presumably, is keeping enough cash on hand to cover expenses, he has also kept his focus on his career after basketball.
“I know there will be more time of my life spent off the floor than on the floor,” James said in his “Kneading Dough” interview.
A big part of why LeBron James is such a force on the court is his diverse skill set. From scoring and rebounding to spreading the ball around, James does it all on both ends of the court. However, diversifying isn’t just a strategy for success in his game — it’s part of how he has found success outside of basketball.
James is a well-known public figure who has leveraged his public exposure into success as an endorser and actor, while building his portfolio as an investor, producer and businessman outside of the public eye. So, even if James were to suddenly lose his scoring stroke on the court or his ability to sell sneakers, he would still have avenues available to keep making money.
Although most money lessons are about how to increase your net worth, one important one that both James and Buffett have taken to heart will only decrease your holdings: Always make room to give back. Buffett, for instance, has already signed the Giving Pledge, which commits 99 percent of his massive net worth to charitable giving in the long run.
And James has gone to great lengths to help kids growing up with some of the same hardships that he overcame. He has founded an elementary school, started his own charitable foundation and even turned one of his most regrettable moments in the public eye to $2.5 million for the Boys and Girls Club of America.
Learn From Everything
James had a pretty interesting response when asked recently about what advice he would give to his 18-year-old self: nothing. That’s because James saw the incredible value that comes from turning every mistake and misstep into a learning experience, as he expressed during an interview at a recent Nike event.
“I don’t want advice, and the reason I don’t want advice is because every experience is a teacher,” James said. “Every experience that you have is the best teacher in life. You could read books, you could have great parents, you could have great mentors, but in order for you … to be able to tackle something, you have to go through things.”
And although lessons are a little harder when they cost you money, looking for opportunities to expand your knowledge through each misstep is one of the best ways to build for the future.
If It Worked Once, It Might Be Worth Trying Again
OK, so Warren Buffett is not on record regarding his opinions about either the classic 1996 Michael Jordan/Bugs Bunny film “Space Jam” or the current plans for a sequel starring James and produced by Ryan Coogler of “Black Panther” and “Creed” fame. However, the first flick had a total lifetime gross of over $230 million. For the sequel, James — a noted expert on slam dunks — is already on board, so this has to be the can’t-miss movie of 2020, right?
Investing Experience Can Come From Anywhere
Buffett’s admiration for LeBron James is certainly heartwarming for anyone who loves the Oracle of Omaha, King James or both. But their successes — despite their different paths to achieving it — speak to how financial acumen doesn’t always come from the most predictable places, and that you don’t have to start rich to take advantage of it.
Neither Buffett nor James inherited large sums of money from their parents, so they had to rely on their own skills and instincts — not to mention a lot of hard lessons learned along the way — to build the fortunes they have today. However, in both cases, they used their solid money skills to take full advantage of the breaks they did get and turned them into successful business empires.
And who knows? Maybe you’re eventually going to have to convince your grandchildren that famed investor LeBron James actually used to be a basketball player way back when. Though, maybe don’t hold your breath on Buffett making a successful transition to NBA superstar.
Click through to read about money habits making millennials rich we can all learn from.
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