Last week the Milwaukee Bucks were purchased by two hedge-fund billionaires for $550 million. In a recent piece for Grantland, Bill Simmons tried to nail down what exactly drives the super rich to acquire NBA teams, a purchase that—at least by the numbers—is often a pretty lousy investment.
Simmons concluded that for many owners, exclusivity and prestige outweigh straight number crunching: “You can’t rationally assess the “value” of anything when ego is involved. What’s the value of sitting courtside as everyone watches YOUR team?” Apparently over a half a billion dollars, even for a losing, small-market team. After all, according to Simmons, “plenty of rich people can buy a plane or an island, but only 30 of them can say they own an NBA franchise.” It’s about supply and demand. As long as the supply in question remains incredibly limited, the super rich will remain drawn to what Simmons billed as “the world’s most exclusive club.” Here’s how he broke it down:
If you pretend the NBA is an exclusive beach on Turks and Caicos, it makes more sense. Let’s say it’s the single best beach in the world, and it can only hold 30 houses. Let’s say some of the houses are bigger and prettier than others, only all of them have the same gorgeous ocean view. And let’s say all 30 owners feel strongly that their investments will keep improving, barring a collapsed stock market or an unforeseen weather catastrophe, of course. Does it really matter if you bought one of the ugliest houses on that beach? Don’t you just want to crack the 30? You can always knock the house down and build a better one … right?
That’s the National Basketball Association in 2014. Who wants to be on the hottest beach? What will you pay? How bad do you want it? Get one of those 30 houses and you can invite your friends down for the weekend, show them around, make them drinks and eventually head out to your deck. And you can look out and watch the sun slowly setting, and you can hear the water splash, and you can hear your friends tell you, “I love the view, it’s spectacular.” Because right now, it is.
Photo: Wikimedia Commons