LeBron's Decision

[txlaw]

By now, most of us in the US have heard that LeBron James is going to join the Miami Heat next season along with Duane Wade and Chris Bosch.  James, who counts WEB as one of his friends, has stated that he wants to be a global icon.  He has also stated that he wants to be a billionaire. 

 

The decision was televised and is widely thought to be one of the biggest media spectacles that's ever been seen in the sports world.

 

So the first question is: do you guys think he made the right decision from a purely financial perspective?

 

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"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently. " -- Warren Buffett

 

The second question is: did LeBron permanently impair his brand or reputation or did he make it more strong by deciding to go to Miami?  Is a brand and a reputation even the same thing in a world where exposure will get you rich(er) despite what people think about you?

 

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Finally, does anybody see any similarities between the LeBron situation and the Biglari situation?  I sort of do, since both decisions seem to have been made in order to maximize the decision maker's wealth over the long run but have brought about some intense criticism.

 

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My hope is that our discussion leads to some insight on the connection between reputation, brand, and profit maximization, or lack thereof.

[ExpectedValue]

The best argument that I've read, which is in favor of the deal, is that this is great because it represents players figuring out a way to work outside of the league's ownership/regulatory structure and make their own decisions.

 

I don't think this was a financial decision but a "championship" decision. The three players have enjoyed playing with each other for years and wanted to figure out a way to do it all under one roof. They did that by signing relatively short 3 year contracts which would allow them to be free agents at the same time and then move to a team that could support the cap space. So instantly, this kind of maneuvering has created the best team in the NBA.

 

The people of Cleveland are mad and they think he turned his back on them. I agree, his 1 hr special was a bit on the egotistical side, but I think most of all, Lebron just wanted a championship ring and that was not going to happen with Cleveland. They simply could not build a good enough team. Basketball is a finite sport, as you age, your ability to perform wears down. Lebron could not afford to stay in Cleveland and hope the rest of the team got better in order to get him to a championship.

[tiddman]

There is a statistic (not sure of the accuracy) that 78% of NFL players go bankrupt within 2 years of retirement.  For instance:

 

http://sportsillustrated.cnn.com/vault/article/magazine/MAG1153364/index.htm

 

This makes the whole cycle of sports players becoming stars seem kind of pointless, since they are basically a conduit for money transferred from fans to purveyors of luxury goods.

 

Has LeBron elaborated on why he wants to become a billionaire?  Why isn't being a millionaire enough?

[watsa_is_a_randian_hero]

The best argument that I've read, which is in favor of the deal, is that this is great because it represents players figuring out a way to work outside of the league's ownership/regulatory structure and make their own decisions.

 

I don't think this was a financial decision but a "championship" decision. The three players have enjoyed playing with each other for years and wanted to figure out a way to do it all under one roof. They did that by signing relatively short 3 year contracts which would allow them to be free agents at the same time and then move to a team that could support the cap space. So instantly, this kind of maneuvering has created the best team in the NBA.

 

The people of Cleveland are mad and they think he turned his back on them. I agree, his 1 hr special was a bit on the egotistical side, but I think most of all, Lebron just wanted a championship ring and that was not going to happen with Cleveland. They simply could not build a good enough team. Basketball is a finite sport, as you age, your ability to perform wears down. Lebron could not afford to stay in Cleveland and hope the rest of the team got better in order to get him to a championship.

 

I'm originally from Cleveland, but I totally agree with you.  My friends from Cleveland, and Dan Gilbert have done an awful lot of trash talking lately.  However, the bottom line is, James had a contract with Cleveland.  He fulfilled his contract.  Its his choice to go where he wants.  He owes Cleveland and its fans nothing. He is not a coward for wanting to leave a team, after trying for 7 years with an organization to win a title, and failing. 

 

James put it best at his first Heat conference.  He said something about Kobe being 6 for 24 (i think thats what he said) from the field in lakers game 7, and the lakers still won.  If Bosh, Wade, or him put up numbers like that, there is no way their respective teams would have won.  They just didn't have the support.  The Cavs did not put the support around James necessary build a championship team.

[Parsad]

Doesn't really matter to me...I'm a Nash and Kobe fan...anyone out of the West baby, anyone out of the West!  ;D  Cheers!

[Myth465]

His legacy will be determined by whether they win or not. Kobe's was in the dumps when he had the rape charges and now he is back on top.

 

I also feel that James gave the Cavs all he had and 7 years is a long time. Nothing sadder then a great without a ring.

[wiessman]

I guess I'm an old timer.  The whole thing reeked of personal aggrandizement.  I harken back to the day when the team was what mattered.  It was probably an illusion.

 

Having said that, I don't have a problem with free agency (how could a self-described libertarian think otherwise?).  The major problem I have with the NBA (and all professional sports teams for that matter) is the issue of public financing of stadia.  What happens is that these "colosseums" (a reference to the Roman Empire) are financed on the public dole which then allows capital to be freed up to pay these enormous salaries to the players.  And then joe six-pack can't even afford to go to the game.  The financing capacity of the dole is then limited; no wonder our schools and hospitals are falling apart and under funded.  The Reason TV (www.reason.com) series on Cleveland is a case in point.  Moreover, I will never understand how the titans of Wall Street and public CEO's get pilloried for non-sensical pay packages in comparison. 

 

When the Martians invade us 1,000 years from now, they will observe and contemplate how such an advanced society could completely have it's priorities so screwed up.

[Myth465]

Honestly I can understand the pay differences. Jordan, Kobe, James, and the greats in Baseball, Football, and Soccer are truly one of a kind and generate a large return in entertainment value and revenue.

 

Aside from Buffett and Prem most CEOs are interchangeable, and just climbed the corporate ladder.

[watsa_is_a_randian_hero]

The major problem I have with the NBA (and all professional sports teams for that matter) is the issue of public financing of stadia.  What happens is that these "colosseums" (a reference to the Roman Empire) are financed on the public dole which then allows capital to be freed up to pay these enormous salaries to the players.  And then joe six-pack can't even afford to go to the game.  The financing capacity of the dole is then limited; no wonder our schools and hospitals are falling apart and under funded.  The Reason TV (www.reason.com) series on Cleveland is a case in point.

 

I couldn't agree more.  Sports stadiums a public necessity? A public good? This is the one of the worst uses of public funds.  It is reverse wealth redistribution.  Society bears the cost; owners and players (already wealthy) bear the rewards.

[txlaw]

The best argument that I've read, which is in favor of the deal, is that this is great because it represents players figuring out a way to work outside of the league's ownership/regulatory structure and make their own decisions.

 

I don't think this was a financial decision but a "championship" decision. The three players have enjoyed playing with each other for years and wanted to figure out a way to do it all under one roof. They did that by signing relatively short 3 year contracts which would allow them to be free agents at the same time and then move to a team that could support the cap space. So instantly, this kind of maneuvering has created the best team in the NBA.

 

The people of Cleveland are mad and they think he turned his back on them. I agree, his 1 hr special was a bit on the egotistical side, but I think most of all, LeBron just wanted a championship ring and that was not going to happen with Cleveland. They simply could not build a good enough team. Basketball is a finite sport, as you age, your ability to perform wears down. LeBron could not afford to stay in Cleveland and hope the rest of the team got better in order to get him to a championship.

 

LeBron is a great player, and he clearly wants a championship, so from that perspective it makes perfect sense to go to Miami.  As you noted, Chris Bosh, Dwyane Wade, and LeBron are good friends, and this team would certainly be a strong contender for a championship from the get go.

 

However, the decision special also shows that he was clearly considering the marketing aspects when he helped create the media frenzy around his decision.  It's really the whole media hype aspect, I think, that has gotten people super pissed off at him.  

 

Regardless of his personal motivations, I am wondering whether people think that this whole situation ultimately increased the value of the LeBron brand or decreased it.  The sooner LeBron wins a championship, the more valuable his "brand" becomes, and this move helps out in that respect.  The media hype certainly increased his exposure in the US (people who don't even care about sports know all about what was going down) and possibly has increased his exposure abroad.  It also doesn't hurt that he's going to one of the US's world cities -- and one that has a huge Latin American influence at that.  Latin America could be a nice growth market for basketball in the next few decades.

 

There is certainly a short term negative hit to his reputation, but does that fade away over the long term if he wins multiple championships?

 

Seems to be a good move if he really wants to be the richest player in the NBA.  

[wiessman]

I'll be interested to see what "good" friends the three amigos are when crunch time comes.  LeBron is a quitter.  Talented to be sure but he has quit on his teammates in the past when the bell was ringing.  And a poor sport.  I think the guy has a huge bulls-eye on his back.  He's upped the ante on those rooting for him to fail.  I don't see how that can enhance his brand.  I just don't like the cut of the guy's jib. 

 

Rant over.