Many of our readers remember the late 1990s: The Internet 1.0, the.com craze, the “new economy,” Y2K, and the advent of inexpensive online stock trading. Beginning in or around 1998, until the spectacular “tech wreck” that commenced in 2000, seemingly any stock with a “.com” attached to its name experienced a period of parabolic price increases. Most of these companies (Pets.com, eToys, theglobe.com, etc.) went bust. A few were absorbed into other entities for pennies on the dollar.
During the .com boom, everybody wanted to get in on the action. And for the first time, “everybody” could. For just $10 or $20, online discount brokerages like E-Trade and Ameritrade provided platforms for retail investors to buy shares of the latest.com star.
(The timing of this post is fortuitous. We are in the throes of another speculative stock mania. That will be next week’s topic of analysis. Stay tuned).
Beginning in the 1980s, inspired in part by the blockbuster film “Wall Street,” bankers and traders were the envy of the public. The release of that movie also spoke to the times when Wall Streeters were Masters of the Universe and their excesses on display for all to see. In the decade leading up to the new millennia, online trading coupled with the .com craze exacerbated this phenomenon. Indeed, Wall Streeters and the new kids on the block, “Hedge-Funders”, were larger than life characters who could seemingly do no wrong. For a while, they enjoyed cult-like status, immune to the perils of the public’s wrath. Then 2009 happened.
The subprime mortgage fiasco ignited an intense backlash against the entire finance industry. Bailouts at taxpayer expense (the government was reimbursed, and taxpayers earned a handsome profit from their “bailouts”) enraged Main Street. No matter that a small minority of bad apples were primarily responsible for the complex financial instruments that brought the financial system perilously close to collapse; anybody who worked on wall street was suddenly a villain.
Following the .com bust, the tech industry went through adolescence and (im)matured. The result: trillion-dollar companies run by billionaire “Tech Bros” in charge of seven-figure software engineers showered with plush perks. The founders of these new economy stalwarts and their army of lieutenants were adored by the public and envied for their genius and newfound wealth. Advanced technology had ushered in exponential quality of life improvements through efficiency gains and democratization of information. The former “geeks” were the new kings in town. Then #MeToo happened.
Bloomberg news anchor Emily Chang published “Brotopia: Breaking up the Boys Club of Silicon Valley” depicting the sexist and misogynist culture of Silicon Valley. Big Tech had abdicated its responsibility to establish meaningful standards in the quest for workplace dignity and equality for women and minorities. Indeed, regarding protections, opportunities for advancement and recognition of women and minorities, Silicon Valley finds itself today, where Wall Street was a generation ago. Coupled with the increasing scrutiny of being oligopolistic gatekeepers of (mis)information, TechBros were no longer immune from the public’s ire.
Unlike in finance or tech (two professions that once enjoyed unimpeded status and near immunity from Main Street) the same does not hold true for politicians who have always drawn the wrath of many of their own constituents. Some of the reasons for this are complicated and aplenty; others are not. Politicians hold the distinction of being the second oldest profession in the world. However, many politicians share the same characteristics as the oldest profession in the world.
Consider the following: U.S. Senators and Congressman earn $174,000 per year; a comfortable living in an expensive city (D.C). Yet the median net worth of Members of Congress is a million dollars and half are millionaires. In fact, just the 50th richest Member of Congress (Lisa Rochester of DE), is estimated to be worth in excess of $10 million dollars. Let us be clear, some Members of Congress earned a lot of money before they entered politics. They worked hard in the private sector and earned their keep while adhering to the rules. We applaud that. Others married well and or inherited a lot of money. We are not going to begrudge anybody for that. Still others have spent their entire careers in politics yet somehow have very large balances in their bank accounts. That math does not add up for taxpayers on Main Street who suspect something nefarious.
Are Athletes Next?
Professional athletes are larger than life, adored by throngs of fans across America. Supporters can feel an emotional bond with their favorite teams and players, and get in a sour mood when their team loses (ask my girlfriend about that). Devotees yearn for and are treated to 24-hour coverage of their favorite teams and stars. Videos of athletes scoring the winning touchdown or hitting a game-winning homerun populate the internet. Tweets, posts, quotes, explanations, and declarations typically follow. And Main Street can now participate in the action via fantasy football and sports wagering, which is becoming legal in an increasing number of states. (Nothing like a pandemic for something “immoral” to morph into “a source of much-needed revenue”).
Is this god-like admiration for their talents and priestly forgiveness for the sins of professional athletes sustainable? Consider the bullet points and corresponding information below:
Major League Baseball (MLB)
• Average Salary $4,430,000
• Median Salary $1,400,000
• Average Ticket Price $34
• Average Cost of a Beer $5.97
• Average Cost of a Soda $4.60
• Average Cost of a Hotdog $4.95
Top Player Contracts
Mike Trout: Center Field, Los Angeles Angels
• Full Contract: 12 Years, $426,500,000
• Average Annual Salary: $35,541,666
Gerrit Cole: Pitcher, New York Yankees
• Full Contract: 9 Years, $324,000,000
• Average Annual Salary: $36,000,000
Max Scherzer: Pitcher, Washington Nationals
• Full Contact: 7 Years, $210,000,000
• Average Annual Salary: $30,000,000
National Basketball Association (NBA)
• Average Salary $7,700,700
• Median Salary $2,960,000
• Average Ticket Price $51
• Average Cost of a Beer $7.50
• Average Cost of a Soda $4.49
• Average Cost of a Hotdog $4.96
Top Player Contracts
Damian Lillard: Point Guard, Portland Trailblazers
• Full Contract: 6 Years, $257,000,000
• Average Annual Salary: $42,833,333
Giannis Antetokounmpo: Power Forward, Milwaukee Bucks
• Full Contract: 6 Years, $255,600,000
• Average Annual Salary: $42,600,000
Russel Westbrook: Point Guard, Washington Wizards
• Full Contract: 6 Years, $233,000,000
• Average Annual Salary: $38,833,333
National Hockey League (NHL)
• Average Salary $3,000,000
• Median Salary $2,300,000
• Average Ticket Price $94
• Average Cost of a Beer $7.54
• Average Cost of a Soda $4.46
• Average Cost of a Hotdog $4.84
Top Player Contracts
Alexander Ovechkin, Forward, Washington Capitals
• Full Contract: 13 Years, $124,000,000
• Average Annual Salary: $9,538,461
Shea Weber: Defense, Philadelphia Flyers
• Full Contract: 14 Years, $110,000,000
• Average Annual Salary: $7,857,142
Sidney Crosby: Forward, Pittsburgh Penguins
• Full Contract: 12 Years, $104,400,000
• Average Annual Salary: $8,700,000
National Football League
• Average Salary $2,000,000
• Median Salary $860,000
• Average Ticket Price $151
• Average Cost of a Beer $8.49
• Average Cost of a Soda $4.71
• Average Cost of a Hotdog $5.34
Top Player Contracts
Patrick Mahomes: Quarterback, Kansas City Chiefs
• Full Contract: 10 Years, $450,000,000
• Average Annual Salary: $45,000,000
Russell Wilson: Quarterback, Seattle Seahawks
• Full Contract: 4 Years, $140,000,000
• Average Annual Salary: $35,000,000
Ben Roethlisberger: Quarterback, Pittsburgh Steelers
• Full Contract: 2 Years, $68,000,000
• Average Annual Salary: $34,000,000
“Hey Dad, Can We Go To The Game?!”
Let us be abundantly clear, at TQC we support the tenets of capitalism and free markets. We do not begrudge any athlete for earning as much as the market will pay. If a player can capitalize on his unique skill set(s) to the tune of $100 million in remunerations, all the power to him.
However, might the time come when ordinary hardworking American citizens pause, scratch their heads and think something analogous to:
“We love sports and so do our kids. It is truly a pleasure for my wife and I to see our children enjoy a day at the ballfield. But we are average Joes on Main Street. We earn a combined $65,000 per year, the ~median income for a family of four in America. Some of these guys make $65,000 per game, or more. To treat our family to just one game per year to the four major sports, my wife and I consume one beer and a hot dog, our kids one soda and a hot dog costs us ~$1,500! That is a material part of our income. And wait, that does not even include parking, gas money or other residuals. And forget the playoffs, we could only dream of attending one of those higher priced games. And wait, my wife and I make sacrifices to attend these games. We forgo spending on other important items, move schedules around, sit in the freezing cold, become spectators in political battles. And wait, while most of these athletes are fine people, they do not pay our bills and could care less about me and my family. Why should we care about them?”
Will there be a public backlash against professional athletes? Possibly. In part because their compensation seems increasingly disconnected with the supposed value of what they provide, and is funded by consumers who cannot even fathom earning a fraction of their income.