Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Thursday, December 2, 2010

Michael Jordan's House

OK. So Michael Jordan bought a house and, all in, it's going to come to around $20 million. This has gotten a lot of commenters' knickers all in a snit. And the economics of it all is coming out. How could someone who played a game afford that kind of house when average Americans who worked "real" jobs all their lives blah! blah! blah!... The same arguments that come out over and over and that are dealt with in econ 101 - at least they should have been dealt with.

First off, I will admit that I find it hard to understand how someone wants a house with 11 bedrooms, a two story guard house etc. My house has 4 bedrooms and I'm trying to figure out how to downsize. But all of this is besides the point. If he wanted a $20 million purple dog house - hey, it's his money.

Secondly, just for the record, I've never heard of any of the commenters. The world has heard of Michael Jordan. He has entertained millions. That has something, obviously, a bit to do with the economics. When you have a skill that will fill an arena with people willing to pay top dollar, it is rare. Michael Jordans or Lady Gagas don't come along every day. And this gets us into the economics.

Economists worried about this fairness issue early on. They framed it in terms of what they called the diamond-water paradox. How could something like water, which is necessary for life, have a price of zero when a luxury item - total unnecessary- such as a diamond carries a high price. Through this paradox, they came to understand that value in use is not necessarily the same as value in exchange. School teachers, fire fighters, police officers, the military, hospital workers - the most valuable members of society - don't command as much in the work place as entertainers, money managers, etc. Value in exchange is determined by what economists call marginal utility and marginal cost (works out to demand and supply). A flawless diamond is very rare and is very difficult for mother nature to produce and, hence, carries great value in exchange. A glass of water has zero marginal utility (unless you are in the desert) because you've already had a lot of water.

This is important because many people, like the commenters, go a step further and proclaim that the free market system is unfair, etc. They haven't thought it through, but the implication is that they have a better way to set prices - they know what is "fair."

Let's hope it never gets to that point. Better: I would suggest the commenters work on taking off from the foul line and dunking the basketball. Then I'll pay the big bucks to see them. I have to admit, I don't understand the Lady Gaga thing - I just threw that in for effect.


  1. I wish I had the problem of what to do with $20M. I know I sure wouldn't buy an 11 bedroom house. I have 5 bedrooms now, and as the kid begin to move out the house is too big and becoming a pain to take care of. But it is his money and he earned it fair and square by being the best basketball player of his era with the championship rings to prove it.

  2. Great post and funny too! Yes, I saw the Michael Jordan house yesterday too. I thought the same thing when reading the comments (it's his money, so what does it matter to you what he spends it on). Nonetheless, people do presume to know what's best: hence wealth-redistributionist.

  3. haha, funny post. I don't think anyone understands Lady Gaga, including herself.

    If I had $20m, I would just travel everywhere I wanted. No need for big empty rooms.

  4. D Was said........

    Yeah good post Pops!!!

    You put the last nail in the coffin with: " Better: I would suggest the commenters work on taking off from the foul line and dunking the basketball. " Ha ha that got me laughing!!!

  5. I agree with you DIY, what's the fuss about? Some people burn their money on awkward objects that previously touched a special (famous for something good or bad) person. Humans are a weird bunch, every one of em thinks he knows better!

  6. Great post--but it made me think of a statistic I recently read. It was in the Toronto Star, suggesting that 60% of NBA basketball players declare bankruptcy within 5 years of their retirement. Mike Tyson and Evander Holyfiend also made tens of millions, but both of them are broke. One of my heroes (a bike racer named Eddy Plankaert) is selling tires after making loads of dough. What do you think the odds of MJ being financially well off are? My guess? 50-50.

  7. It has already gone to that point many times in history, and still today. There are plenty of places where we see rationing and black markets (did you know that Canada is full of bribery in its medical system since private systems for some aspects of health care delivery are outlawed? That's right. In order to avoid getting Dr. Joe Blow, some people are paying $10,000 or more, and this is already after paying $6,000 to $30,000 or more in taxes JUST for the medical system).

  8. And just to further add to that point, people like my grandmother get completely shafted. No way she can bribe a doctor $10k to get preferential treatment, so instead she waits six months without even KNOWING when her surgery date will be, and the doctors always say "oh, it will be soon, we'll let you know when."

    She got lucky and she was finally able to find a doctor at another hospital, who did the surgery within a short period of time, and no bribe necessary. ;) Not everyone is so lucky.

  9. Even conventional financial commitment consultants are suggesting that property owners re-finance their present loans. If you took out a loan at a high amount several years ago, re-financing will get you a low cost. This means you will pay less monthly in interest and cut down your monthly installments. financial freedom