Building Wealth Is About Understanding and Managing Critical Risks

KEY POINTS

• Focusing solely on investment risk is shortsighted; athletes must consider career and social risks to achieve long-term financial success.

• Career risk, like transitioning from sports to business, can lead to substantial wealth and personal fulfillment, as demonstrated by athletes like LeBron James, Michael Jordan, or Serena Williams.

• Embracing social risk, such as entering new environments or business negotiations, is crucial for expanding opportunities and building wealth, as exemplified by Magic Johnson and Tom Brady.

👉 Bonus: Below you will find five ChatGPT prompts that you can use to develop your expertise in this area.

When most people think of building wealth, they naturally focus on financial strategies—stocks, bonds, index funds, and alternative investments. They gauge their tolerance for investment risk, often taking questionnaires to measure how much volatility they can handle. Higher risk tolerance suggests a willingness to invest in assets with the potential for fast, large gains—and equally large losses. Conversely, lower risk tolerance tends to steer investors toward safer, more conservative instruments, with slow but steady returns.

However, this focus on investment risk can be shortsighted. Building wealth is not just about choosing the right financial assets; it’s about understanding and managing other critical risks, particularly career and social risks. For elite athletes, these often-overlooked factors can play an even more pivotal role in financial success and long-term satisfaction, both during and after their sports careers.

The Misplaced Focus on Investment Risk

Traditional financial advice emphasizes investment risk above all else. Advisors routinely ask clients to define their risk appetite on a spectrum from conservative to aggressive, shaping their investment strategies accordingly. But as with many athletes, a focus solely on financial risk ignores the bigger picture. An athlete’s life extends far beyond investments, encompassing career transitions and social interactions, both of which involve significant risk.

Investment risk, while essential to consider, is only one part of a much larger wealth-building puzzle. Many people, including elite athletes, often believe that those who achieve significant wealth have an unusually high tolerance for investment risk, assuming that fortunes are made through big bets in the stock market or aggressive financial strategies. However, the wealthiest individuals, including many high-profile athletes, typically accumulate wealth by embracing different types of risk—particularly career and social risks.

Career Risk: The Key to Post-Athletic Success

For athletes, career risk often looms large, especially as they contemplate life after professional sports. The average career in elite sports can be relatively short, and transitioning to a new profession requires a willingness to face uncertainty. This is where tolerating career risk becomes essential.

Consider Michael Jordan, arguably the greatest basketball player of all time. After his first retirement in 1993, he took a major career risk by pursuing a stint in professional baseball—an entirely different sport. Though that chapter of his career was short-lived, Michael’s willingness to take such a risk is an example of how athletes must be open to new challenges, even if the outcome is uncertain. He returned to basketball with renewed focus and eventually leveraged his career risks into extraordinary success in the business world, including ownership of the Charlotte Hornets and a lucrative partnership with Nike that turned the Jordan Brand into a global powerhouse. Michael’s career risks paid off not only on the court but in setting the stage for his post-athletic business ventures.

He has adeptly leveraged his iconic status to build a diverse and lucrative empire far beyond the court. His eponymous Jordan Brand, a subsidiary of Nike, generates an estimated $6.6 billion in annual sales, cementing his position as a dominant force in the athletic footwear market. Michael's entrepreneurial acumen extends to sports team ownership, with his sale of the Charlotte Hornets for a reported $3 billion marking a significant return on his initial $275 million investment. The six-time NBA champion has strategically diversified his portfolio, holding stakes in sports betting company DraftKings, co-owning the premium Cincoro tequila brand, and venturing into NASCAR team ownership. Michael's business prowess is further evidenced by his restaurant ventures and shrewd investments in tech startups and real estate, all contributing to his estimated $3.5 billion net worth and solidifying his status as the wealthiest athlete globally.

A discussion between Frida AI Fridason (Entrepreneur & Advisor, former S(ai)lor) & Tom AI Tomson (Entrepreneur & Investor, former Mount(ai)n Biker) on the topic:

Be aware that this is one of our AI experiments, so Frida and Tom don’t really exist.

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Similarly, Serena Williams has demonstrated a remarkable tolerance for career risk. After dominating tennis for decades, she pivoted toward the world of business and venture capital, launching Serena Ventures to invest in early-stage companies. Stepping into a male-dominated field, Serena embraced the uncertainties of entrepreneurship, knowing that her tennis career wouldn’t last forever. With a net worth of $290 million, Serena has leveraged her athletic fame into lucrative endorsement deals, including a longstanding partnership with Nike. Her business empire, spanning sports recovery products, multimedia production, and even a stake in the NFL's Miami Dolphins, underscores Serena's transformation from tennis champion to formidable business mogul.

Through Serena Ventures, founded in 2014, she has cultivated a diverse portfolio of 85 companies, with an impressive 79% led by underrepresented founders. Serena's investment acumen is evidenced by her backing of 14 unicorn companies, including the edtech platform MasterClass, which reached a $2.75 billion valuation in 2021. Her entrepreneurial pursuits extend to personal ventures, such as her S by Serena clothing line, Serena Williams Jewelry, and the recently launched Wyn Beauty.

Serena’s calculated risk in shifting her career focus has paid off, making her not only one of the wealthiest female athletes but also a successful investor with a growing portfolio in industries far removed from the tennis court.

These examples illustrate how athletes who embrace career risks, rather than shying away from them, set themselves up for greater financial and emotional returns in the long run. The willingness to take on new professional challenges—even outside of sports—can lead to exponential growth in both wealth and personal fulfillment.

Social Risk: A Critical Component of Success

While career risk is widely acknowledged, social risk is often underappreciated, particularly among elite athletes. Social risk involves putting yourself in unfamiliar or uncomfortable social situations, such as networking, public speaking, or business negotiations. These are the personal interactions that build relationships, open doors, and create opportunities that can amplify wealth-building efforts.

Take Earvin "Magic" Johnson, one of the most famous examples of an athlete leveraging social risk for success. Known for his magnetic personality and leadership on the basketball court, Magic took that same approach to the business world. After retiring from basketball, Magic built an empire by embracing social risk, from negotiating high-profile business deals to making bold moves into real estate, movie theaters, and other ventures. His willingness to step into the business world, initiate difficult conversations, and put himself in situations where failure was a real possibility set him apart from many former athletes.

Today, through Magic Johnson Enterprises, founded in 1987, he has strategically diversified his portfolio across various sectors. Magic's acumen is evident in his successful partnerships, including a lucrative venture with Starbucks. His investment prowess extends to sports team ownership, with stakes in the Los Angeles Dodgers, Los Angeles FC, and the Washington Commanders, the latter acquired for a record-breaking $6.05 billion. Magic's urban investment initiative, the Canyon-Johnson Urban Fund, has financed 31 real estate developments across 13 states, demonstrating his commitment to community development1. With his stake in EquiTrust, a $14 billion financial services company, and strategic investments in sectors ranging from healthcare to entertainment, Magic has adeptly leveraged his brand to build a business portfolio valued at over $1 billion. His success in urban markets has not only generated substantial returns but also paved the way for increased corporate investment in underserved communities, solidifying his status as a visionary business leader. His story demonstrates how social risk—taking the plunge into new relationships and environments—can lead to immense financial success.

Another example is LeBron James. His wealth extends far beyond the basketball court, thanks in large part to his social risks. From his role in negotiating one of the largest contracts in sports history to starting SpringHill Company, a media and production enterprise, LeBron has consistently stepped into new and unfamiliar roles. His decision to leave Cleveland for Miami in 2010, though controversial, was a calculated social and career risk that ultimately boosted his personal brand, expanded his network, and positioned him as both a cultural and business icon. LeBron’s social capital and willingness to embrace these risks have enabled him to forge partnerships and business ventures that will sustain his wealth long after his basketball career ends.

Through strategic partnerships and savvy investments, LeBronn has diversified his portfolio across multiple sectors. His 1%-stake in Fenway Sports Group, valued at approximately $90 million, grants him partial ownership of prestigious assets including the Boston Red Sox and Liverpool FC. LeBron’s entertainment venture, SpringHill Company, has rapidly ascended to a $725 million valuation, producing content for major studios and creating branded material for blue-chip clients. His prescient investment in Beats by Dre yielded a $30 million windfall when Apple acquired the company. LeBron has also demonstrated acumen in the food industry, with his initial sub-$1 million investment in Blaze Pizza now estimated to be worth $30 million. His lifetime deal with Nike, reportedly worth over $1 billion, underscores LeBron’s exceptional brand value and business foresight. These ventures, combined with his real estate holdings and other investments, have propelled LeBron’s net worth to $1.2 billion.

For athletes, social risks often involve engaging with sponsors, media, and potential business partners in ways that might feel uncomfortable at first. However, those who navigate these situations skillfully often find that the rewards—both financial and relational—are substantial. Athletes like Magic Johnson and LeBron James show that stepping into the unknown, socially and professionally, is key to building and sustaining long-term wealth.

Balancing Risks for Optimal Wealth Building

For athletes, the lesson is clear: tolerating career and social risks often yields greater rewards than tolerating investment risk alone. While building a solid investment portfolio is crucial, true wealth-building often comes from leveraging one’s personal brand, taking calculated career risks, and embracing the social challenges that come with life after sports.

Athletes who invest in both their professional transitions and social networks are likely to find that the returns from these risks far exceed those from any single financial investment. Much like balancing an investment portfolio with a mix of asset types, balancing life risks—both career and social—can create compounded returns. The key is not just to avoid risk but to manage it strategically. A diversified “life portfolio” that includes career pivots, bold social moves, and personal growth investments will often generate the most significant long-term gains.

Tom Brady, for example, has leveraged his athletic prowess into a formidable business empire that extends far beyond the gridiron. Beyond his lucrative NFL contracts and endorsements, Tom has invested in a diverse portfolio including real estate ventures, health and wellness brands, and technology startups. Furthermore, he has ventured into various business areas, from media production with his 199 Productions (global, multi-platform production company developing original, premium content) to a sports apparel brand. His foray into the digital collectibles market with Autograph, an NFT platform co-founded in 2021, has attracted high-profile athletes and celebrities, positioning Tom at the forefront of the burgeoning Web3 space. Through TB12 Sports, his venture capital arm, Tom has strategically invested in a portfolio spanning health and wellness, apparel, and fitness technology. The TB12 Method, promoting functional training and personalized recovery, aligns with Tom's own career longevity, while his Brady Brand apparel line taps into the lucrative sportswear market. This multifaceted approach not only mitigates risk but also capitalizes on Tom's personal brand and expertise in performance and fitness, setting a new playbook for athletes transitioning into the business world.

And now, with the acquisition of a 5% minority stake in the Las Vegas Raiders, Tom is back in football. But this time, again, in a completely new role for him. All these post-career moves reflect Tom's ability to balance both career and social risks, leveraging his celebrity and connections to explore new ventures. Tom's strategic business acumen and strong personal brand have solidified his position as one of the most influential athletes in the world. As athletes transition into life beyond sports, those who, like Tom, diversify their "life portfolio" are the ones who continue to build wealth long after the final whistle.

Career and social risks are about playing the long game. In this sense, tolerating these risks can lead to the same kind of compounded returns as a well-managed investment portfolio. The wealthiest people aren’t necessarily those who took the biggest financial risks but rather those who balanced their investment portfolios with calculated life risks. It is the overall return from our life portfolios, not just our financial portfolios, that truly matters.

5 PROMPTS THAT ATHLETES CAN USE TO DEVELOP AND BUILD EXPERTISE

• How can I effectively balance career risk and investment risk as I transition from professional sports into business?

• What strategies can I use to leverage my personal brand to create new business opportunities after my athletic career ends?

• What are the key factors to consider when forming partnerships and building a strong business network in industries outside of sports?

• What lessons can I learn from athletes like Michael Jordan and LeBron James on building wealth through entrepreneurial ventures and diverse investments?

• How can I build a diversified 'life portfolio' that includes career pivots, personal growth, and social relationships to ensure long-term success beyond sports?

👉 Check ChampionsChat GPT for your prompts.

Conclusion: Rethinking Risk Tolerance for Athletes

For elite athletes, the journey to building lasting wealth requires a shift in perspective. Many enter their post-athletic careers assuming that financial investments alone will secure their future. While managing investment risk is critical, the real drivers of wealth often lie in an athlete’s ability to tolerate career and social risks. These risks—whether transitioning to new industries, building businesses, or leveraging personal relationships—carry immense potential for long-term financial and personal rewards.

Career Risk as a Catalyst for Reinvention

One of the biggest challenges for athletes is the finite nature of their professional sports careers. Unlike traditional careers that can span decades, an athlete’s prime years in sport are limited, making the stakes higher when planning for life after the game. Tolerating career risk, whether by launching a business, entering a new industry, or pursuing further education, becomes not just a path to wealth, but a means of reinventing oneself. As athletes leave behind the structure and certainty of their playing days, those who are willing to embrace uncertainty and push the boundaries of their comfort zones are the ones most likely to find new success.

Michael Jordan, Serena Williams, and Tom Brady—all prime examples of athletes who embraced career risk—did not merely rely on their past accomplishments to sustain them. They took bold steps into unfamiliar territories, such as entrepreneurship, investment, and media production. For athletes reading this, the lesson is clear: career risks are not obstacles but opportunities for growth, both financially and personally. The post-sports career landscape is vast, with potential for reinvention and achievement in countless fields.

Social Risk as a Gateway to Opportunity

Equally important is tolerating social risk. Athletes often live under intense public scrutiny, making social risk—whether networking with business leaders, speaking publicly, or entering high-stakes negotiations—feel particularly daunting. Yet, those who embrace these risks often discover that they lead to some of the most rewarding and lucrative opportunities.

Magic Johnson and LeBron James are striking examples of athletes who mastered the art of social risk. Their willingness to engage in high-profile business deals, launch media companies, and negotiate partnerships opened doors that investment risk alone could never have achieved. For athletes, networking, brand-building, and even cultivating public speaking skills can offer pathways to opportunities far beyond what they achieved on the court or field.

The ability to step into social arenas, whether negotiating business ventures or building professional relationships, is essential for athletes transitioning out of sports. It requires facing fears of rejection, judgment, or failure—but it also positions athletes to connect with decision-makers, investors, and industry leaders who can help them expand their wealth and influence.

Balancing Risks for Holistic Wealth

Ultimately, the key for athletes lies in balance. Tolerating investment risk is important, but it should not overshadow the more impactful risks of career transformation and social engagement. These areas hold far greater potential for building both financial wealth and personal fulfillment. Athletes who succeed post-retirement are those who diversify their life portfolios, embracing calculated risks in various domains of their lives—not just their investment portfolios.

Athletes have the advantage of possessing both a unique platform and a strong personal brand, which can be leveraged in ways that traditional investors cannot. By embracing career and social risks, athletes can build wealth that lasts long after they’ve left the game. The financial world offers many paths to success, but for athletes, the ability to tolerate broader life risks—whether it’s starting a business, entering a new field, or mastering the social intricacies of business relationships—is what truly separates the financially secure from the financially extraordinary.

Building a Legacy Beyond the Game

At the core of this approach is the desire for athletes not just to build wealth, but to build a legacy. When athletes balance their investment risk with thoughtful career moves and strong social strategies, they create lasting influence and financial security that extends beyond their playing days. They redefine themselves not just as athletes, but as business leaders, investors, philanthropists, and cultural icons.

In today’s fast-moving world, where professional sports careers can end abruptly due to injury, age, or changing dynamics, athletes must think ahead. Career and social risks, while intimidating, offer the most promising routes to long-term success. As athletes expand their horizons beyond the world of sports, they must embrace this new reality: the greatest gains in wealth and fulfillment come not just from managing investment portfolios, but from taking calculated risks in the broader arenas of life.

The future of an athlete’s wealth doesn’t lie solely in financial markets—it lies in their ability to pivot, connect, and embrace uncertainty. And it is those who take the leap, both in their careers and social spheres, who will find not just wealth but the satisfaction of having built something that truly lasts.

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I really appreciate you reading my note today.

Peace,

Irg

Irg’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. This work may feature assets and entities in which the author has invested.

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