Kareem Abdul-Jabbar: I Hired an Idiot to Manage My Money
Well, not those exact words, but that was the sentiment behind it. Offering some life advice for a younger version of himself in an Esquire column, retired NBA superstar Kareem Abdul-Jabbar provided some poignant anecdotal evidence on investing.
Allowing someone else to manage your money is a huge leap of faith. Psychologically, letting go of control of something as important as a retirement nest egg or a child’s tuition is difficult. On the other hand, good financial planning is difficult. Improperly investing that cash means it could not grow enough to satisfy future needs — or worse, a bad investment could result in losses.
There is no secret formula to investing. Good investors pursue strategies more like artists than scientists (though scientific tools are certainly applied), and the process of the most successful money managers in the business is notoriously difficult to emulate. What works for one investor may not, and probably will not, work for another. Every person has their own investment goals, and has to bushwhack a new trail in order to get there.
But most people have little — if any — time for bushwhacking. It’s not realistic for someone who works full time to also juggle children, a hobby, or a social life alongside the hours and hours of thought and research it takes to pursue a truly competent investment strategy. This is why money managers exist, and in the pursuit of saving time people turn to financial advisers and trust them with the fate of their assets.
Unfortunately, but not too surprisingly, this does not always go over so well.
As a professional NBA player, Abdul-Jabbar and his peers certainly had cash flow, and definitely did not have the time (or, back then, the interest) in becoming financially literate. Instead, they trusted their cash to financial managers, and — worst of all — they chose financial planners based solely on the advice of friends, without verifying whether or not the person was at all qualified.
“I chose my financial manager, who I later discovered had no financial training, because a number of other athletes I knew were using him,” he wrote. “That’s typical athlete mentality in that we’re used to trusting each other as a team, so we extend that trust to those associated with teammates.”
This type of thinking extends into everyday advice, when friends and family offer well-meaning tips on subjects they may not be particularly informed on, or recommend an unqualified financial planner who has duped them into trusting them. “Consequently, I neglected to investigate his background or what qualified him to be a financial manager,” Abdul-Jabbar continued. “He placed us in some real estate investments that went belly up and I came close to losing some serious coin.”
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