In 1979, Earvin “Magic” Johnson was the hottest basketball player on the planet. As a result, every sneaker company wanted him to wear their shoes. As discussed in the HBO series Winning Time, Johnson narrowed his choices down to two: Converse and Nike.
These were the two offers:
Converse would pay Johnson $100,000 per year.
Nike, which couldn’t afford that price, allegedly (the exact details of the offer are murky) offered him $100,000 worth of Nike stock — five years before they made a deal with Michael Jordan.
Johnson took Converse’s cash. Today, that Nike stock is worth about $5.2 billion.
Johnson is still a very wealthy man, but as he reflected on that decision he admitted that, at the time, he didn’t really understand stocks. That doesn’t surprise me, but what surprises me is that Johnson didn’t view the situation like this:
The $100,000 represented a fixed value of his worth. A stock represents potential. You don’t become the best basketball player in the world without having supreme confidence in your ability to influence outcomes. I would have thought Magic Johnson would have bet on himself.
That is not always an easy decision, as I am learning first hand. There is also nothing magical about it. We are all faced with similar decisions every day: take the cash from a big company or roll the dice with startup equity. The decision is a personal one, as everyone has different goals, risk tolerance and desires.
For me, well, the show is called Winning Time, so if you’re going to go for it, you might as well win big.
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