Calculating Opportunity Cost
During my rookie year, I read a book that transformed my life.
“Rich Dad, Poor Dad” by Robert Kiyosaki provided me a financial lesson in the most practical form during a time in which I had just begun earning an income.
It was 2016 and I had made the Houston Texans’ 53-man active roster as an undrafted free agent. My bank account slowly began to look a little different. That lofty $5,000 (pretax) signing bonus that dwindled over the course of the off-season was now receiving serious reinforcements every other Friday morning.
Kiyosaki put me on game. I was already privy to the world of stocks, as I had begun investing in tech stocks during my year at Stanford. But Robert told me assets > liabilities. He spoke intently about the real estate game. He is a proponent of real estate being one of the more surefire ways to building generational wealth; a healthy real estate portfolio can provide you the freedom to live whatever life you please. If you want to coach your kids’ high school football team for $17/hour while continuing to live the lifestyle of an NFL player, Robert painted real estate as the solution. If you want to purchase a fly whip or a buss down Roley, Robert illustrated that the cash flow from your real estate investments can pay for those liabilities instead of the hours you’re logging at your 9-5. Robert provided me an initial direction for my money and empowered me with the tools and general roadmap to creating financial stability.
It sounded right to me. I vowed to purchase a piece of property after every season. As I began my investing journey, I put a lot of time towards learning the fundamentals of the real estate game. I figured if inside hands can help me set an edge against an outside zone, there must also be techniques available to help me invest in real estate. So, I leaned in. I spent a lot of time combing through Zillow and Loopnet. I learned about interest rates, appreciation and closing costs. I went through the process. But it took time.
“Time is the most expensive luxury in the world. You spend it and can never get it back.”
– Roddy Rich
My real estate journey has been fruitful and I am still allocating a portion of my time, energy, and capital towards it. But, at a much lower clip than I did in my early years. Early in my career, real estate investing proved as an effective way to hedge against the short duration of a football career and the temptations of having too much cash sitting in an easily accessible account. The investing I’ve done so far has created financial stability and will lay the foundation for my financial freedom in the future.
But, as I proceeded into the past couple years, I found I was spending too much time in real estate. When I calculated the opportunity cost of focusing a majority of my time and energy on real estate, I personally concluded that I was losing in the long-run.
You see, the most traditional entry points in the real estate game require capital. Typically, in order to purchase a property you need 20-30% down payment to enter into contract. Without this capital, it can be difficult to enter the industry. And once you’re in, if you want to forcibly add value, you need even more capital for renovations. You’re fairly limited in what you can do to boom your real estate asset. Now, I am not a real estate professional nor am I pretending to be one, but I’ve found that who you are, what you do, and who you know rarely matters in real estate deals. At the end of the day, you’re going to need to front that bread.
As I began to realize this, I started to get the feeling that real estate was going to be one of those things that will always be there. When I am a 50 year-old former sexiest football player in the league, I’ll likely have the same opportunities in the real estate game as I do now as the current sexiest football player in the league. Real estate began to look like that girl I always saw pop up in my section at the club. As long as I have the capital to make the moves, she will be there.
In most other industries, however, I found this to be different. As a current NFL player, I have been fortunate enough to be able to open doors and create relationships that otherwise would have taken much more effort had I not been able to flex the NFL shield.
I concluded that my time and energy was better spent leveraging the NFL platform and its audience and access. I began to focus on my network – meeting folks whom I admire and am excited to learn from. I began to focus on my brand – vlogging with B Scar TV, collaborating with clothing brands, hopping on podcasts. I began to focus on my philanthropy – creating the Big Yard Foundation, strategizing events to bring communities together, inspiring kids to read.
I found the efforts in all of these passion categories had their impact amplified as a result of who I am, who I know, and what I do. The ceiling was higher now than it might potentially be in the future. Future me would’ve blown that b**** off if I had to, but y’all get what I’m saying.
Opportunity cost is defined as:
“the loss of potential gain from other alternatives when one alternative is chosen.”
Imagine you have two closed garage doors to choose from - Door A and Door B. You choose Door A, and behind it is one orange. Behind Door B, three oranges are revealed. Your opportunity cost is two oranges.
This window of being a professional athlete is short for most of us. For NFL players, the average career is somewhere around 3.5 years. We spend a mere 4.58% of our lives (based on the average 76.3-year life expectancy) in this hot ass window where we are able to leverage our position to help us enter and/or create any world we please. This time with which we are blessed should be treated with passion and intention. As we make decisions on where we spend our time, what we do with it, and how we do it – we should make the effort to constantly reevaluate if our decision maximizes our value given our current life positioning. If the opportunity cost of our other options is great enough, then maybe we proceed to pivot our efforts or reposition our thinking.
There are no doors if you look hard enough. Lean into your passions and leverage your position as you seek access. Visualize who you want to be and what you want your life to look like in the future. What can you do now to manifest that vision? It is never too late to take the first step towards that manifestation.
Oranges are sweet, but what you might find could be sweeter.
Brennan Scarlett
3/23/22