Calculating Risk

A few weeks ago, I listened to a radio interview with Dallas Mavericks owner Mark Cuban. For those not familiar with professional basketball Mark Cuban is arguable the most visible owner. He is young for an owner, and looks even younger. He often attends the games dressed like a fan and sits in the upper decks. He has proved to be a savvy owner. The Mavericks have been transformed from a perennial cellar dweller to among the top ranked teams in the league. The success on the court has been matched with financial success a rising tide lifts all the boats. One might be surprised to learn that the ownership of a professional sports team is only a small part of Cuban’s business life. In the interview he talked about his life. It seemed to follow the classic pattern of the American dream. Cuban was raised in a modest home in the Pittsburgh area. His parents moved to America for employment opportunities. He did not have any family savings to draw on to attend college, but was able through scholarships and work to attend Indiana University. He started a successful consulting business and within ten years of graduating college he was a multi-millionaire. He did not stop there. He was an avid basketball fan and since moving away from Indiana he could not listen to any of their basketball games. So he and a friend invested money in a company to make it possible to listen to radio broadcasts over the internet. Ten years later they sold the company for several billion dollars. Mr. Cuban has been extremely successful. Listening to the interview he conveyed a poise and sharp wit that gave the impression that he had a very capable mind. As one might expect judging from all his success. He made one comment in this interview that especially caught my attention. The interviewer asked him about his charity work. He mentioned several organizations that he supports, but he conceded that he had not done anything nearly the scale of Bill Gates or Ted Turner. The interviewer pressed him at this point, asking why he had not. He responded slowly. First by saying that he should do more, and that he was planning to put more attention in that area, but he confessed, “I want to provide for my family. I would hate to blow it all on a bad deal.” A billionaire worrying about losing all his money. How much is enough. Surely a few hundred thousand a million a billion I think I could manage. It is never enough. You cannot get enough money to eliminate risk. This is something Mark Cuban knows well. After all he has made his money on investments.