When Magic Johnson entered the NBA in 1979 fresh off a national championship victory over Larry Bird, he was presented with sponsorship offers from three companies: Converse, Adidas and Nike — the latter of which was still a rookie of its own kind as a public company. He went with Converse. It’s not a decision, financially speaking, that has aged well for Johnson.
“Converse offered me the most money,” Johnson said on Showtime’s “All the Smoke” podcast. “So you know, when you grow up broke, you take the money. [Nike co-founder] Phil Knight came in and said, ‘Hey, I can’t offer you the same type of money, but I can offer you stock.’
“I didn’t know nothing about it,” the Lakers legend continued. “My family didn’t come from money. See, that’s one thing that hurt us sometimes. When you don’t come from money, I didn’t even know what stocks was at that time. So I passed on the stocks. Can you imagine? Forty-five years. Five billion dollars that stock would’ve been worth today.”
Yes, you read that right. That’s five billion. With a B.
Magic missed on a once-in-a-lifetime opportunity with Nike. 😳
Luckily for him, everything turned out alright.
Watch episode 165 of #AllTheSmoke with @MagicJohnson on our YouTube.#ATSBestofSeason4 pic.twitter.com/3YZK469tr3
— SHOWTIME Basketball (@shobasketball) August 9, 2023
Listen, nobody is feeling bad for Magic financially. If the man isn’t worth a billion, he’s close. But he has had to work hard for that money. He only made $40 million in salary as a player, and has since gone on to make hundreds of millions more in the business world since retiring from basketball, for all intents and purposes, in 1991.
In other words, Magic, to this point, could have made likely more than five times his total net worth in purely passive income had he taken the Nike stock. Again, tough pill to swallow.
It’s easy to understand why Johnson didn’t take the Nike deal at the time. It was a risk. Nobody knew that Nike would become the money-printing factory that it is today. As Johnson said, at the time, he needed the guaranteed money, and like most of us in our early 20s, he wasn’t financially savvy enough to consider or even understand alternative payment structures.
If you’ve seen the movie “Air” about Michael Jordan’s deal with Nike as a rookie in 1984, you know that he also set up a non-traditional structure that paid him a percentage of sales on his custom shoes. That was a landmark precedent and incredibly wise decision for Jordan to properly monetize his value, and though it’s different than the stock Johnson was offered (to be fair, Jordan may have gotten some stock, too), the main takeaway is that Nike had to get creative with its offers to present itself as a viable option against the more established companies that had more upfront money to offer prospective athletes.
Looking back, Nike offered Magic Johnson a $5 billion windfall. He passed and took the sure thing. It’s good that he’s ended up in a place financially that he can have a good laugh about the misstep now.