There’s this big fight this weekend between undefeated boxer Floyd Mayweather and MMA Champ Conor McGregor. They’re reportedly earning a combined $175 million +. It’s the biggest fight ever. On paper it looks like a no-brainer. Mayweather is the best boxer maybe ever. If you’ve watched him fight before it is breathtaking. The guy will go 12 rounds ducking, weaving and striking and he will look as good in the 12th round as he did in the 1st. He’s an artist in the ring. Hence why the odds for the fight heavily favor Mayweather. But I have a financial theory for this fight….
According to several reports Floyd Mayweather is in deep financial doodoo. So, if you’re a 40 year old boxer who can’t manage hundreds of millions of dollars and obviously needs hundreds of million more to be financially sound then how does this fight play into your long-term financial plan? Well, step into my office Mr. Mayweather because this one is easy.
First, there is no bigger draw for Mayweather than McGregor. He brings in an international crowd, a more diverse crowd and there’s an unknown with his fighting style that makes this fight intriguing. In addition, Mayweather should dominate the pace and style of the fight. There is no world in which Mayweather can lose this fight. He does not get knocked out. Hell, he barely even gets hit. He’s that good. And McGregor isn’t a boxer. So Mayweather should be able to determine the outcome here. Vegas does not have this wrong. Floyd really is that much better than McGregor at boxing. The reverse would be true if they were wrestling. But they’re on Floyd’s turf and Floyd totally dominates that turf like no one else.
Second, Mayweather needs to fight three times. He apparently owes $22+ million to the IRS on his 2015 taxes. I think it’s safe to assume he owes something on his 2016 taxes. And he’s going to make at least $100 million from this fight alone. So he’s going to net something like $40 million after taxes. That might sound like a lot of money, but this guy seems to blow through cash like Tony Montana in a cocaine castle.
Alright. So we know the background here. Mayweather has his perfect pawn and he needs the money badly. So the question is, does he love his perfect record more than he loves money? I would strongly advise him that he should love money more. And so here’s how we proceed:
- Fight the fight you know how to fight for about 6 rounds. Tag McGregor left and right. Duck his every best punch. Win the rounds on points. Then, around the 7th or 8th round, after the crowd has had a taste of what the talent difference is, get tagged on the chin and get back up. The crowd goes crazy. It happens again and this time you get back up looking so wobbled that the ref stops it all. It’s just a TKO, not a real KO. McGregor wins a shocker.
- This guarantees a rematch. More importantly, the crowd thinks McGregor actually won. Yeah, you could win fight 1 and get a rematch, but it won’t be nearly as exciting and if he wins on points in the first fight then the second fight will be a dud. Plus, you can still go on the world tour telling everyone “he got lucky”. After all, you won the first 6 rounds on points. He just tagged you with one lucky punch. This sets the stage for the biggest fight ever. And an even bigger pay day. And then you unleash the real Mayweather in fight 2. Which sets the stage for the rubber match and a third humongous pay day which you also win. And best of all, you turn McGregor into a Roberto Duran – an accomplished fighter who didn’t win the fights that really mattered.
So here’s the thing. If Mayweather only wins one fight he keeps his unblemished records, nets $40 million and probably goes bankrupt in the next 10 years as he comes out of retirement a few more times to fight people that no one cares about. The alternative is my advice where he throws this fight and basically guarantees $250 million in future earnings. From there the financial management is easy. He just needs a super conservative 3-4% total return portfolio, control his spending a lot better and he lives the high life for the next 40 years as the best fighter the world ever knew….
NB – I am kind of sort of kidding about this entire post.
Update – Floyd obviously did not take my advice. This either means he’s in much better financial condition than I assumed or he is about to be in much worse financial condition than he assumes.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.