LeBron James has agreed to a two-year, $42.1 Million deal with the Cleveland Cavaliers, which is the highest possible amount of money he can make playing basketball in the NBA under the league salary cap.
LeBron will make just over $20 Million a year, and around $60 Million in endorsements. In all likelihood, if the maximum salary per-season was $50 Million, he would have got it, because he is LeBron James, the NBA’s pre-eminent superstar.
LeBron can score, rebound, shoot the three, pass, and has won two championships in the last four years. He has the look and swagger of a star and is the most complete player in the NBA. Between his salary and endorsements, LeBron will earn roughly $80 Million annually, which is by far the most of anyone in the NBA.
Why Blake Griffin and Kevin Durant Are Not LeBron James
There are numerous players in the NBA with similar skills and abilities to LeBron James that do not get paid nearly as much in salary and endorsements. Blake Griffin and Kevin Durant are two notable players, who on any given night, may outperform LeBron. However, both Durant and Griffin are not considered to be in LeBron’s echelon: neither have won a championship, neither are as complete, and neither have LeBron’s gravitas.
Put another way, LeBron’s superstar status allows him to earn dramatically more money than his peers.
In fact, LeBron has the potential to make so much money that he has a publicly stated personal goal of being a billionaire athlete.
With his significantly higher annual earnings, LeBron is the only player in the NBA right now that has a hope of achieving that lofty goal, even though Griffin and Durant are somewhat comparable to him in skill.
LeBron James is a Superstar, Blake Griffin and Kevin Durant are not. LeBron has a chance at becoming a billionaire, the other two do not.
Superstar Athletes and Why CEO’s Make 354 Times as Much Money as Their Employees
This discrepancy between the top and the rest of the pack is underscored by this2013 CNN article which found that CEO’s make 354 times as much money as their employees. Like sports, rising to the top of business like Oracle or Discovery Communications has disproportionately higher rewards.
Wayne Gretzky, Steve Jobs, Michael Jordan, Babe Ruth, Warren Buffett and Tiger Woods are names that are synonymous with the sport or business they have dominated, and are all examples of the fame and riches associated with being the best of the best.
Put another way, in every sport and business, the reward for rising to the top is significantly more than the reward for being second or third.
Tim Ferriss and What You Need To Know About The Superstar Effect
I first read about the Superstar Effect in this blog post by Tim Ferriss in which he outlines the relatively small difference in performance abilities between Opera Singers Juan Diego Florez and Luciano Pavarotti. He relates that Pavarotti had a voice that was a small cut above Florez, and how this lead to a dramatic difference in fame and fortune between the two:
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Pavarotti got the best gigs, Florez did not.
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Pavarotti became synonymous with Opera, Florez did not.
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Florez is considered to be ‘well off” and Pavarotti’s net worth, when he died, was between $275 and $475 Million.
You get the picture.
The lesson to learn from LeBron James, Luciano Pavarotti and others is that rising to the top of your profession, sport, or business will lead to dramatically greater rewards than the rest.