Monday, February 20, 2012


For me the biggest news last week was the death of Whitney Houston. She burst on the scene when some of us were cutting our romantic teeth, plagiarizing her lyrics mercilessly in attempts to score points with the fairer sex. One couldn’t but feel what a waste her death at forty eight was, while watching videos of her past hits.

A lot of ink has already been spent eulogizing the queen of song but the tragic last years of her life point to a greater problem among African-American celebrity: an apparent failure to handle the immense wealth that comes with success.

While it is estimated that she lives behind an estate worth about $20m – a fraction of her earnings over the years, she joins a long line of black celebrities that include Michael Jackson, Mike Tyson, OJ Simpson and Gary Coleman, who have squandered fortunes – potential and actual.

Observers of financial matters would not be surprised.

"Financial illiteracy is endemic among blacks in the US, with more than half of their population without a bank account. Financial literacy is an understanding of money, which allows individuals to make choices and take other effective actions to improve their financial well-being and protect their financial resources...

As counter intuitive as it sounds it is easier to make money than to keep it.

The successful black celebrity after years of hard work – it takes more work to excel as a celebrity than it is to get a first class degree, follows a familiar pattern; they buy the biggest house, the flashiest cars and the blingest jewelry; live large, flying their private jets and patronize the high end streets. But they worked hard for their money why not let them enjoy it? We ask. And that is at the heart of the problem.

The white celebrity – often in film, music or golf is much wiser. He knows or is advised that one, money is for making more money not for spending, secondly, that there are only two decisions with money, you either invest it or consume it and finally, that there is a difference between earning money and making money.

On the basis of these three premises you are unlikely to see the white celebrity indulge in orgies of ostentatious consumption, which means they are unlikely to fall into destitution when their earning power diminishes as inevitably happens.

As an example former tennis professional Andre Agassi early in his career created a company to which all his earnings paid – prize money and endorsement fees amounting to a few million dollars a year. He was an employee of his own company, earning $400,000 annually or about a tenth of annual earnings. The company then invested this money on his behalf, multiplying his wealth to an amount many times over his total $31m career earnings. Today Agassi – whose father was an Iranian Olympic boxer and naturalised American, continues to earn from his investments and it is unlikely that he, his children or their children will ever want for anything.

"It is not that the black man is inherently allergic to wealth accumulation through steady work and diligent investing. Maybe what can be said is that the black celebrity does not have the financial expertise around him to shepherd him along, leaving his financial decision making to his base instincts. Never a good idea...

Nearer to home last week I went through the arduous task of compressing more than a 100 years of Madhvani history into 800 words. The Madhvani empire as we know it today is the product of hard work, but just as importantly delayed gratification and judicious investment.

Also more importantly the Madhvanis will never be accused of conspicuous consumption and if such displays of wealth are a sign of having “arrived” who better to have arrived than them?

Which brings us to the state of our local “rich”. When we make a few millions we plunder the company capital to buy a four wheel drive car, plan holidays to Europe and upgrade our taste in alcohol.

Partly our troubled past, which one can argue we should have put behind ourselves by now, but mainly our rural approach to urban excitement means there are barely any Ugandan businesses that are passed down the generations. The idea of a financial legacy is alien to us as we believe we must eat all we have made.

Whitney Houston’s death is sad on many fronts but it is most telling as a sign of the black’s ineptitude around money.

No comments:

Post a Comment