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Wednesday, May 6, 2015

MAYWEATHER’S FINANCIAL TRANSITION A USEFUL LESSON

By the time you read this it will have been decided who is the greatest boxer of his generation, Floyd Mayweather or Manny Pacquiao.

The two boxers faced off yesterday morning in the most lucrative fight in boxing history. With Mayweather, win or lose, set to walk away with $120m (sh360b) and make him the world’s highest paid athlete for the second year in a row. Last year he took home at least $100m from a single fight.
Mayweather at 38, is making more money in one night than previous big money draws like Mike Tyson made in their entire careers.

How he does this is a story of understanding one’s own value and believing in it. In the process he might have changed the way boxing is organised especially with the best fighters.

But is particularly interesting when viewed against the changing role of labour globally. Labour is on the back foot. With changes in the global trading system and increased automation in the workplace the situation is not improving for workers anywhere in the world...

Back to Mayweather. Generally professional boxers are employees, their promoters set up fights, organise their schedules, negotiate endorsement, licensing and image rights. After a fight they pay off everyone – including the boxer and keep the profit – many times over what they paid the boxer, to themselves.

In 2006 Mayweather went out to change this. He forwent a $8m fight, bought out his contract for $750,000 and went off on his own to manage his own career.

By this time he was the best pound-for-pound fighter in the world but he was forgoing a guaranteed pay out up front for an uncertain income from the fights he fought, a risk previously born by his promoters. The reason more fighters have not gone the same route.

It has turned out very well for him. He has made about $400m in his career with most of it coming after 2006.

"In 2006 Mayweather stopped being a worker, leasing his labour to the highest bidder and became an owner of his own value. That is a bigger transition than we give him credit for...

No employer will pay you your true value however much you earn. It would not make sense. The businessman needs to make a profit – earn more than he spends, so why would he pay you your true value?

This is an important question for all workers because in the changing global environment, it is becoming increasingly clear that we have to stop thinking about jobs.

With tariff barriers around the world falling it is cheaper to move goods around, so a lot of manufacturing capacity has moved to China and Asia, where anything can be made cheaper than anywhere else in the world.

The west has suffered the brunt of this move with hollowing out of US industry as a prime example. But the developing world has not avoided it since their own attempts at industrialisation have stalled or collapsed altogether because no one can compete with China.

Economic history shows that industrialisation is what drove high employment in the western economies, so it’s worrying when we cannot jumpstart our own industrialisation.

Beyond that the speed of innovation means that more work process are becoming automated. This means on one hand, that the worker is becoming more productive than his predecessors but by logical extension also means fewer workers are needed to do a similar job.

Faced with this reality being able to leverage your own talents and skills, create a system around them and sell them, essentially become self-employed while evolving into a feasible company, is becoming the “workers” reality. This will become the default mode just as “looking for job” has been during our life time.

It’s inevitable.

"The trick is to ask yourself what is that you do that makes money for your company and look to monetise it for yourself. Worst case scenario a better appreciation of yourself will highlight what you need to improve in yourself and best case scenario will allow you crystallise a business model that you can exploit in the future.....

For Mayweather it was his skill as a fighter, that he has been honing since he was two, as the best fighter in his division he was not making a shabby living but by going out on his own he has unlocked more of his value for himself.

It’s hard to begrudge a man honest pay for honest work.


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