For Your Own Good, JR Smith, Get It Together

Earlier today, the mercurial JR Smith was fined $50,000 by the NBA following his attempt to untie Greg Monroe's sneaker.  After a video of Smith succeeding in untying Shawn Marion's sneaker surfaced and quickly went viral, Smith was reportedly issued a warning.  Clearly, he disregarded said warning, and now he'll be forced to dig deep into his wallet.  Again.

According to ESPN's Brian Windhorst, the NBA has fined Smith approximately $1 million over his ten seasons as a professional.   Windhorst also notes that this figure represents only publicized punishments, meaning that, in reality, the sum could be a good deal larger; but we'll take it at face value.  Keep in mind that this $1 million is in addition to the $1 million he was fined during his Chinese caper.  In all, JR's shenanigans have cost him $2 million of a possible $37 million.

Okay, so what?  What's $2 million to a man who's made $37 million?  Well, according to a simple concept known as time value of money, quite a goddamned bit, actually.

Time value of money can measure the expected value of some amount of today’s money at some time in the future.  This expected value is known as future value.  The idea is easiest to understand when put to use.  So, as an example, let's examine the future value..er..potential cost of JR Smith's disciplinary expenses.

Two-million dollars is a substantial sum of money.  Thus, let's assume JR, who, in an alternate universe, is not a knucklehead and has never incurred a substantial fine, saved then invested this money rather conservatively.  First, though, we must consider taxes.  According to my old man, CPA/CFP/a bunch of other financial designations, the NBA probably subtracts players' fines from pretax salary ("unless they're trying to screw them").  So, had JR been taxed on his $2 million in the state of New York, where he presently plays, he'd have been left with about $1 million (I know, I know, half the amount was earned in China, and foreign contracts are often announced net of taxes; but let's look past that minor detail).

So, JR, 28, invests his million dollars.  For the next 37 years, he achieves an average return of seven percent, which is in the ballpark of the stock market's historical return minus three percent for inflation.  At age 65 (known as "normal retirement age"), JR Smith, who is not a knucklehead, has seen his $1 million grow to $12 million (real value, adjusted for inflation). 

Even $12 million down the drain, alarming as even the thought of it ought to be, shouldn't be enough to break a man who figures to earn $60 million or more playing basketball.  Rumor has it, though, JR was "financially broke" upon his return from China in 2012.  The specifics of this situation are unclear, and, needless to say, many rumors are utterly unfounded; but if we are to take "financially broke" to mean a net worth of $0, then reports suggest JR blew through approximately $25 million in eight years.  JR's decisions to accept a Chinese contract with no opt-out clause as well as, upon his return, a contract offer from the Knicks only slightly larger than one from the Clippers corroborate his supposed brokeness at the time period in question.

Admittedly, this has all been somewhat speculative, and JR has enough unspent money remaining on his current three-year deal to last a lifetime, given just relatively responsible management.  And, unless he keeps shooting at a 34-percent clip, this deal will likely not be his last.  Still, though, in his refusal to conduct himself professionally, JR has already cost himself more than he probably realizes.  Having already been both suspended and fined this very season, he's given no indication that a change is in store. 


I don't dislike JR Smith --- in fact, I've closely tracked and thoroughly enjoyed his roller-coaster career since its beginning --- so I haven't written this for the sake of kicking a man when he's down.  I simply fear the young man is expressing token signals of being destined for classic NBA tragedy, in which half of all players are bankrupt just five years into retirement.  Just prior to his most recent fine, for instance, Smith was on Twitter making light of the shoe-gate incident (tweets have since disappeared) that, as I demonstrated, could cost him ever so dearly.  His actions certainly don't express the degree of foresight one would hope to see in a 28-year-old man of immense potential to do exceptionally well not only for himself, but also for those around him.

Time to get it together, JR.