As a lifelong fan of the NBA’s Los Angeles Lakers, I watched with interest when it was announced earlier this month (June 2025) that an agreement had been reached to sell the storied team for a U.S. professional sports franchise record of $10 billion. I noted with pleasure that the Lakers’ long-time rival, the Boston Celtics, sold two months earlier for “only” $6.1 billion. Just like Magic over Bird, the Lakers crushed the Celtics yet again!
The mainstream media sensationally reported that the Buss family turned their father’s $67.5 million purchase into an astounding $10 billion! However, things aren’t always what they seem. Since Dr. Jerry Buss purchased the team in 1979, some quick math shows that this 14,714% gain over 46 years is equivalent to an 11.48% annualized return. The S&P 500, with reinvested dividends, returned 15,447% during the same time frame, or 11.59% annualized!
This juicy nugget has not escaped everyone. Personal finance enthusiasts on social media claim that if Dr. Buss had invested the $67.5 million in an S&P 500 index fund at the beginning of 1979 and reinvested the dividends, his family would have had nearly $10.5 billion at the beginning of 2025, a $494 million increase over the Lakers’ sale price.
While beautifully illustrating the power of time, compound interest, and index fund investing, something about the comparison just didn’t sit right with me. U.S. sports franchises have seen significant value increases over the past two decades, primarily due to large TV and streaming deals, as well as an expanding global fan base. As impressive as the S&P 500 returns have been over the past half-century, I had a hard time believing that they outpaced owning such a popular and successful sports franchise. In honor of my beloved Lakers, this post will examine the financial details behind the recent headlines.
Complex Transaction
Dr. Jerry Buss (PhD Physical Chemistry), who made his initial fortune in Los Angeles real estate, purchased the Lakers, along with the Los Angeles Kings of the National Hockey League, the Forum stadium in Inglewood, CA, and a 13,000-acre ranch in the Sierra Nevada from Jack Kent Cooke for $67.5 million. Cooke wanted to get rid of his California property amid a divorce in which he would ultimately pay the largest settlement in history at the time—$42 million.
Dr. Buss didn’t pay $67.5 million for the Lakers. As noted by daughter Jeanie Buss in her book Laker Girl, “Dad’s purchase of Cooke’s assets broke down this way: $33.5 million for the Forum, $16 million for the Lakers, $8 million for the Kings and $10 million for Cooke’s Raljon Ranch.”
The Los Angeles Lakers
Now that we know what Buss actually paid for the team, the math starts mathing. With a $16 million purchase price, a $10 billion valuation constitutes an annualized return of 15.02%, significantly outperforming the S&P. In comparison, $16 million invested in the S&P 500 in 1979 would be worth “only” $2,487,563 at the beginning of 2025.
Unfortunately, the Buss family no longer owns 100% of the Los Angeles Lakers. Dr. Buss sold 4.5% of the franchise to former Laker superstar Earvin “Magic” Johnson in 1994, 25% to Phillip Anschutz in 1998, and an additional 4.5% to Anschutz at some other point (the details of this transaction were not publicly disclosed). At the time of his death in 2013, Buss’ family inherited the remaining 66% of the franchise. The recent sale reportedly leaves the family with an 18% minority ownership interest in the team.
To examine the actual return of the Buss Family, we must take these equity sales at face value, although there is likely more than meets the eye. The sale to Magic Johnson may have been a form of payback for services rendered as a player and coach. Anschutz owned the group behind the Staples Center in Los Angeles, where the Lakers moved in 1999, and Buss may have received additional value, given that he sold to his new landlord. Since these are complicated, private transactions, we have no access to the details.
To assess the current total value from the Lakers purchase, we will assume that all proceeds were invested in the S&P 500 at the time of each equity sale.
Putting it all together, the Buss family has created a total value of $7.28 billion, which is less than the current value of the franchise but significantly more than the alternative 1979 investment of $16 million in the S&P 500.
Other Assets
We must also account for the other assets acquired in the transaction.
The Los Angeles Kings
In 1987, coin collector Bruce McNall purchased the Kings from Buss in three blocks for a total of $15 million. Since the sale was in three blocks throughout the years, I started the investment at the beginning of 1988.
The Forum
The Forum hosted the Lakers, LA Kings, and LA Sparks (WNBA). In 1999, Buss sold the Forum to the L. A. Arena Company in a deal valued at less than $20 million.
The Ranch
Unfortunately, I was unable to find any information about the 13,000-acre ranch in the Sierra Nevada, so I will assume it was sold immediately for the same price and the proceeds invested in the S&P 500.
The rest of the assets purchased in 1979 did not perform as well as the Lakers did, bringing the total annualized return from the initial investment down to 11.35%. The real stinker was The Forum, which became obsolete when the Lakers moved from Inglewood to downtown LA and the $375 million Staples Center in 1999. Interestingly, the Los Angeles Kings are currently valued at $2.85 billion, which would represent a theoretical 13.62% return if Dr. Buss had held onto it to the present day.
Ultimately, comparing the purchase of multiple businesses to an investment in the S&P 500 is not apples-to-apples, as we will now discuss.
Sports Franchises are Businesses
While sports franchises may be the ultimate trophy for billionaire owners, they are also functioning businesses that generate significant revenue and (usually) profits. Teams generate revenue through merchandise sales, ticket sales, local television rights, and other sources.
The Lakers
Buss knew the Lakers were a profitable business that he could improve. In 1979, he stated, “The Lakers are a good ordinary investment. Nothing spectacular. In the past, they have probably averaged around $500,000 a year in operational profits, and the franchise value has appreciated $500,000 a year. However, if we get into some pay television there, that could add as much as $2.5 million in profits.” And improve he did. According to Forbes, the Lakers generated $522 million in gross revenue and $199 in EBIDTA in 2024.
The LA Kings
While the Lakers were profitable, the Kings, well, not so much; however, it seems that Buss had a plan, stating, “With the Kings, you have the all-important question: Can hockey ever be a West Coast sport? I don’t think anyone knows the answer to that. The Kings definitely lose money every year . . . However, in the first few operating years, the tax treatment would be such as to allow a breakeven situation as regards cash flow. To make money steadily, the Kings have to sell another 3,000 season tickets. If they can, great. If not, I’ve made a bad deal.” While no longer owned by Buss, the LA Kings generated $337 million in revenue and $110.1 million in EBITDA in 2024.
Other Operating Businesses
The Forum
The Forum was an event center that hosted concerts, as well as being the home of the LA Lakers, LA Kings, and eventually, the LA Sparks (WNBA). In 1979, Buss said, “I like to buy real estate that can’t be replaced. The Forum is like that—30 acres of commercial real estate in a very desirable location. If anyone tried to build a Forum today, they’d have to charge $15,000 a night, not $10,000. So, it’s effectively irreplaceable. It’s rented now about 220 times a year. If we got that up to 260 times, we’d have a very profitable venture. Also, we’re in a controlling position for all pay TV out of The Forum. We get a piece of it for any concerts or boxing matches or whatever. That could also help make it a very profitable venture.”
The purchase of the Forum basically consisted of two parts: (1) the real estate and (2) the operating business. So, while Buss lost money on the sale of the building in 1998, I assume the events business was profitable during his 19-year ownership.
Why the S&P 500 is Not a Fair Comparison
The supposition is that Dr. Buss could have invested $67.5 million into an index fund in 1979, reinvested the dividends, and had more money in 2025 than from his purchases. While theoretically possible, as S&P index funds did exist, having been introduced by Jack Bogle and Vanguard in 1975, it is not a fair comparison for multiple reasons.
Leverage
Although he purchased the sports teams himself, Dr. Buss partnered on the largest portion of the deal, the $43.5 million of real estate. He didn’t spend $67.5 million out of his own pocket; instead, he used partners and leverage to control assets. You can more easily use leverage to purchase assets that produce enough cash flow to cover the debt service, such as real estate and profitable businesses.
If Buss used 50% leverage to purchase the assets, he only put $33.75 million into the deal, which means a more apt comparison would be to invest the same amount in the stock market in 1979. His theoretical 2025 returns from this S&P 500 investment would, therefore, be half of the comparison amount, or $5.25 billion instead of $10.5 billion.
Dividends
The total annualized return of the S&P 500 includes dividends, which are always assumed to be reinvested. Taxes associated with reinvested dividends are irrelevant if the investment is inside a tax-advantaged account and/or the investment is small. However, taxes become a significant issue when dealing with large sums of money in a taxable brokerage account, especially at the historically higher yields and tax rates of the 1980s. We must assume that there was no way for Buss to make such a large investment in a tax-advantaged account and thus would be responsible for taxes on the dividends.
The S&P 500 yielded 5.24% in 1979, so a $67.5 million investment would have earned $3,537,000 in dividends in the first year alone, which, at the time, were taxed as ordinary income. The highest marginal tax bracket in 1979 was 70%, which means Buss would have had to come up with nearly $2.5 million for taxes in order to reinvest the dividends fully. By 2024, even with the yield down to 1.36% and the tax rate on dividends at 20%, the investment would have generated over $130 million in dividends, costing more than $26 million out of pocket.
In the 46 years that the Buss family would have had to hold their investment in the S&P 500, the taxes on reinvested dividends would have totaled $396,825,733! If they had withheld only enough of the dividend to pay the taxes and reinvested the rest, the portfolio total in 2025 would have been “only” $6.5 billion, instead of the $10.5 billion quoted on social media—still a fantastic 10.46% annualized return.
A More Realistic Comparison
If you combine these two issues and assume that Dr. Buss invested $33.75 million into the S&P 500 in 1979 and only reinvested the post-tax portion of the annual dividend, you end up with a more realistic account balance in 2025 of $3.27 billion. The annualized return of 10.46% is slightly lower due to the tax issue, and we started with less money invested because of the lack of leverage.
Like a Kareem skyhook, a no-look pass from Magic to Worthy, a lob from Kobe to Shaq, or any of their 17 NBA championships, the Lakers investment pulled off the victory.
Conclusion
Catchy headlines, quickly written articles, and attention-grabbing social media posts rarely tell the whole story. Dr. Jerry Buss did not turn a $67.5 million investment in the Los Angeles Lakers into $10 billion. Additionally, he couldn’t have simply invested the same amount of money in the S&P 500, waited 46 years, and emerged even richer.
While it’s never a bad idea to invest in broad-based, low-cost index funds, in this case, Buss made the right decision in 1979. He enjoyed the prestige and glamour of owning the Lakers, decades of cash flow, the glory of multiple championships, and, in the end, set his family up for an incredible, record-breaking exit.
Most of us don’t have the option of purchasing a sports franchise, but medical professionals can buy other businesses. Our company purchased three urgent care clinics last year, and Heather just recently purchased a non-medical business. Like Dr. Buss, buying an existing business provides cash flow, tax benefits, the opportunity to improve performance, and the possibility of an equity exit, albeit without the glamour of owners’ boxes, courtside celebrities, and the Lakers Girls.
Fortunately, for those who don’t want their own business, index funds allow you to passively own a small portion of every publicly traded company. The S&P 500 has returned an annualized 11.59% over the past 46 years with reinvested dividends and 10.46% if you need help with the taxes. For the average medical professional who can steadily invest in tax-advantaged accounts, index funds will reliably make you rich without the notoriety of running a pro sports team.
Thanks for reading! If you’re wondering why someone from the Midwest loves the Los Angeles Lakers, here’s a bit of history that isn’t relevant to money or finance. I was a rabid basketball fan as a child in the early 1980s, and at that time, there were only two teams that mattered: the LA Lakers and the Boston Celtics. As we did not have cable TV, the only games I was ever able to watch were the Sunday afternoon games on the network channels. More often than not, they featured the Lakers or the Celtics, who were the two best teams of the decade. All my friends chose sides, and I was drawn more to Magic and Showtime than Larry and Tradition.
I am nothing if not loyal. The Chicago Bulls won their first championship by defeating the Lakers in the 1991 Finals, so I spent the next decade unhappy as a Bulls hater living in Illinois. I patiently suffered through the Eddie Jones and Nick Van Exel years until we reached glory again with Kobe & Shaq. I spent many nights in the basement of my medical school “studying” and watching Lakers playoff games in ’00, ’01, and ‘02. My wife later lived in LA, and we attended many games. I’ve been on the waitlist for season tickets for about 15 years and am finally getting close!
While I was obsessed with basketball in my youth, my passion as an adult is personal finance. Subscribe to BusinessIsTheBestMedicine.com to receive articles about personal finance and the business of medicine! Leave a comment below if you love (or hate) the Lakers, sports team investments, or have any questions. Thanks for Reading!