A billionaire bought a soccer team and says an index fund would have paid more

Sports 4 min 80 sources

Peter Mallouk paid a record $700m for Sporting Kansas City, then said sports teams are worse investments than stocks. The numbers back him up — and explain why franchises still sell for billions.

Key takeaways

A billionaire paid a record $700m for an MLS club and openly says stocks are a better investment — and the Lakers' own returns (11.5% a year vs the S&P's 12.4%) prove his point.
Sports teams sell for billions because buyers want the trophy, not the cash flow, and leagues keep the number of teams artificially small to keep prices climbing.
Manchester United will consider £2bn for a stadium while £1.3bn in debt, and Premier League clubs' losses jumped over 600% — because sport is run for glory, not profit.

The man who just paid a record price for a Major League Soccer team will happily tell you it was a bad investment. That is the strange logic running through sport’s money this week — from Kansas City to Manchester to Las Vegas.

The billionaire who prefers stocks

Peter Mallouk spent hundreds of millions of his own cash this year to buy a majority stake in MLS side Sporting Kansas City, valuing the club at roughly $700m — an MLS record [3]. Mallouk is a wealth adviser worth an estimated $16.1bn, ranked 18th among the world’s richest sports-team owners [3]. And he says, plainly, that he still prefers the stock market.

His own example is the Los Angeles Lakers. The Buss family bought the club in 1979 for $67.5m and sold a majority stake last year at a $10bn valuation [3]. That looks spectacular. But run the maths and it isn’t: the annual return works out to 11.5%, just below the S&P 500’s 12.4% over the same years [3]. The same $67.5m left in a plain index fund would have grown to about $16bn — more than the Lakers fetched [3].

“If you were evaluating it purely as investment, you could have performed better with a lot more anonymity, a lot less hassle and a lot less drama,” Mallouk said [3]. He admits he “didn’t really look at it from an economic perspective” when buying Sporting KC [3].

That is the tell. Mallouk’s own quote names it: “Sometimes you have people that have already made all the money they want to make, and they’re in this for other reasons” [3].

Why the price keeps climbing anyway

If teams are mediocre investments, why do prices keep breaking records? Because the buyers are not really buying cash flow — and the supply is kept tiny.

Look at Las Vegas. A group led by Jerry Colangelo has lined up an $8bn war chest to land an NBA expansion franchise [14]. Eight billion dollars — for the right to be handed a team that does not exist yet. The NBA controls how many franchises exist, and it adds new ones rarely. That scarcity is a choice, and it is why the entry fee climbs each time the league opens the door.

Expansion fee, in plain terms, is the price a league charges a new owner to create a brand-new team and join the club. The existing owners set it, split it, and benefit when it rises — because a higher entry price lifts what their own teams are notionally worth.

Manchester United and the £2bn stadium

The same instinct shows up in bricks and steel. Manchester United unveiled plans this week for a new 100,000-seat stadium, 350 metres from Old Trafford, with a working cost of £2bn [4][19]. The club is already about £1.3bn in debt, and executives admitted the project may load on more [4].

United’s leadership pushed back on the obvious worry. “This needs to be a sanity project, not a vanity project,” said Collette Roche, the stadium project’s chief executive [4]. Since Sir Jim Ratcliffe bought into the club two years ago, United have cut costs hard, including roughly 450 redundancies [4]. Yet they are still willing to consider £2bn of new spending on a ground — because the stadium is identity as much as arithmetic.

Public money often carries the same logic. The Kansas City Chiefs are moving to a new $3bn stadium in Kansas, with the state funding about 60% of it through special bonds [27]. Cities and states pay a premium to keep or attract a team, for reasons that rarely pencil out on a spreadsheet.

The businesses that lose money on purpose

Under all of it sits an uncomfortable fact: top-level clubs frequently run at a loss. A Deloitte football-finance report this week found Premier League clubs’ combined pre-tax losses rose more than 600% in the latest accounts [45]. Record revenue, record losses — because the money that comes in goes straight back out chasing players and glory.

That is the machine behind the headlines. A sports team is priced like a trophy, not a business. The number measures how much the wealthy want to own it, not how much it earns — which is why a man who paid $700m for one can call it, without contradiction, a poor place to put your money.

02 · Lesson · why it matters

Some things are priced by how much people want them, not by what they earn

When a buyer wants the thing itself — the trophy, the belonging, the name — the price stops tracking what it makes and starts tracking their desire, and that quietly prices out everyone else.

Two facts that shouldn’t fit together

A man pays a record price for a sports team. Then he says, out loud, that he could have made more money leaving the cash in a plain index fund. Both things are true, and he means them both.

That should feel like a contradiction. We assume price and worth are the same word wearing two coats — that if someone pays $700m for a soccer club, the club must be worth roughly $700m as a money-making machine. The buyer just told you it isn’t. So what is the price actually measuring?

Price as cash, price as meaning

Most of what we buy, we price by what it does for us. A used car is worth what it saves you over walking. A share of a company is worth the stream of cash it will pay you. The number tracks the use.

But some things are bought for what they are, not what they earn. A trophy. A name. A seat at a table you always wanted to sit at. When the buyer wants the thing itself, the price stops answering to the earnings and starts answering to the wanting. And desire has no ceiling the way cash flow does.

The Lakers make the split visible. Bought in 1979 for $67.5m, sold last year at $10bn — a return of 11.5% a year. Spectacular, until you notice a boring index fund did 12.4% over the same stretch, and would have turned that same money into about $16bn. As a business, the team slightly lost to the market. As a trophy — eleven championships, courtside for the Showtime era, your name on the franchise — it did something the index fund never could. The price paid for the second thing, not the first.

The scarcity is a choice, not a fact

Here is the part that hides in plain sight. If trophies are priced by desire, the surest way to keep prices climbing is to keep trophies rare — and someone gets to decide how rare.

A group in Las Vegas has $8bn lined up for the right to be handed an NBA team that doesn’t exist yet. Eight billion, for a permission slip. It costs that much because the league adds new teams almost never. That scarcity looks like a law of nature — there just aren’t many top teams — but it’s a decision made by the people who already own the teams, and it happens to lift what their own teams are worth every time the door opens. The rarity isn’t found. It’s manufactured, and it serves its makers.

Who this leaves out

This force runs far past sport. It’s the house on the “good” street that costs triple the one two roads over for the same bricks. It’s the watch, the painting, the degree with the right name on it. Anywhere people buy meaning, the meaning-buyers set the price — and everyone who only wanted the use of the thing gets priced out of the room.

That’s the quiet cost. A fan can love a club their whole life and never come within a universe of owning a piece of it, because the price was set by billionaires buying a feeling, not by anyone counting what the club earns. Manchester United will weigh £2bn for a new stadium while already £1.3bn in debt — not because the arithmetic demands it, but because the identity does. Across the Premier League, clubs’ losses jumped more than 600% in a single year. These are not failing businesses. They were never really being run as businesses at all.

What the number won’t tell you

So when the next team sells for a figure that makes you blink, hold the number loosely. A big price can mean “this earns a fortune” or “someone wanted it badly enough to overpay” — and from the outside, you often cannot tell which. The same figure hides two completely different stories.

The billionaire who bought the soccer team isn’t a fool who got the maths wrong. He’s honest about being in it for other reasons — the same wanting that sets every trophy’s price, ours included, whenever we pay for what a thing means to us over what it does for us. We’re inside that market, not above it. And a price, it turns out, is one of the least reliable ways to learn what something is worth.

03 · Lab · your turn

Bid on the Trophy

Rehearse a franchise auction and feel the price climb past what the team earns — every dollar above fair value buys the trophy, not a return.

04 · Hope · carry this

The billionaires bid on the trophy, but the thing that makes a club worth loving — the belonging, the shared Saturday, the feeling handed down a generation — was never on the auction block. That part still belongs to everyone who shows up.